General
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.