HELP: UNILATERAL DEOBLIGATION OF UNBILLED FUNDS - GOVT CUSTOMER WONT LET US HAVE THEM BACK

Submit your invoice.  If the amount is payable, the agency will restore the money or find new money.  But quit worrying about the deobligation -- just submit your invoice.

Kimberly, does your contract have a time period within which requests for reimbursement of travel and ODCs need to be submitted?

If the GSA PSS contract is a commercial item contract some may argue that a unilateral modification is not permissible if it effects your substantive rights under the contract.  A deobligation of funds may do that if there is no intent to replace the funds.  If I were a contractor I would seek a guarantee that funds will be available for legitimate billable contract costs in light of an attempted unilateral mod.  

My comment sort of lines up with ji20874 however I believe I am advocating a proactive approach to assure that the government intention is to pay again with "if" the charges are legitimate costs.

C Culham said:

If the GSA PSS contract is a commercial item contract some may argue that a unilateral modification is not permissible if it effects your substantive rights under the contract.

Carl, knowing the GSA process well, it really doesn’t matter what some may argue.  The terms of the GSA contract control.

I know lots of agencies now are deobligating excess funds in the 4th quarter to reprogram for other purposes so money doesn’t lapse.  That may be the case here.

ji20874 offer sound advice.  I would also call the CO and explain the situation.  The program office likely wasn’t aware additional charges apply.  But invoice and there’s plenty of time to add funding back on the order.

FY 17 funds might be approaching the limit for expending payments…?

formerfed said:

Carl, knowing the GSA process well, it really doesn’t matter what some may argue.  The terms of the GSA contract control.

GSA PSS Schedule Contract holds 552.212-4 and provides changes to terms and conditions must be bilateral.  If the funding withdrawal on an order under the contract is with intention to be forever and no funding will ever be put back on the order a substantive right of the contactor would be done unilateral and it cannot be so per 552.212-4.

formerfed said:

may

I am simply recommending the OP find out.  I would never guess as a contractor why I got a unilateral mod, I would find out.

On 7/10/2021 at 7:44 AM, C Culham said:

If the GSA PSS contract is a commercial item contract some may argue that a unilateral modification is not permissible if it effects your substantive rights under the contract.  A deobligation of funds may do that if there is no intent to replace the funds.  If I were a contractor I would seek a guarantee that funds will be available for legitimate billable contract costs in light of an attempted unilateral mod.  

My comment sort of lines up with ji20874 however I believe I am advocating a proactive approach to assure that the government intention is to pay again with "if" the charges are legitimate costs.

Government contract funding terminology is confusing, especially the terms obligate and deobligate.

If a contract is entered into in accordance with law and regulation, including Congressional authorization and appropriation of funds, then the government, acting through the contracting officer, has incurred a legally enforceable contractual obligation. What we call "obligating funds on a contract" is the act of recording the obligation against the appropriation in accordance with 31 USC 1501. However, funds have been obligated whether or not the obligation has been recorded. That's how you get a violation of the Antideficiency Act.

"Deobligating" however, is tricky.

According to the OP: "We received a unilateral deobligation of unused funds from two of the 3 expired contract periods on our ACTIVE contract."

Once a contract has been entered into, the only way for the government to contractually deobligate itself would be to liquidate all of its contractual obligations or properly terminate the contract. A unilateral "mod" that simply removes funds from the contract without altering the contract's other terms would not affect the government's contractual obligations. If it is obligated to pay, then it is still obligated to pay, funds or no funds.

I think ji20874 was right: The OP's company should invoice for the amounts due, assuming that the amounts are, in fact, still due and the contract did not establish a billing deadline that has already passed. To hell with the government's intentions. What matters is the government's contractual obligations. If it is still contractually obligated to pay, then all the deobligation mod did was create a possible Antideficiency Act violation. See the GAO Red Book, Volume 2, Ch. 7, Part E, Deobligation:

Quote

The definition of the term “deobligation” is an agency's cancellation or downward adjustment of previously incurred obligations. Deobligated funds may be reobligated within the period of availability of the appropriation. For example, annual appropriations may be reobligated in the fiscal year for which the funds were appropriated, while multiyear or no-year appropriated funds may be reobligated in the same or subsequent fiscal years. Deobligations occur for a variety of reasons...

For the most part, there are no special rules relating to deobligation. Rather, the treatment of deobligations follows logically from the principles previously discussed in this and preceding chapters. Thus funds deobligated within the original period of obligational availability are once again available for new obligations just as if they had never been obligated in the first place. Naturally, any new obligations are subject to the purpose, time, and amount restrictions governing the source appropriation. Funds deobligated after the expiration of the original period of obligational availability are not available for new obligations. B-286929, Apr. 25, 2001; 64 Comp. Gen. 410 (1985); 52 Comp. Gen. 179 (1972). They may be retained as unobligated balances in the expired account until the account is closed, however, and are available for adjustments in accordance with 31 U.S.C. § 1553(a).

A proper and unliquidated obligation should not be deobligated unless there is some valid reason for doing so. Absent a valid reason, it is improper to deobligate funds solely to “free them up” for new obligations. To do so risks violating the Antideficiency Act. For example, where a government check issued in payment of some valid obligation cannot be promptly negotiated (if, for example, it is returned as undeliverable), it is improper to deobligate the funds and use them for new obligations. 15 Comp. Gen. 489 (1935); A-44024, Sept. 21, 1942. (The two cited decisions deal with provisions of law which have since changed, but the thrust of the decisions remains the same.) The Antideficiency Act violation would occur if the payee of the original check subsequently shows up and demands payment but the funds are no longer available because they have been reobligated and the account contains insufficient funds. This does not preclude an agency from exercising flexibility in the use of its appropriations so long as the agency does not risk an Antideficiency Act violation. B-272191, Nov. 4, 1997. Under some programs, an agency provides funds to an intermediary which in turn distributes the funds to members of a class of beneficiaries. The agency records the obligation when it provides, or legally commits itself to provide, the funds to the intermediary. It is undesirable for many reasons to permit the intermediary to hold the funds indefinitely prior to reallocation.

Unless the program legislation provides otherwise, the agency may establish a reasonable cutoff date at which time unused funds in the hands of the intermediary are “recaptured” by the agency and deobligated. GAO recommended such a course of action in 50 Comp. Gen. 857 (1971). If recapture occurs during the period of availability, the funds may be reobligated for program purposes; if it occurs after the period of availability has ended, the funds expire absent some contrary direction in the governing legislation. Id.; Dabney v. Reagan, No. 82 Civ. 2231-CSH (S.D.N.Y. Mar. 21, 1985).

[Footnotes omitted.]

I agree with Culham that the OP's company should ask the contracting officer what's up. There may be some misunderstanding that could easily be resolved.

I wonder why the company has not invoiced for two-year old expenditures.

Vern Edwards said:

I wonder why the company has not invoiced for two-year old expenditures.

The OP said it’s the companies accounting system fault 

Quote

We have unbilled travel and ODCs that due to a very poorly performed accounting system transition, and current reconciliation that is still on-going, those invoices were not generated nor submitted

Unfortunately this stuff happens frequently.  It’s most due to CFOs wanting to clear the books of unused money and also makes them look bad for annual audits.  The right think to do is having the CO check with the contractor.

C Culham said:

GSA PSS Schedule Contract holds 552.212-4 and provides changes to terms and conditions must be bilateral.  If the funding withdrawal on an order under the contract is with intention to be forever and no funding will ever be put back on the order a substantive right of the contactor would be done unilateral and it cannot be so per 552.212-4

Carl, you are quoting a contract clause that pertains to the contractor and GSA.  The issue here is a task order.  The GSA contract doesn’t say anything like that applies to orders.  I know GSA contracts well

formerfed said:

Carl, you are quoting a contract clause that pertains to the contractor and GSA.  The issue here is a task order.  The GSA contract doesn’t say anything like that applies to orders.  I know GSA contracts well

So please explain your thoughts and application of 52.216-18 a clause that resides in  PSS Scedule Contracts.  Specifically tell me your interpretation of paragraph (b).

The 552.212-4 clause says “Changes. Changes in the terms and conditions of this contract may be made only by written agreement of the parties.”  That just addresses contract changes.  Those are revisions made to the Contractor/GSA PSS contract

FAR 52.216-18(b) on Ordering says “All delivery orders or task orders are subject to the terms and conditions of this contract. In the event of conflict between a delivery order or task order and this contract, the contract shall control.”  That simply covers  agency orders for supplies and/or services under the contract.  The clause means agencies can’t order something that’s not part of the contract.  

I know several GSA people are on here.  Hopefully one will explain this citing prior opinions.

Im not saying an ordering agency can unilaterally take funding away from a order without the contractors concurrence.  But 552.212-4 isn’t the basis.

@C Culham@formerfed Your discussion of FAR 552.212-4 and 52.216-18 is pointless without more information.

A "modification" that deobligates funds but changes nothing else in the contract is not a change to the terms and conditions of the contract. It is just a permissible administrative change—see FAR 43.101—in this case, a government accounting transaction. It does not change the substantive rights and obligations of the parties.

The exception would be an incrementally funded contract containing the Limitation of Cost clause, FAR 52.232-22, or a similar clause, which limits the parties' obligations to the "total amount actually allotted." 

If the mod deobligates funds that the government will need to liquidate its contractual obligations to the contractor, then it would be administratively improper and might give rise to an Antideficiency Act violation, but it would not be a breach of contract.

It would be a different matter if the modification also seeks to change the contract price or estimated cost or some other contract term. In that case it seems clear that the government cannot do so unilaterally except as otherwise provided in the contract.

That's why I asked what the OP's deobligation mod says.

Bottom line: The OP has not provided enough information.

I think ji20874 has given the OP good advice.

Vern Edwards said:

our discussion of FAR 552.212-4 and 52.216-18 is pointless without more information.

I would agree as the intent of the government is not known at least based on information shared by the OP.

However I do disagree that our discussion is pointless with regard to specific statements made by @formerfed that is clarified as.....

formerfed said:

FAR 52.216-18(b) on Ordering says “All delivery orders or task orders are subject to the terms and conditions of this contract. In the event of conflict between a delivery order or task order and this contract, the contract shall control.”  That simply covers  agency orders for supplies and/or services under the contract.  The clause means agencies can’t order something that’s not part of the contract.

I read all statements combined to suggest that 552.212-4 does not apply to task orders issued under the contract and I believe that such a suggestion is inconsistent with 52.216-18 and how it has be interpreted.   Without getting to details of case law etc. it makes no sense and is exactly why task orders are issued with no terms and conditions such as 552.212-4 in a task order as the terms of the parent FSS contract extend to the task order.  Remember such things as  payments, labor laws, T4c, T4C and many more contained in the parent FSS that are not included in a task order yet apply as the parent FSS contract extends all to the task order.

Now @formerfedsuggests there are opinions (case law?) that suggests otherwise and I am intrigued by the suggestion as it is a view I have never heard nor seen.

Vern,

Agreed.  Seeing the specific language removing funding is necessary first.

Carl,

I’ll wait for someone at GSA to respond.

@formerfedFor what it's worth, I think Culham is correct about 52.216-18 and 552.212-4.

formerfed said:

Carl,

I’ll wait for someone at GSA to respond.

Well some will say that the following is not authoritative on the matter of GSA FSS Schedule Contract clauses not extending to an order place under the GSA FSS contract but I really doubt that GSA would allow misguided information to reside on a webpage they manage.   

"1. Here is how to find clauses  already in the Schedule contracts. That's important because you want to ensure your order doesn't conflict with the Schedule contract terms. (You also don't need to put clauses in your order that are already in the Schedule contract.)" Ref.  https://interact.gsa.gov/wiki/adding-provisionsclauses-rfqs

Carl,

You're taking this way off topic.  Those GSA blog comments have nothing to do with this.  Of course agencies can add clauses to their orders that don’t conflict with the Schedule.

My comment had to do with whether clause 552.212-4 applied to orders.  I admit I got off track thinking of a couple past situations where Schedule clauses referred to “GSA” and “contractor” and agencies tried wrongly to say those clauses pertained to their individual orders substituting themselves for GSA.  I was wrong with that. 

As Vern mentioned, we don’t know what the agency modification said in the OPs case.  Certainly an administrative action can be unilateral.  But In other situations where an agency’s action infringes altering contractual rights, the modification needs to be bilateral reflecting mutual agreement.

formerfed said:

My comment had to do with whether clause 552.212-4 applied to orders.  I admit I got off track thinking of a couple past situations where Schedule clauses referred to “GSA” and “contractor” and agencies tried wrongly to say those clauses pertained to their individual orders substituting themselves for GSA.  I was wrong with that.

THAT is how to gracefully acknowledge that you were wrong about something. I will remember it and try to emulate it.

formerfed said:

Carl, you are quoting a contract clause that pertains to the contractor and GSA.  The issue here is a task order.  The GSA contract doesn’t say anything like that applies to orders.  I know GSA contracts well

formerfed said:

arl,

I’ll wait for someone at GSA to respond.

formerfed said:

Carl,

You're taking this way off topic.

As you can see it was not me that started the thread down the trail of a GSA FSS Schedule contract not applying to an order under the the GSA FSS Contract.

formerfed said:

Of course agencies can add clauses to their orders that don’t conflict with the Schedule

You well know that the intent of me providing the reference was not adding clauses but whether the GSA FSS Contract clauses apply to an order.   Ergo my emphasis on one paragraph of the reference that being paragraph No. 1.  

formerfed said:

My comment had to do with whether clause 552.212-4 applied to orders.  I admit I got off track thinking of a couple past situations where Schedule clauses referred to “GSA” and “contractor” and agencies tried wrongly to say those clauses pertained to their individual orders substituting themselves for GSA.  I was wrong with that.

Exactly and thank you for clarifying but I ask with all sincerity please do not cast my comments in the light that I was the one to take the thread off track.

formerfed said:

Certainly an administrative action can be unilateral.

I agree and specific to the FAR an administrative change is defined.   Reference FAR 43.101.   My point from the beginning that many place a comment like the following in the category  of "administrative change".   Actually it depends.  Edwards has added great context to the depends but a modification to a contract  that de-obligates funds without context of what the de-obligation means might in fact affect the substantive rights of the parties, in this case the contractor.  My acknowledged agreement that we do not know and it seems that the OP does not know or would not be concerned.

On 7/8/2021 at 11:34 AM, Kimberly McCliggott said:

We received a unilateral deobligation of unused funds from two of the 3 expired contract periods on our ACTIVE contract.

C Culham said:

[A] modification to a contract  that de-obligates funds without context of what the de-obligation means might in fact affect the substantive rights of the parties, in this case the contractor.

How might the lack of context affect the substantive rights of the parties?

Vern Edwards said:

A unilateral "mod" that simply removes funds from the contract without altering the contract's other terms would not affect the government's contractual obligations.

Here is a "try" on my part borrowing from your post.   

The agency refuses to pay the invoice on the basis that there is no money as somebody made them de-obligate it, regardless of the ability of the contractor to prove that they are appropriate costs of the T&M order.  While you have provided a great example of the "government" being liable for the monies, if in fact legit costs, who does the contractor then turn to.   CBCA or GSA noting that it is well settled in case law that contract is with the government and not a particular agency.   In the end after scratching and clawing to get their money through whatever venue will finally agree to paying appropriate costs it is my view that the "substantive rights" of the contractor to be paid timely have been violated.   

Change the paying office, change appropriation data, but taking away money with no explanation implies a substantive right has been removed.    The OP has expressed a concern and rightly so until they are satisfied that their substantive rights have not been violated.

While I appreciate your information about obligation I really do wonder that if it is right minded thinking for a person holding  a government contract and that receives a unilateral modification to remove all of its monies that they should simply sit back say no problem I know I will get the money that I can prove was a cost to the contract sometime.   The need for case law seems to suggest otherwise.

C Culham said:

The agency refuses to pay the invoice on the basis that there is no money as somebody made them de-obligate it, regardless of the ability of the contractor to prove that they are appropriate costs of the T&M order.  While you have provided a great example of the "government" being liable for the monies, if in fact legit costs, who does the contractor then turn to.

Who does the contractor turn to? To the contracting officer for the order. Who else? The contractor files a claim pursuant to the Disputes clause and demands a final decision. If payment is still denied by final decision, the contractor appeals, seeking the payment due, prompt payment interest, and CDA interest. If the contractor is entitled to the payment, then the contractor gets paid. The contractor has been inconvenienced, but its contractual rights have been honored.

C Culham said:

Change the paying office, change appropriation data, but taking away money with no explanation implies a substantive right has been removed.

I suppose that a contractor might draw an inference to that effect. Whether the inference is justified is another question entirely.

C Culham said:

While I appreciate your information about obligation I really do wonder that if it is right minded thinking for a person holding  a government contract and that receives a unilateral modification to remove all of its monies that they should simply sit back say no problem I know I will get the money that I can prove was a cost to the contract sometime.

No one said "No problem." What ji20874 said was to just go ahead and submit an invoice. Whether there will be a problem remains to be seen. I have said that you were right to suggest a call to the CO.

On 7/8/2021 at 1:34 PM, Kimberly McCliggott said:

We still need roughly $170k that the government is taking back and not willing to allow us to bill against.

To be able to more definitively respond, the OP would have to describe what the contract or order billing requirements and time limits are for those un-billed expenses.

De-obligating the funds probably wouldn’t, by itself, justify a refusal/inability to pay otherwise allowable costs (per the above discussion), if those type appropriations are still available for payment purposes. 

The OP can invoice for them. It wasn’t clear to me if they already did and were denied based solely on the unilateral de-ob mod.

Vern Edwards said:

The contractor has been inconvenienced, but its contractual rights have been honored.

I see it differently.  A dispute route is taken when a contractor believes a substantive right of the contract has been breached by the government.  What results is a determination of whether it has or has not.

Vern Edwards said:

I suppose that a contractor might draw an inference to that effect. Whether the inference is justified is another question entirely.

Yes the "depends" of such issues.

Vern Edwards said:

No one said "No problem."

I did not say any specific individual did.  I apologize if my post reads as such.  It was intended as a general comment of what I have experienced.  Hang "administrative change" on a mod to imply no problem.  Specific to ji20874 my initial post was intended and in part stated a more proactive approach to ensure a substantive right was not being taken away.

Nothing should be taken for granted when it is unclear yet in writing.

C Culham said:

I see it differently.

Yes. You do.

Vern Edwards said:

Yes. You do.

Thanks Vern and as always I keep plowing until I find something.   

I am providing the following as an interesting read.   I am well aware it is not on point but close as it relates to an IDIQ and task orders (construction however) and provides a  discussion about a unilateral modification that simply deobligates money versus (in my words) a modification that deobligates money with intention to change the price of the contract. I found every thing in-between these topics to be interesting .

https://www.cbca.gov/files/decisions/2016/LESTER_07-25-16_ 3912__SAFE_HAVEN_ENTERPRISES_LLC_V_DEPARTMENT_OF_STATE.pdf

If I got the idea of a unilateral modification off track I apologize yet the case does seem to support one thought repeated in this thread.   The contractor should communicate with the government to find out something that Joel has point out with regard to the OP , why is the government "not willing to allow us to bill against."

C Culham said:

If I got the idea of a unilateral modification off track I apologize yet the case does seem to support one thought repeated in this thread.

@C CulhamYes, it supports the thought that I communicated, which was that a deobligation of funds, in and of itself, does not affect an agency's legal obligations under contract. See the following, from page 20 of the decision:

Quote

In its filings, SHE’s [the contractor's] sole focus has been on what it calls DOS’s illegal deobligation of funding. Yet, a contractor’s rights are generally governed by its contract and the agreement that it reached on price with the Government in that contract. Information Systems & Networks Corp. v. United States, 64 Fed. Cl. 599, 604-05, appeal dismissed, 157 F. App’x 264 (Fed. Cir. 2005). Although there is certainly a relationship between the price of a firmfixed-price contract and the agency’s obligation of funds to support that contract, contract funding is a concept associated with and dependent upon an agency’s appropriations from Congress, which is separate and distinct from contract pricing. See 1 General Accounting (now Accountability) Office (GAO), Principles of Federal Appropriations Law 1-2, 2-5 (3d ed. 2004) (GAO Redbook) (defining “appropriation” as “[a]uthoritygiven to federal agencies to incur obligations and to make payments from Treasury for specified purposes”). Once there is an available appropriation through which an awarded contract could be funded, the amount of appropriated money that the agency affirmatively obligates to a firm-fixed-price contract (or takes away from it) becomes, in many ways, irrelevant to the contractor because the contractor will be entitled to payment of its contract price if it performs its contract obligations. Salazar v. Ramah Navajo Chapter, 132 S. Ct. 2181, 2189 (2012) (if agency has obligated funds through the award of a specific procurement contract, and the “Government contractor is one of several persons to be paid out of a larger appropriation sufficient in itself to pay the contractor, . . . the Government is responsible to the contractor for the full amount due under the contract, even if the agency exhausts the appropriation in service of other permissible ends”). Accordingly, assuming that “Congress appropriates adequate funds to cover a prospective contract, contractors need not keep track of agencies’ shifting priorities and competing obligations; rather, they may trust that the Government will honor its contractual promises.” Id. There is no allegation here that DOS did not have appropriations adequate to cover task order 003.

Emphasis added.

Deobligation of funds, in and of itself, without other contract changes, has no bearing on a contractor's substantive contractual rights. See also King Construction Co., ASBCA 39170, 94-2 BCA ¶ 26630, Jan. 14, 1994. The appellant in the case above paid a lawyer for nothing. It was stupid to file a claim objecting to a deobligation of funds.

Once again, ji20874's advice to the OP not to freak out over the deobligation and just send an invoice has been proven to be sound. However, I do agree with you that upon receiving an unexplained unilateral modification to deobligate funds, a contractor would be wise to inquire.

Vern Edwards said:

Once again, ji20874's advice to the OP not to freak out over the deobligation

I am not going to disagree based on the general information offered by the OP but in context of all of WIFCON I have a concern about quick answers.  I will simply use this thread as an example.  Two additional thoughts  - the OP has never come back and with regard to quick answers I am singling no one out and adding myself to the list.

With regard to this thread.....we know -

T&M Awarded under a GSA PSS Schedule contract.   "ODCs" that need to be billed.   What are the ODCs? If ODC's are for the labor are not ODC's already included in the labor rate?  A read of GSA contract practices do allow for travel, and possibly "Other Direct Costs".

FAR and GSA FSS standards strongly suggest (example FAR 16.601 &12.207) that a T&M have a ceiling price.   Could it be that the governments action of deobligation and the inferred   "We still need roughly $170k that the government is taking back and not willing to allow us to bill against." is about a ceiling and not a simple action of fund management?  

I then took the thread on a journey regarding why a contractor might freak out, my bad.    But I do wonder if advice to quit worrying and simply submit an invoice is sound as well.

I read too much, and read in too much, and I am resolved after re-reading the thread that the first action of the contractor is not to submit an invoice but talk to the  CO to find out what is going on and go from there as there could be a whole lot more buried in the original post.

Off base, derailing the thread with this post, yes probably, but I was reminded of this recent thread as I read and re-read this thread.   Great information in general was provided but was the issues for the OP really sorted out?

C Culham said:

But I do wonder if advice to quit worrying and simply submit an invoice is sound as well.

You have made your point, Carl, that the contractor should inquire. You have made it several times. No one disagrees with you.

Vern Edwards said:

You have made your point, Carl,

Haven't we all ☺️

“…I think ji20874 was right:…”

“…I think ji20874 has given the OP good advice….”

“…Once again, ji20874's advice to the OP not to freak out over the deobligation and just send an invoice has been proven to be sound. …”

let’s call a truce. 😁

C Culham said:

Haven't we all ☺️

“…I think ji20874 was right:…”

“…I think ji20874 has given the OP good advice….”

“…Once again, ji20874's advice to the OP not to freak out over the deobligation and just send an invoice has been proven to be sound. …”

Do you disagree with me? If not, then truce. 😈

I’ve learned over the years that certain debaters in the Forum will doggedly persist until they have the last word. Recommend that somebody let the other one have it. 🤗

Carl, take it! 😇

Wait.  I stirred up things too.  I want the last word🤣

Actually, ji20874 should get the last word, since he provided the very best response to the OP on the very first day of this thread.

👏

This reminds me of the time that the mother said to her child, “Just don’t say another word!”

“Okay”

”I said NOT ANOTHER WORD!

”Yes ma’m.”

”I MEAN IT!”

”I KNOW”

”sigh”…

🤣😂

Amen!

Zyzzyva.

I have a customer who didn't pay a full invoice amount on a CR contract because the program office didn't budget the funds to cover the additional efforts that were imposed via a unilateral mod issued under the changes clause.  Contract PoP has expired.  No funds left on the relevant CLIN.

Did we mod the contract to require additional IT testing due to Covid telework? Yes.  Did we receive a benefit? Yes.  Did the vendor account for and submit the basis for their full invoiced amount? Yes.  Were the additional costs reasonable? Yes. 

Pretty simple really.  The fact that they are a SB and the amount was only $9K made it easier.   Currently available funding and an expired PoP are irrelevant in regard to the government's responsibility to pay for supplies and services required and received.

REA'n Maker,

So, the agency only paid the contractor a partial amount?

Since you are talking about a cost-reimbursement contract, FAR 52.232-20 para. (g) or FAR 52.232-22 para. (j), whichever is in the contract, will come into play when a change order is involved.  A contractor's failure to follow those clauses may easily result in non-payment of overrun amounts, and rightfully so.