My question is, is it possible to set up contingent liabilities using FY17 and FY18 funding in anticipation of the overrun? We have the funds available in FY17 and FY18 but will not have the funding in FY19 or FY20 if the program continues to slip.
This response is based on the information provided. We suggest you discuss with your contract administrator, finance manager, and/or legal department as appropriate.
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You did not address the "color of money" you have on this program. As USAF program, it seems from the background you have 30X0 procurement dollars. The FY17 dollars should be usable through Sep 30, 2019, the FY18 dollars should be usable through Sep 30, 2020, and the FY19 dollars should be usable through Sep 30, 2021.
You cannot establish a contingency line on the contract nor can you "park" money on a CLIN just in case. But although you should have obligated only the target price your budgeted dollars should be able to cover up to the ceiling price.
Be sure that you do not violate the Bona Fide Need rule by using the funds during the period of obligation for needs other than for which they were identified (if these are procurement funds then that is 3 years). Also, you could check with the Contracting Officer about adding a CLIN for Engineering Change Proposals (ECPs) if the overrun is a result of changes. The dollars could be obligated against an ECP CLIN.