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    When De-obligating Canceling Funds, should the individual Contract Line Item Price and/or the overall Contract Price be changed? Based on leadership last year, after receiving both the PCO & Customer concurrence, we issued Unilateral De-Obligation Mods for the agreed upon amounts that were due to cancel. We did not change the individual Contract Line Item Price or the overall Contract Price, as the ACO at the time stated that De-obligation Canceling Funds SHOULD NOT affect the individual or overall price, as the Contractor is still going to get paid the agreed upon amount, it will just be funded from a different source than the "Canceling Funds". That ACO is gone and now under the direction of the new ACO, we are advised that we are to change the Individual Line Item Price AND the overall Contract Price. I understand De-obligating for Closeout is a different situation & agree/understand why we change both of the listed Prices, but not in the situation with Canceling Funds. Thank you in advance for your help.


    Answer

    Funds identified to cancel at the end of the current fiscal year are “At Risk”.  At the end of the fiscal year, the funds are now identified as canceled funds and are no longer available to be used for any purpose. This includes for payment and disbursement even on work that had been completed. When funds have canceled, the only way to get funds to pay obligations is to request replacement funds.  DCMA’s goal is to avoid requesting replacement funds for funds that have canceled.
     
    Per DCMA policy at risk funds are given a status code A or B
    ·  Status Code A: At-risk amount will likely require current year funds if not disbursed/resolved prior to FYE.
    ·  Status Code B: At-risk amount will not require current year funds if not disbursed/resolved prior to FYE.   
     
    The funding amount on the contract equates to work i.e. when the contractor performs the work, they are entitled to payment.  The majority of the time if the funding has Status Code A, a deobligation contract modification will not be issued.  In the best case, the contractor will submit a request for payment and will be paid before the funds cancel.  If the funds cancel, replacement funds will be required when the contractor submits a request for payment and current year funds will be requested to pay old bills.  The reason a deobligation modification should not be issued for funding with Status Code A is since funding is linked to work, deobligating the funding would be deleting the work from the contract.  Issuing a deobligation modification would changes the amount of funding on the contract and when the contractor does submit a request for payment, a request for additional funds will be made to the buying office.  Additional funds are different than replacement funds.  Replacement funds are just to replace funds that have cancelled.  No contract modification is needed; the amount of funding on the contract stays the same.  Additional funds are funds needed in additional to original funds obligated to the contract – the amount funds needed to pay the contractor was more than was initially obligated. A contract modification is needed to put additional funds on the contract.
     
    Funding with the Status Code B is probably excess funds and all excess funds on an ACRN must be deobligated. This allows the funds to be returned to the service or agency so funds can be reused on other projects.  Excess funds are funds relating to a specific line item or deliverable that was not performed on the contract and can result from the following when contract effort/scope is reduced, when significant cost reductions are identified on cost-reimbursement contracts, settlement of indirect rates or after final price determination.
     
    Your current ACO is correct, if you issue a deobligation modification you affect the CLIN price and the overall contract price.  The funding might have cancelled but if the work remains on the contract, the funding must remain on the contract.
     


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