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  • Question

    When federal service contracts (or task orders) are awarded, is there a negative impact to having unfunded accounting lines? The idea is to award a contract with an estimated ceiling, keep a CLIN unfunded until an adequate resource is presented for the requirement. The overall benefit is that actual funds are not obligated until work begins. This way, programs are able to utilized Just-In-Time staffing without incurring a real obligation in the budget or have to pay for non-work. Keeping the obligation as "paper money" we can award without burden. It removes some incentive pressures to allow the contractor to hire stronger resources. Please ask if I can clarify my question since it was hard to explain.


    Answer

    This response is based on the information provided.  We suggest you discuss with your contracting team, program manager and/or legal department as appropriate. 

     

    To clarify some terms.  Just-in-Time Funding.  By that, we think you intend to convey Just-in-Time obligations.  If you have a known requirement, you need to have the money within your control, a commitment, as a minimum.  We realize some tasks and/or funds do pop up, but the NTE should be at a value the government reasonably expects to use over the accounting period.

     

    First, the contracting officer cannot create a contract that establishes an obligation that s/he does not have funds to support. 

    You can structure the NTE CLIN such that the contractor cannot invoice against the CLIN without government authorization.  A common way to deal with T&M or Fixed-Price Level of Effort contracts is to require a contracting officer's letter of authorization, task direction,  instruction to start work or whatever terminology your unit uses.  You would have an anticipated amount on the CLIN that cannot be expended, charged, invoiced unless and until a contracting officer authorized that particular task, formally, not by phone, text, etc.  The rules of engagement for activating performance would be captured in the contract, best by use of a Section H clause. 

    You could leave the CLIN unfunded, which would require a funding modification to fund the action each time you want the contractor to work.  Your dollars are committed but not obligated and the contractor nominally less access, but the funds are more susceptible to being pulled for other needs.

    Either way, the contractor presumes funds and wants to have the government fund work for it to perform and bill.

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