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  • Question

    What is the law related to the Bona Fide Need rule (31 USC, Section 1502) of having to deliver all assets within a 12 month delivery period? Is there a law prohibiting deliveries longer than 12 months?


    Answer

    No, there is no “law” stating that procurement items must be delivered within a 12 month delivery period.  Instead, this 12 month delivery period requirement is part of the full funding budgeting “policy” that applies to all procurement and military construction appropriations within the Department of Defense (DoD). 

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    As stated in the DoD Financial Management Regulations (FMR), Volume 2A, Chapter 1:

    010107.  The full funding policy requires the total estimated cost of a complete, military useable end item or construction project funded in the year in which the item is procured. If a future year’s appropriation is required for delivery of an end item, the end item is not fully funded. It prevents funding programs incrementally and provides a disciplined approach for program managers to execute their programs within cost.

    010202.  General. A budgeting rule that requires the total estimated cost of a, military useable end item, be funded in the fiscal year in which the item is procured. Under the full funding policy, the entire procurement cost of a weapon or piece of military equipment is to be funded in the year in which the item is budgeted. An end item budgeted in a fiscal year cannot depend upon a future years funding to complete the procurement. Regulations governing the full funding policy are found in Office of Management and Budget (OMB) Circular A-11 and DoD Directive 7000.14-R.  The full funding policy is intended to prevent the use of incremental funding, under which the cost of a weapon system is divided into two or more annual portions or increments. Thus, full funding provides disciplined approach for program managers to execute their programs within cost and available funding.

    Time-Phased Procurement. Within defense system acquisition programs, nonrecurring costs and costs of certain production items related to, but not integral to, the end item of equipment are considered part of the overall acquisition cost. DoD Components shall plan and budget in a manner to ensure completion of the nonrecurring effort or delivery of such production items consistent with the planned delivery of the associated end items. That is, the programming and budgeting shall be on a time-phased "lead-time away" or "need to commit" basis. The Funded Delivery Period is part of the process to determine the quantities required to be budgeted in a particular fiscal year. DoD Components may not budget funds for obligation for items such as support, trainers, or data before the design or specifications of such items are essentially complete. These items shall be budgeted on an "ability to contract" basis as well as on a "lead-time away" basis.

     

    010224: Funded Delivery Period: A funded delivery period encompasses a 12-month period that begins when the contractor delivers the first item of a fiscal year procurement. Confusion exists regarding this time period because, in many instances, accurate administrative and production lead-times (ALT/PLT) have not been included in the calculation. The calculation should begin with October 1. From this point in time, the ALT and PLT should be added.

    https://comptroller.defense.gov/Portals/45/documents/fmr/current/02a/02a_01.pdf

    The Bona Fide Need Rule (31 USC §1502(a)):

    “The balance of an appropriation or fund limited for obligation to a definite period is available only for payment of expenses properly incurred during the period of availability…”  For procurement appropriations, this period of availability is 3 years.

    https://www.law.cornell.edu/uscode/text/31/1502

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    As such, and same as ABO advised, any deviations from this 12 month delivery period would not have fiscal law implications.  That said, the full funding policy is still a DoD-wide policy and required to be followed – unless an exception has been granted by your chain-of-command, up to, and including Congress.  This is likely why ABO warned you that, “Professional Staff Members would certainty ask why the deliveries are longer than the 12 months.”, as it is quite likely that these Professional Staff Members, when reviewing your budget as part of Congress’ annual appropriation and authorization acts, will both question and mark (i.e., cut) your program.  Such budget cuts are also likely by anyone in the DoD reviewing your budget (including Army and OSD).  As such, and while exceptions to the 12-month delivery period can be granted, you would be well advised to proactively seek out this waiver approval in advance.

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