Extension of POP on a Severable Service Contract

A couple of thoughts. I presume that the contract is funded with annual appropriations and that it is subject to FAR. This much I know:

1. Extending the period of performance because funds remain unobligated under the original appropriation is a new procurement requiring either full and open competition or a J&A for other than full and open competition.

2. The funds used for any such time extension must have been appropriated for the period covered by the time extension.

You have said this:

Changing [i.e., extending] the POP, according to a white paper forwarded to me, has the same effect as deobligating the remaining funds and reobligating them...which, of course, is not allowable because the money has expired for obligation purposes.

Here is how I understand what you wrote:

1. Suppose that you have an annually-funded contract for 12 months of severable services that crosses fiscal years, from 1 June 2013 through 31 May 2014. The funds obligated to cover those 12 months are FY 2013 funds.

2. Suppose further that in March 2014, with two months (April and May) remaining on the contract, you decide that you want to extend the contract by two months, from 1 June 2014 through 31 July 2014.

3. You say that according to your unidentified "white paper," modifying the contract to add two months would deobligate the 2013 funds that cover April and May 2014 of the original 12 months, and that you would have to use FY 2014 funds to cover them as well as the two months that you want to add: 1 June 2014 through 31 July 2014.

Do I understand what you wrote correctly? If so, what is the title of that white paper of yours, and who is the author?

I read the situation a little differently. I thought "money left on a sustainment contract" meant that some obligated funds had not been expended, and there was a desire to use that money to fund two more months of performance. I did not think the question was about expired funds to be obligated for an additional two months of performance.

My interpretation of what summerlady51 is trying to say is that if you have a contact, say a CPFF type contract funded with annual appropriations, and the contractor doesn’t have a need for all the funds obligated on the contract to meet the requirements in the contract you cannot use the “unused/money left on the contract” to fund the period of performance extension. This makes sense to me since you would have a bona fide need of the next FY at the time you extend the PoP.

It sounds like people are confusing "obligation" with "availability" and "liquidation". Funds placed on a contract award are "obligated". Obligated funds on a contract that are paid to a contractor for specified performance (i.e., the purpose of the contract) are "liquidated". Obligated funds on a contract that have not been paid to a contractor for specified performance (i.e., unused, not yet invoiced, will not be invoiced, etc.) are "unliquidated". Under appropriations law, funds will generally expire for obligation at the end of the fiscal year concluding their period of availability for obligation (O&M = 1 yr; Procurement = 3 yrs; MILCON = 5 yrs; etc.). Unliquidated funds remaining on a contract after the conclusion of the funds' period of availability for obligation does not change their status from being "obligated" for a particular purpose. Funds that will not be liquidated for the purpose against which they were obligated (bona fide need of the original fiscal period of availability) cannot be reobligated for a new purpose arising after the fiscal period of availability.

I will wait for summerlady to confirm or correct my interpretation of her comments. If she meant that funds already obligated on the contract had not been expended and that the tech people wanted to extend the period of performance so that they could be expended, then my comments on funding a new procurement with money appropriated for the period of the extension still apply, and I still want to see that white paper.

We have a delivery order funded with two lines of accounting (one FY12 and the other FY13). We would like to extend the FY13 ACRN to 30 September 2013 or further if possible to bridge the gap for FY14 appropriations to be allocated from the AF for execution. We were denied because PL was in fact applied on the task order. I don't see why that would prevent the extension of the ACRN AB. I have received extensions before on OPN task orders with multiple lines of accounting where the one with life on its apprn was still active. I am familiar with the 10 USC Code 2410a but I can't find a resource to support the request being rejected.

AA: 57 2 3400 302 7874 142141 0 10000 56992 23765F 667100 ESP:7C F67100 - AMOUNT: $917,000.00 indicates FY12 Air Force Operation & Maintenance funding was used to award the first increment of funding on task order 2. Since the period of performance is 12 months I expect that PL-105 severability for 12 months was implemented on this task order. Interestingly enough it appears that the next increment on this task order was funded with FY13 Operation & Maintenance appropriation. The line of accounting and separate ACRN AB is 57 3 3400

Please advise and preferable point me in the right direction to reference material that may support my request or justify their rejection.

Thank you very much-

You have a task order for 12 months of severable services that crosses fiscal years. Performance began in FY12 and continues in FY13.

The contract is incrementally funded (3400 money). The first increment is funded with FY12 money. The second increment is funded with FY13 money.

There will be a gap between the end of the order and 30 September. You want to use FY13 funds to cover the gap and perhaps beyond if FY14 funds are delayed. You think you can do it pursuant to FAR 32.703-3, but you have been told that you cannot.

You want to know the rationale for rejecting your idea and whether there is a work-around.

Is that the situation?

Yes-

The only alternate option I think of is to deobligate the FY13 ACRN and re-obligate on a new delivery order with severability for 12 months, but I imagine that would be rejected too. It's a large sum of funding and I would hate to see it go unspent and most importantly a gap in service to our customer. Do you know of a resource that may be able to help me.

Some points about your terminology:

1. You would not fund an ACRN or deobligate an ACRN. An ACRN is just a reference number used to associate a funds account with a contract (order) line item (CLIN). See PGI 204.7107. You would fund or reduce funding on a CLIN, not an ACRN.

2. Also, the phrase "severability of 12 months" does not make sense. Services are either severable or nonseverable (entire). A task order is either for severable services or nonseverable services. When using annual appropriations, a contract or order for severable services may not exceed one year (12 months) in duration. See FAR 32.703-3( b ).

3. Also, you're buying services, so you don't have a "delivery order," you have a task order. See the definitions of those terms in FAR 2.101. See also FAR 16.501-1.

As to your question:

I'm not sure what the problem is, but it might be that extending the period of performance would result in a period of performance of more than one year in duration, which is impermissible when buying severable services, unless you use options for extensions. See above. If that's what's wrong, you would have to issue a new order for the extension or establish a new CLIN. However, that would be an out-of-scope change that would probably trigger a requirement for new competition.

Thanks for the clarification. This is a sole source SBIR III contract. The agency we are doing business with uses the term "severable for 12 months" for task orders that are obligated with annual appropriations which cross fiscal years. So the first "CLIN" was funded with FY12 annual appropriation and "severable for 12 months" IAW 10 U.S.C. 2410a. Could they deobligate CLIN AB that was funded with the FY13 funds and issue a new task order?

Leslie, what is the current period of performance for the FY13 funded CLIN?

Joel, The initial award for FY12 CLIN ACRN AA (as stated on the task order award) has a period of performance of 28 August 2012 expiring 27 August 2013 with severable and 10 U.S. Code 2410 (a) noted on the award. We received a mod effective 6 March 2013 with the FY13 SUBCLIN ACRN AB that does not specify a different expiration date. As you know, the FY13 annual appropriation expires 30 September 2013 and I don't understand why we can't extend AB. Thank you!

Thanks for the clarification. This is a sole source SBIR III contract. The agency we are doing business with uses the term "severable for 12 months" for task orders that are obligated with annual appropriations which cross fiscal years. So the first "CLIN" was funded with FY12 annual appropriation and "severable for 12 months" IAW 10 U.S.C. 2410a. Could they deobligate CLIN AB that was funded with the FY13 funds and issue a new task order?

How are the CLINs numbered? Does the order have two CLINs: 0001 and 0002? Or is there a CLIN 0001 with two SUBCLINs, 0001AA and 0001AB?

Vern,

000101 ACRN AA

000102 ACRN AB

Leslie:

Okay, it appears that what you have is an order with a single CLIN (line item), 0001, which is for a total of 12 months of severable services.

Line item 0001 has two informational SUBCLINs (subline items), 000101 and 000102. They are components of CLIN 0001. See DFARS 204.7104(a). I presume that each SUBCLIN identifies the funding for a segment of the total period of performance. The segments are separately funded, the first, 000101 is funded with FY12 money and the second, 000102 is funded with FY13 funds. That is why you have two ACRNs, to identify the funds that will be used to pay for each of the segments.

Since line item 0001 totals 12 months of performance of severable services crossing fiscal years, FAR 32.703-3( b ) prohibits adding more time to it. You cannot extend the period covered by item 0001. If you want to extend the period of performance you must either (1) add another line item or (2) issue a new order. Either way, you'll have to get new competition or justify a sole source procurement. You cannot add any funds to that item to cover a time extension. You don't need to deobligate any funds. That wouldn't solve your problem.

Do you understand?

I do understand and I'm disappointed in myself for not seeing that to begin with. Thank you so much!

Leslie

Leslie, seeing that you work for the Air Force you may find the following useful for future efforts. AFI 65-601 Vol 1, 4.61, Service Contracts Crossing Fiscal Years - The total cost of the services to be provided over the 12- month period must be reflected in the contract and that amount must be obligated when the contract is signed.

What is the thought process for the statement in bold below? I've never understood why the full amount must be obligated at time of contract award. What's the rationale? With budgets being doled out is such a piecemeal fashion nowadays, to me it seems incrementally funding a CLIN/Contract would be reasonable. Thanks,

"AFI 65-601 Vol 1, 4.61. Service Contracts Crossing Fiscal Years. The FY 98 National Defense Authorization Act
(NDAA) (P.L. 105-85) (Codified in 10 U.S.C. 2410A) allows ―for procurement of severable services
for a period that begins in one fiscal year and ends in the next fiscal year if (without
regard to any option to extend the period of the contract) the contract period does not exceed
one year. The total cost of the services to be provided over the 12- month period must be
reflected in the contract and that amount must be obligated when the contract is signed. The FY
2004 NDAA (P.L. 108-136), Section 1005 further amended 10 U.S.C. 2410A. In addition
to authorizing severable service contracts for a 12-month period crossing fiscal years, it
now authorizes 12-month contracts crossing fiscal years for leasing of ―real or personal property,
including maintenance of such property when contracted for as part of the lease agreement."

The thought process is that appropriations law requires it.

An obligation is a commitment to pay with appropriated funds. See the GAO Redbook, Vol. II, Ch. 7, Sec. A. When the government enters into a firm-fixed-price contract for one year of services, it has obligated itself to pay for the contract price for the entire year. The GAO requires that agencies record the full amount of an obligation when the obligation is made. See the GAO Redbook, Vol. II, Ch. 7, Sec. B.

When AFI 65-601 says that an "amount must be obligated when the contract is signed," it means that amount is obligated when the contract is signed and the obligation must be recorded. If you work for DOD, recording the obligation begins when the CO inserts a fund citation in the contract, assigns an associated ACRN to a CLIN, and distributes a copy of the contract to the finance office.

While it is possible to incrementally fund an FFP contract, policy generally prohibits it, with certain exceptions. That's because incremental funding creates budget management problems.

With budgets being doled out is such a piecemeal fashion nowadays, to me it seems incrementally funding a CLIN/Contract would be reasonable.

As a policy matter, I am not sure I agree. In today's budgetary climate, incrementally funding a contract, with the expectation that it will be fully funded later, runs the significant risk that the funds will not be provided and you will ultimately have to terminate the contract for convenience. The risk is exacerbated when this is done with several contracts. For example, assume you have piecemeal funding of $1M. You have four requirements, each needing $500K. If you award each contract but only obligate $250K apiece, you are obligating within the amount available, but what happens when the expected funding does not materialize. You are up the creek, heading to the waterfall without the necessary means of propulsion and guidance.

The thought process is that appropriations law requires it.

An obligation is a commitment to pay with appropriated funds. See the GAO Redbook, Vol. II, Ch. 7, Sec. A. When the government enters into a firm-fixed-price contract for one year of services, it has obligated itself to pay for the contract price for the entire year. The GAO requires that agencies record the full amount of an obligation when the obligation is made. See the GAO Redbook, Vol. II, Ch. 7, Sec. B.

When AFI 65-601 says that an "amount must be obligated when the contract is signed, it means that amount is obligated when the contract is signed and the obligation must be recorded. If you work for DOD, recording the obligation begins when the CO inserts a fund citation in the contract, assigns an associated ACRN to a CLIN, and distributes a copy of the contract to the finance office.

While it is possible to incrementally fund an FFP contract, policy generally prohibits it, with certain exceptions. That's because incremental funding creates budget management problems.

Vern, I really dislike disagreeing with you and running the risk of displaying my ignorance, but here goes.

You say that "appropriations law requires it," with "it" being the requirement to obligate the full amount of the contract at the time of award. However, this seems to be directly contradicted by the DFARS provisions on incremental funding (as well as the last sentence of your post concerning policy).

DFARS 232.001 defines incremental funding as "the partial funding of a contract or an exercised option, with additional funds anticipated to be provided at a later time." DFARS 232.703-1(1) says a fixed-price contract may be incrementally funded if "(i) The contract (excluding any options) or any exercised option -- (A) is for severable services; ( Does not exceed one year in length; and (C ) Is incrementally funded using funds available (unexpired) as of the date the funds are obligated."

If appropriations law required obligating the full amount of the contract at award, the DFARS incremental funding authorization would violate appropriations law. It appears that the Air Force, rather than being forced to prohibit incrementally funding severable service contracts, has made a policy decision to do so.

Also, the requirement is not to record the value of the contract, the requirement is to record the obligation. Therefore, when a contract is incrementally funded, all that needs to be recorded is the amount obligated. Of course, the contract should/must include a clause, such as DFARS 252.232-7007, advising the contractor that cost incurred in excess of the amount obligated are not allowable, and advising the contractor what to do as its incurred costs approach the amount obligated.

wvanpup:

You need to go back and read what I wrote -- the whole thing, this time. It may be necessary for you to think before you comment again.

Vern

The original question that was posed, and to which you responded, was: "What is the thought process for the statement in bold below?" The statement in bold, from AFI 65-601, vol 1, para 4.61, was: "and that amount must be obligated when the contract is signed." The phrase "that amount" referred to the earlier part of the sentence, which was: "The total cost of the services to be provided over the 12-month period." Your response was: "The thought process is that appropriations law requires it."

To me, your statement means that appropriations law requires that the full amount of the contract must be obligated at the time of contract award. If this is what you meant, I disagree for the reasons stated in my earlier post (my references to the DFARS provisions on incremental funding, which specifically permit obligating less than the full amount of award, and your specific recognition that incremental funding of an FFP contract is possible). If this is not what you meant, if all you really meant to do was to describe the thought process of the drafter of the regulation whether or not appropriations law requires obligating the full amount of the contract, your language was as sloppy as much of what you routinely criticize.

Vern

The original question that was posed, and to which you responded, was: "What is the thought process for the statement in bold below?" The statement in bold, from AFI 65-601, vol 1, para 4.61, was: "and that amount must be obligated when the contract is signed." The phrase "that amount" referred to the earlier part of the sentence, which was: "The total cost of the services to be provided over the 12-month period." Your response was: "The thought process is that appropriations law requires it."

To me, your statement means that appropriations law requires that the full amount of the contract must be obligated at the time of contract award. If this is what you meant, I disagree for the reasons stated in my earlier post (my references to the DFARS provisions on incremental funding, which specifically permit obligating less than the full amount of award, and your specific recognition that incremental funding of an FFP contract is possible). If this is not what you meant, if all you really meant to do was to describe the thought process of the drafter of the regulation whether or not appropriations law requires obligating the full amount of the contract, your language was as sloppy as much of what you routinely criticize.

wvanpup, did you see where Vern, also said: "While it is possible to incrementally fund an FFP contract, policy generally prohibits it, with certain exceptions. That's because incremental funding creates budget management problems."

Now read DFARS 232.703-1 (1) again, with emphasis on "...only if -". That seems to confirm that there are "certain exceptions" for DoD. Also read both (i) and (ii) under 232.703-1 (1).

Whereupon, the cited AFI appears to restrict Air Force application of the broader DFARS 232.703-1 (1) exceptions when its says "The total cost of the services to be provided over the 12- month period must be reflected in the contract and that amount must be obligated when the contract is signed."

Joel

Of course I saw what Vern wrote, I quoted it and made specific reference to the part where he says it is possible to incrementally fund a contract.

Of course I read DFARS 232.703-1, all of it, before I referred to it.

Let me ask you, in context, what did Vern's first sentence mean? Did he just describe the thought process without implying that the thought process was correct? If so, I misread what he said, though I still think it is a poor way of expressing that opinion.

mm6ch asked for the reasoning behind the AFI 65-601. I gave it to him, in clear, accurate terms, and referred him/her to the Redbook for further reading. I'm happy with my answer. The key language in my post was this: "The GAO requires that agencies record the full amount of an obligation when the obligation is made."

Your only point is that some FFP contracts are incrementally funded and that in such cases the government obligates itself to pay only part of the contract price, and so must record an obligation for only that much, not the total price. mm6ch seemed to understand that, so I didn't feel the need to explain it to him. If you wanted to make that point clearer than you thought I had, all you needed to say was: Vern, you don't have to obligate the total amount of the contract if the contract is incrementally funded. In which case I would have said, You're right. Thanks.

In reading VOL II of the Redbook, Chapters 6 and 7, as well as a GOOGLE search for incrementally funded contracts, it appears that non-severable contracts for services must be fully funded but that severable contracts for services may be incrementally funded. I also found policy preferences to fully fund severable services when the funds are available at the beginning of the period of performance in the contracts.

However, I dont profess to be qualified in this area so won't cite the specific sources. Plus, I couldnt copy the verbiage from the pdf pages. I looked in Redbook, HHS Acquisition Policy Memorandum (http://www.hhs.gov/asfr/ogapa/acquisition/funding-of-contracts-exceeding-one-year-06282010.pdf ) and NASA documents (http://www.nasa.gov/pdf/706737main_Acquisition_Funding_w_o_citations_101512_posting_no_NFS_chgs%5B1%5D.pdf) for example.

At any rate, I did not see a prohibition on incrementally funded several services contracts in VOL II, Chapters 6, 7 or 8. Not to say it isnt there...

Incremental funding is a funny topic. The GAO Redbook does not define incremental funding. The GAO glossary of budget terms defines incremental funding as follows:

The provision or recording of budgetary resources for a program or project based on obligations estimated to be incurred within a fiscal year when such budgetary resources are provided for only part of the estimated cost of the acquisition.

FAR does not really define it, but says:

If the contract is incrementally funded, funds are obligated to cover the amount allotted and any corresponding increment of fee.

However, FAR does not set any rules for incremental funding of contracts.

Although OMB pubs say when a program can be incrementally funded, they do not say when a contract can be incrementally funded. The rule in DFARS 232.703-1 has been there only since 2005 or 2006. Before that, the only fixed-price contracts that could be incrementally funded by DOD were for R&D. I know of no statute that says when a contract can be incrementally funded.

Incremental funding within a fiscal year appears to be rare.

Vern, one of those references I provided cited FAR 32.701-3 for prohibition on incremental funding of a non-severable contract for services, but my 2011 hard copy FAR said it is "reserved". I think that the date on the document was 2012. I have to go to a meeting, so don't have time to provide more detail now.

Incremental funding within fiscal year is far from rare in my agency. While severable services can be ended if funds run out, many of the more high value, complicated, overseas service contracts have huge demobilization costs that are rarely funded or obligated in the incremental funding. This leaves contracting vulnerable to the Anti-deficiency Act.

That's regrettable.

B-317636 April 21, 2009, pg 14 of 26 - Severable services, which are recurring in nature, are bona fide needs at the time the service is completed, and obligations for severable services should be charged to appropriations current at that time (B-287619, July 5, 2001, at 6). Really?? Am I missing something here?

So if the AFI is more restrictive than DFARS 232.703-1 in what instance, if any, would an Air Force program ever be able to incrementally fund a firm fixed price O&M effort?

The current edition of Air Force Instruction 65-601, Budget Guidance and Procedures, is dated 16 August 2012, so it's not very old. It is a financial management publication, It bears the legend, "Compliance with this publication is mandatory." It says, "In cases of conflict with other Air Force instructions or policy directives, the funding propriety rules stated here take precedence." It appears to require full funding of severable service contracts that cross fiscal years.

The current DFARS 232.703-1, which permits incremental funding of severable service contracts that cross fiscal years, can be traced back to a final rule dated April 12, 2006, 71 Fed. Reg. 18671. The explanatory statements accompanying the rule state:

This rule amends the DFARS to allow incrementally funded fixed-price contracts in certain limited, and clearly defined, situations. The objective of the rule is to encourage the full funding of contracts, while recognizing that there are specific situations where full funding is not possible, and allowing incremental funding to be used in those situations... The rule applies to all entities with incrementally funded fixed-priced DoD contracts. DoD believes that the rule has little or no economic impact on such entities, since the rule places little cost risk on the contractor. This is especially true of the final rule, which includes revisions that clarify that a contractor is not authorized to continue performance of a contract beyond the amount incrementally funded. The final rule maintains the clear preference for fully funded fixed-priced contracts; and requires the use of a standard clause in clearly defined and limited circumstances permitting DoD to award, and the contractor to begin work under, a contract prior to the availability of full funding. The rule requires that full funding be placed on the contract as soon as funds are available; clearly states that the contractor is not authorized to perform work beyond the available funds allotted to the contract; and provides specific protections to the contractor until full funding is made available.

I don't think DFARS 232.703-3 conflicts with AFI 65-601 or vice versa. AFI 65-601 clearly addresses situations in which contracts are fully funded, and reflects the GAO's stance in the Redbook. The DFARS rule permits incremental funding in the situation addressed by Leslie in Post #7, where a contract for severable services crosses fiscal years and part of it is funded with appropriations for the first fiscal year and the other part is funded with appropriations for the second fiscal year. Keep in mind that FAR 32.703-3 contemplates a severable services contract crossing fiscal years that is fully funded with appropriations for the first year. It implements a statute that exempts such contracts from the bona fide needs rule.

I am looking for some guidance or a resource. My agency, HHS, currently has a policy (Agency supplement to the FAR)of permitting incremental funding on cost reimbursement and fixed price contracts under certain conditions. Let me provide a scenario and it is my intent to capture if correctly. I am making an assumption that a Continuing Resolution (CR) will be put in place in FY2014. HHS is funded by annual appropriations. Also, assume that the services are severable for this scenario and that funds would cross the fiscal years (2014 into 2015.)

On October 1, 2013, the Agency is appropriated under a CR. During such CR, the Agency allots a percentage of the appropriations to budget officials and funds certifying officials. It is determined that such percentage will not permit full funding of options on all contracts. Most of the severable service contracts will be fully funded for a period not to exceed 12 months. But, in the situation where a contract option cannot be fully funded due to a CR, I have a few questions:

Assume the following: Option Year is 12 months, severable services and it crosses fiscal years (2014 into 2015)

1. Is the partial funding, due to a CR, now considered incremental funding? The contract does not cite any incremental funding clauses, only option clauses.

2. If not considered as such, is it appropriate for the Contracting Officer to "shorten" the option period to match the funding available? Note: this funding approach was not solicited, evaluated, negotiated or awarded under such terms.

3. If it is considered an increment and the Agency is fully appropriated, can a Contracting Officer fund the remaining 12 months? or only through the end of the fiscal year of the appropriations?

Assume the following: Option Year is 12 months, severable services and it crosses fiscal years (2014 into 2015)

1. Is the partial funding, due to a CR, now considered incremental funding? The contract does not cite any incremental funding clauses, only option clauses.

2. If not considered as such, is it appropriate for the Contracting Officer to "shorten" the option period to match the funding available? Note: this funding approach was not solicited, evaluated, negotiated or awarded under such terms.

3. If it is considered an increment and the Agency is fully appropriated, can a Contracting Officer fund the remaining 12 months? or only through the end of the fiscal year of the appropriations?

I am in DoD. I looked at the HHS regulation and found its definition of incremental funding confusing, but perhaps that is because I have a DoD orientation and prefer the DoD definition (DFARS 232.001, "the partial funding of a contract or an exercised option, with additional funds anticipated to be provided at a later time"). In any event, I offer the following thoughts:

1. Incremental funding is not based on whether the funds are from the Department's regular annual Appropriations Act or from a Continuing Resolution. Incremental funding is based on funding less than the full amount of the contract. Your proposal would clearly be incremental funding under the DoD definition, and it looks like it would be incremental funding under the HHS regulations.

2. Unless the contract provides for incremental funding, you cannot unilaterally exercise an option with incremental funding. I am not aware of any reason why you cannot incrementally fund the option bilaterally (i.e., with the contractor's agreement).

3. I do not know why you would want to shorten the option period. You will probably have full funding available when the agency is fully funded. If you shorten the option period for this option you are messing around with all future options (how do you cover the period that was deleted, when do you exercise the remaining options, etc.).

4. I think from reading the HHS regulation you can fully fund the 12 months, but you should rely on advice from within your agency (or someone more knowledgeable than I).

Deleted

I'm sorry it has taken me so long to get back...I didn't realize ya'll were waiting on me. Rather than just give you the white paper, I'll give you the CompGen Decisions that are pertinent.

B-211464. First, concerning the period of performance, we point out that there is a significant difference between those situations where a contractor is given additional time to perform a contractual obligation, and those where time is used in a contract to define the extent of an obligation. B-191078, May 17, 1978, 78-1 CPD P P377 (distinguishing between one-time and ongoing requirements). Requirements or indefinite quantities contracts generally concern on-going needs. Extension of the performance period under those kinds of contracts involves new requirements that should be competed.

====================================================================================================================================================================================

B-237148. Generally, an extension of a requirements contract beyond the period of performance creates additional requirements that are outside the scope of the original contract. B-211464, June 7, 1984. As we noted in the cited decision, there is a significant difference between those situations where a contractor is given additional time to perform a contractual obligation, and those where time is used in a contract to define the extent of an obligation. The latter type of contract extension is on its face a new procurement. B-211464, June 7, 1984.

Here, Unisys and BIA entered into a requirements contract. As such, the original period of performance defined the extent of the obligation. Extension of the contract beyond that period was thus outside the scope of the original contract and on its face a new procurement.

Such a new procurement must be made in accordance with the Competition in Contracting Act of 1984 (CICA). [*3] 41 U.S.C. § 253 (1988). Under CICA, agencies must "obtain full and open competition through the use of competitive procedures" to procure goods or services. 41 U.S.C. § 253(a)(1). Therefore, an agency may only enter into a contract extension, which on its face is a new procurement, if the agency either procures the services competitively or separately justifies it as a noncompetitive procurement. See 65 Comp. Gen. 25 (1985). BIA did neither. As such, the contracting officer was without authority under CICA to contract with Unisys to extend the contract and no binding contract extension came into effect. See B-224702, Aug. 5, 1987.

==================================================================================================================================================================================================================

B-402576.

In determining whether a modification triggers the competition requirements under CICA, we look to whether there is a material difference between the modified contract and the contract that was originally awarded. Engineering & Prof'l Servs., supra, at 4; AT&T Commc'ns, Inc. v. Wiltel, Inc., 1 F.3d 1201, 1205 (Fed. Cir. 1993). Evidence of a material difference between the modification and the original contract is found by examining changes in the type of work, costs, and performance period between the contract as awarded and as modified. Overseas Lease Group, Inc., B-402111, Jan. 19, 2010, 2010 CPD P 34 at 3;

So what we've found here in our review is that folks weren't understandng that an extension of a POP for a non-severable service and extension for a severable service were two different matters. The first wasn't a problem but the second (especially after the funds were no longer available for obligation) essentially had the effect of deobligation of the unexpended balance and no legal right to re-obligate those funds which were left over. Yes, they were trying to extend the POP because they hadn't used all of the funds.

We also addressed use of multiple year funds on a severable service contract because apparently there was a widely held misunderstanding on that one. Even the experts wanted to fight with me about using multiple year funding on a severable services contract after the period of availability has expired. See B-371636. This was a bitter pill for some but Navy Comptroller confirmed that I had read it correctly.

That's all I have for now on the subject.

.

Vern,

I finally have a copy of the "white paper" I mentioned. It is in fact a memorandum authored by one of our attorneys. It is labeled as confidential attorney/client work product so I don't think I can post it. However, I'm comfortable paraphrasing from it to get you the information.

summerlady51:

If you have anything that is confidential, please don't post it here in public.

My thoughts exactly. The CompGen Decisions I cited previously should provide sufficient information.

I find myself in need of the expertise of the Contracting folks.

I have a request for research and citations concerning no cost extensions of the Period of Performance on a non-severable contract. I know that a no cost extension is allowable on a non-severable contract provided both parties agree that extra time is required to complete the project.

I need to find "official" "legal" language to support these actions for our Budget Officer.

Thanks in advance,

Summerlady51

Is your budget officer questioning the legality of a modification to extend the period of performance date? Some things are self-evident, and are hard to prove. For example, you might assert you have a legal right to wear shoes without socks -- but can you provide official legal language to support your right? Maybe he or she wants you to terminate the contract? Or to allow continued performance while you forbear terminating?

Sometimes, you need to be careful what you ask for -- you might not like the answer. FAR 50.103-2( a ) allows you to modify a contract without consideration, but I don't think that's the answer you want.

Anyway, you might try FAR 43.103( a )( 3 ) or FAR 49.402-4( a ).

It might be easier just to negotiate a price reduction of ten dollars. The requirement is that consideration floow both ways, not that the consideration be equal in value.

You write that both parties agree that more time is needed, but you don't say why -- if there is any Govenrment culpability that might form the basis of a claim, you might use FAR 33.204 and 33.210 as your authority for a no-cost modification wherein the Government grants additional time and the contractor waives any and all claims under the contract for matters arising up to that point in time -- that's consideration flowing both ways.

She's just "that kind of person". I agree that some things aren't law or regulations but are a logical extension of things that are in the laws and regulations. I've been dealing with this same issue with the same person for years. As a Financial Policy person I find it totally logical that a project could go sideways and need an extension. That doesn't even seem foreign to me. She doesn't want to terminate the contracts that have this kind of issue but she wants something in the regs that says it is okay to do this. I've pulled some information and written it up but wanted to check with the experts also.

Thanks.

Summerlady:

"No cost extension" is unclear. Do you mean at no cost to the government or at no cost to the contractor? By :no cost" do you really mean without consideration?

Does the contractor need more time to complete the project. If so, why? If the contractor cannot keep its original promise, why should the government agree to give it more time without getting something in return? If you did give it more time without consideration, would the extension be legal, i.e., contractually binding?

Did the government delay the contractor? Did each do something that comes down to a tradeoff, resulting in a net $0.?

It would be a shame if your budget officer knew more contract law than the contracting people. So please explain what's going on.