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  • Question

    Do we have to obligate all the money or can we pay on a month to month basis without obligating all the money at once? The contract does have progress payments and the CLIN is FFP.


    Answer

    Yes, you do need to obligate all the funds on a firm fixed price contract.  I've referenced both a DFARS excerpt and a Financial Management Regulations (FMR) excerpt as the basis for this answer.  While severable service contracts are an exception, your length of contract exceeds one year. 
     
    DFARS subpart 232.7
    232.702 Policy.  Fixed-price contracts shall be fully funded except as permitted by 232.703-1.
    232.703 Contract funding requirements.
    232.703-1 General.
    (1) A fixed-price contract may be incrementally funded only if—
    (i) The contract (excluding any options) or any exercised option—
    (A) Is for severable services;
    (B) Does not exceed one year in length; and
    (C) Is incrementally funded using funds available (unexpired) as of the date the funds are obligated; or
    (ii) The contract uses funds available from multiple (two or more) fiscal years and—
    (A) The contract is funded with research and development appropriations; or
    (B) Congress has otherwise authorized incremental funding.
    (2) An incrementally funded fixed-price contract shall be fully funded as soon as funds are available
     
    FMR Volume 3
    0806 RECORDING OBLIGATIONS FOR PROCUREMENT CONTRACTS AND ORDERS 080601. Firm Fixed Price Contract When the contract is executed, an obligation must be recorded for the total amount stated in the contract.

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