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    1. I heard somewhere that a Contractor has 5 years to disburse against funds on a contract, is it true? 2. Also, if a Contractor overspends a CLIN, or goes in "the red", who is responsible for the deficit? The Govt or the KTR?


    1.  To answer your 1st question, I believe you meant the government has 5 years to disburse against the obligated funds on the contract.  The following text is taken from concerning the 5 year rule to disburse funds after it has been obligated.  You can also find this in Volume 1, chapter 5 of the GAO REDBOOK.

    Funds associated with a settlement fall into one of three categories: (1) current, (2) expired, or (3) cancelled. 
    Current year funds are funds whose availability for new obligations has not expired under the terms of the applicable appropriation. For example, procurement funds are current for three years, R&D funds for two years and O&M funds for one year.
    Expired funds are those funds whose availability for new obligations has expired but they retain their fiscal year identity for five years after expiration and are available to adjust and liquidate obligations alreadyincurred. The FY91 National Defense Authorization Act generally phased out the previous merged or "M" account funds. As partial replacement, the Act extended the life of "expired" accounts from 2 to 5 years. Funds move from current to expired status after a varying number of years depending on their type. For example, O&M funds "expire" and can no longer be obligated, after 1 year from the time the funds are first appropriated; RDT&E after 2 years; procurement after 3 years; and MILCON after 5 years. Both obligated and unobligated funds in the expired accounts are available for settlements and in-scope changes so long as the fiscal year identity of the funds and the fund types are respected.
    Canceled funds are funds that are no longer available for any purpose. Funds become canceled after their five-year period in an expired account. The Anti-Deficiency Act prohibits the use of canceled funds. Any payments beyond the expired phase must be taken from currently available appropriations and cannot exceed one percent of current Air Force appropriations without congressional approval. 

    2.  If a contractor overspends on a CLIN in a time and material or labor hour contract, the responsibility is the contractor's.  The government would have to modify the contract and obligate funding to increase the CLIN's value if the contracting officer chooses to do so.  This should eb done before the contract exceeds the value of the CLIN.  Ultimate responsibility is with the contractor if they exceed the CLIN without the contract being modified.
    In a firm-fixed price contract, again the responsibility is on the contractor. The government only pays what is on the contract and nothing more.
    You may want to research Unauthorized Commitments and Anti-Deficiency Act violations to help you understand more of what your question implies.

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