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  • Question

    Is the Government responsible for the open commitment amount? If the Government terminates are we responsible pay their open commitments even after we sent the contractor a written notification, stating we were not obligating any additional funds? should the Government always have enough funding to cover the contractors open commitments on a incrementally funded contract?


    Answer

    The relevant clause is FAR 52.232-22 (Limitation of Funds), which states "The Contractor agrees to perform, or have performed, work on the contract up to the point at which the total amount paid and payable by the Government under the contract approximates but does not exceed the total amount actually allotted by the Government to the contract." Paragraphs (c) and (d) levy notification requirements on the contractor. Furthermore, (f)(1) states "The Government is not obligated to reimburse the Contractor for costs incurred in excess of the total amount allotted by the Government to this contract." In other words, the content of the Limitation of Funds clause establishes the Government's responsibility to reimburse the contractor. The Government is not responsible for any contractor commitments or outlays that were not made by direction of the contracting officer. The clause at FAR 52.249-6 (Termination-Cost Reimbursement) provides procedures to establish a fair termination settlement for open commitments that did not violate other provisions of the Termination or Limitation of Funds clauses.

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