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  • Question

    Is there a public law which restricts awarding a new contract this far in advance?


    Answer

    It's hard to say without more facts, but it sounds like they want you to award a contract using current year funds for a requirment that is not needed for six months, well into next FY.  If that is the case, you may have a potential Bona Fide Needs Rule violation and a potential Antideficiency Act violation.  One of the fundamental principles of approprations law is the so-called Bona fide Needs Rule:  A fiscal year appropriation may be obligated only to meet a legitimate, or bona fide, need arising in, or in some cases arising prior to but continuing to exist in, the fiscal year for which the apprpriation was made. Generally, bona fide need is determined by when the government actually will be able to use the supplies being acquired. 

    Supplies or services of a future fiscal year are the bona fide need of that fiscal year, not the current one.  However, there are two exceptions to the rule for supply contracts:  The lead-time exeption allows the agency to consider the normal production lead-time when determining the bonafide need for supplies that are not available off the shelf. So, in limited situations, we can cross fiscal years.  If, however, the government directs the contractor to withhold delivery until the next fiscal year, even though production leadtime would allow delivery in the current FY, there is no bona fide need for the supplies in the current fiscal year. The stock level exception allows agencies to purchase enough supplies to maintain sufficient stock levels. In other words, the government may use current year funds to replace stock consumed in the current year, even though the replacement items will not be used until the following FY. 

    Services:  A service contract is one that calls for routine, repetitious services.  A good example might be a custodial contract where the janitors clean the school each night. So, the service is routine. A contract such as this is severable if it may be divided by fiscal years, because it involves providing a series of servies, like cleaning offices or cutting grass.  See FAR 37.106(a) and (b). When contracts for services are funded by annual appropriations, the term of contracts so funded shall not extend beyond the end of the fiscal year of the appropriation except when authorized by law (see paragraph (b) of this section for certain service contracts, 32.703-2 for contracts conditioned upon availability of funds, and 32.703-3 for contracts crossing fiscal years). (b) The head of an executive agency, except NASA, may enter into a contract, exercise an option, or place an order under a contract for severable services for a period that begins in one fiscal year and ends in the next fiscal year if the period of the contract awarded, option exercised, or order placed does not exceed one year (10 U.S.C. 2410a and 41 U.S.C. 2531).. Funds made available for a fiscal year may be obligated for the total amount of an action entered into under this authority.
    (c) Agencies with statutory multiyear authority shall consider the use of this authority to encourage and promote economical business operations when acquiring services.

    So even though, your contract for services may be severable, which my guess it is, and you may cross fiscal years, in this case it appears that the service is not needed and won't begin until well into next FY.  Accordingly, this appears to be a potential violation of the Bona Fide needs rule and if so, the FY 2011 funds would not be appropriate and you would also have a potential Anti-deficiency Act violation.  I recommend discussing this with your legal office before proceeding in this matter.

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