Contractor is planning to submit a request for equitable adjustment on FY 17 contract. Contract will be completed and fully paid by 30 Sep 2022, which is the date the O&M funds will expire on this minor construction project. However, request for equitable adjustment or claim may be submitted towards the end of fiscal year. So reviewing, approving and paying will be after 5 year fund availability. So. long story short, is there any fund expiration for payment arising from request for equitable adjustment/claim arising out of a contract? FAR Part 33 reads that contractors has 6 years to submit a claim but does not particularly talk about funding. Please advise. Thanks
The answer to this question appears to be reasonably straight forward. The Questioner is correct in that Federal Acquisition Regulation (FAR) 33.206 does not address funding. It only addresses the timeliness of a claim submission and adjudication of that claim. The question of what year of appropriation to utilize to pay a contractor’s claim is a completely different issue and as such is addressed in DoD Financial Management Regulation (FMR) 7000.14-R.
FMR Volume 2A, Chapter 1, paragraph 010107, section 25 provides a table of all the DoD’s appropriations and when they enter and exit each of the three Phases of the “Normal Life Cycle of Appropriations” (i.e., Unexpired/Current, Expired, and Canceled/Closed). From this FMR section, we recognize that the FY2017 Operations and Maintenance (O&M) appropriation was in its Unexpired/Current Phase from 01 October 2016 – 30 September 2017. It will be in its Expired Phase until 30 September 2022 and will enter its Canceled/Closed Phase on 01 October 2022.
The dilemma becomes, in each of the Appropriation Life Cycle Phases, what can an appropriation be used for? In the Unexpired/Current Phase, an appropriation can be used for new obligations (i.e., new scope), expenditures, and adjustments to existing obligations. When discussing appropriations in their Expired Phase, FMR Volume 2A, Chapter 1, paragraph 010107, section 25 says, “During this period, the appropriation is available for adjustment to, or payment of, existing obligations. Appropriations remain in an expired status for 5-years ... At the end of the five-year expiration period, the appropriation is closed (canceled) and is no longer available for the payment of unliquidated obligations.”
Thus, it should be obvious that if payment of a contractor’s claim against a FY17 O&M appropriation must be made after 01 October 2022, the FY17 O&M appropriation cannot be used since it will be in its Canceled/Closed Phase. The method for paying such a claim is addressed in FMR Volume 3, Chapter 10, section 3.3.3. That section states, “In some instances, following closure/cancellation of an appropriation, it becomes necessary to adjust an obligation that otherwise would have been properly chargeable (both as to purpose and amount) to an appropriation before closure/cancellation. Should such an adjustment become necessary, the obligation must be charged to an appropriation currently available for the same purpose, subject to certain limitations discussed in subparagraph 100303.D.”
Summary: If payment of a contractor’s claim against a FY17 O&M appropriation must be made after 01 October 2022, the FY17 O&M appropriation cannot be used since it will be in its Canceled/Closed Phase. That claim must be paid using an O&M appropriation that is in its Unexpired/Current Phase. For O&M appropriations, that means that it would have to be paid with FY2023 O&M funds.
Suggestions: First, read DoD Financial Management Regulation (FMR) 7000.14-R, Volume 2A, Chapter 1, paragraph 010107, sections 14 and 25. Second, read FMR, Volume 3, Chapter 10, paying particular attention to sections 3.2 and 3.3. Finally, it is most strongly recommended that you contact your local financial comptroller organization, and acquisition legal counsel for more information and their policy interpretation of this issue.