17.104 General
Source: FAR 17.104 on acquisition.gov
Multi-year contracting allows agencies to acquire requirements over several years with flexible funding and cancellation terms, but requires strict compliance with funding and risk management policies.
Overview
FAR 17.104 outlines the general principles and requirements for multi-year contracting, a method that allows agencies to acquire known requirements over a period of up to five years, even if full funding is not available at contract award. This method can be used in both sealed bidding and negotiated procurements. The section emphasizes flexibility in contract terms, especially regarding cancellation provisions, which may be tailored to the specific contract with agency head approval. Funding for multi-year contracts must comply with OMB Circular A-11 and ensure sufficient funds are available to cover potential cancellation or termination costs. The regulation distinguishes between cancellation (which occurs between fiscal years and applies to all future quantities) and termination for convenience (which can occur at any time and for any quantity).
Key Rules
- Multi-year Contracting Definition and Duration
- Agencies may enter into contracts for up to five years for known requirements, even if not all funds are available at award.
- Flexibility in Cancellation Terms
- Cancellation terms can be modified based on contract circumstances with agency head approval.
- Funding Requirements
- Agencies must follow OMB Circular A-11 and ensure funding covers potential cancellation/termination costs.
- Distinction Between Cancellation and Termination
- Cancellation applies between fiscal years for all future quantities; termination for convenience can occur at any time for any quantity.
Responsibilities
- Contracting Officers: Ensure multi-year contracts comply with funding, cancellation, and termination requirements; seek agency head approval for modifications.
- Contractors: Understand and comply with contract terms regarding funding, cancellation, and termination.
- Agencies: Oversee compliance with OMB Circular A-11 and approve modifications to standard requirements.
Practical Implications
- Multi-year contracting provides flexibility and potential cost savings but requires careful planning for funding and risk management.
- Contractors must be aware of the differences between cancellation and termination and the financial implications of each.
- Common pitfalls include inadequate funding for cancellation costs and misunderstanding contract modification authority.
(a) Multi-year contracting is a special contracting method to acquire known requirements in quantities and total cost not over planned requirements for up to 5 years unless otherwise authorized by statute, even though the total funds ultimately to be obligated may not be available at the time of contract award. This method may be used in sealed bidding or contracting by negotiation.
(b) Multi-year contracting is a flexible contracting method applicable to a wide range of acquisitions. The extent to which cancellation terms are used in multi-year contracts will depend on the unique circumstances of each contract. Accordingly, for multi-year contracts, the agency head may authorize modification of the requirements of this subpart and the clause at 52.217-2, Cancellation Under Multi-year Contracts.
(c) Agency funding of multiyear contracts shall conform to the policies in OMB Circular A-11 (Preparation, Submission, and Execution of the Budget) and other applicable guidance regarding the funding of multiyear contracts. As provided by that guidance, the funds obligated for multi-year contracts must be sufficient to cover any potential cancellation and/or termination costs; and multi-year contracts for the acquisition of fixed assets should be fully funded or funded in stages that are economically or programmatically viable.
(d) The termination for convenience procedure may apply to any Government contract, including multiyear contracts. As contrasted with cancellation, termination can be effected at any time during the life of the contract (cancellation is effected between fiscal years) and can be for the total quantity or partial quantity (where as cancellation must be for all subsequent fiscal years’ quantities).