Can the gov't descope based on available funding or would this be a TforC situation?
The Government cannot require a contractor to perform when we can’t pay. Although using the term “descope” seems to avoid the sometimes-perceived nasty word of “termination,” that is essentially what you are doing, albeit a partial termination. The nature of the descope you have described does not fit under the Changes clause, but rather seems to fall under the situation described in the Limitation of Funds clause at FAR 52.232-22 where it says, (in paragraph (e)), “(e) If, after notification, additional funds are not allotted by the end of the period specified in the Schedule or another agreed-upon date, upon the Contractor’s written request the Contracting Officer will terminate this contract on that date in accordance with the provisions of the Termination clause of this contract.” This Limitation of Funds clause is prescribed for incrementally funded cost-reimbursement contracts, so I’m assuming it is in your contract. And the paragraph cited specifically says that if additional funds will not be allotted to the contract, the CO will terminate. You’ll also need to make sure you are familiar with the termination clause(s) in your contract, probably 52.249-6 Termination (Cost-Reimbursement) which will govern how both parties should proceed in such a situation. Keep in mind that a T4C does not/should not reflect negatively on the Contractor and both the Government and Contractor can address the issues and reason for the T4C in CPARS. As with all matters, the rights of each of the contracting parties are determined by the clause or other cited authority used to support the decision for how to proceed.
Please Note: DAU responses like this one are intended to provide useful info but should not be used as the sole basis for decision making by the DoD Component organization(s) involved in a specific matter. Please consult the cognizant Acquisition Team Members (PCO, PM, Legal, etc.) for the acquisition in question.