17.103
Definitions
FAR 17.103 defines essential terms for multi-year contracting, ensuring all parties understand cancellation, cost recovery, and contract structure requirements.
Overview
FAR 17.103 provides definitions for key terms used in Subpart 17.1, which governs multi-year contracting. Understanding these definitions is essential for both contracting officers and contractors to ensure proper application of multi-year contract procedures, especially regarding cancellation, funding, and cost recovery. The section clarifies what constitutes cancellation, the calculation of cancellation charges, and distinguishes between multi-year and multiple year contracts. It also defines cost categories relevant to contract pricing and cancellation scenarios.
Key Rules
- Cancellation
- Defined as the termination of all remaining program years within a contractually specified time, typically due to nonavailability of funds or lack of notification of fund availability.
- Cancellation Ceiling and Charge
- The ceiling is the maximum charge a contractor can receive if a contract is canceled; the charge covers unrecovered costs that would have been amortized over the contract term.
- Multi-year Contract
- A contract for supplies or services spanning more than one but not more than five years, potentially contingent on annual appropriations and may include cancellation payments.
- Nonrecurring and Recurring Costs
- Nonrecurring costs are one-time expenditures (e.g., tooling, training), while recurring costs vary with production quantity (e.g., labor, materials).
Responsibilities
- Contracting Officers: Must use these definitions to structure, negotiate, and administer multi-year contracts, especially regarding cancellation terms and cost recovery.
- Contractors: Should understand these terms to accurately assess risks, costs, and potential cancellation charges in multi-year contracts.
- Agencies: Ensure consistent application of definitions in policy and oversight of multi-year contracting.
Practical Implications
- These definitions underpin the structure and risk allocation in multi-year contracts, affecting pricing, funding, and cancellation procedures.
- Misunderstanding these terms can lead to disputes over cancellation charges or contract scope.
- Proper use ensures compliance and reduces the risk of financial loss or contract mismanagement.