17.106-1
General
FAR 17.106-1 ensures multi-year contracts are structured to manage risk, funding, and cancellation through clear procedures for contracting methods, cancellation ceilings, and payment limits.
Overview
FAR 17.106-1 outlines the general principles and requirements for multi-year contracting, focusing on the selection of contracting methods, contract types, cancellation procedures, and financial obligations. It emphasizes that the nature of the requirement should dictate the contracting method, and that multi-year contracts can use sealed bidding or negotiation. The section provides detailed guidance on establishing and adjusting cancellation ceilings, calculating nonrecurring costs, and managing payment obligations. It also addresses the importance of presolicitation conferences and sets limits on the government’s payment liability, including procedures for contract termination and cancellation charges.
Key Rules
- Method of Contracting
- The requirement’s nature determines the contracting method; multi-year contracts are compatible with sealed bidding and negotiation.
- Type of Contract
- Fixed-price contracts should consider economic price adjustments and profit objectives reflecting contractor risk and financing.
- Cancellation Procedures
- All years except the first are subject to cancellation; contracting officers must establish and adjust cancellation ceilings based on nonrecurring costs and remaining requirements.
- Cancellation Ceilings
- Ceilings and dates can be revised before contract award, with specific procedures for sealed bidding and negotiation.
- Payment of Cancellation Charges
- Government liability for cancellation is determined by contract terms.
- Presolicitation Conferences
- Recommended to ensure all sources understand multi-year contracting.
- Payment Limit
- Government payment is limited to available funds for each program year.
- Termination Payment
- If terminated for convenience, the government’s obligation is capped at the available amount plus the cancellation ceiling.
Responsibilities
- Contracting Officers: Select appropriate contracting method, establish and adjust cancellation ceilings, ensure payment limits, and conduct presolicitation conferences as needed.
- Contractors: Understand cancellation and termination terms, provide cost data as required, and comply with contract payment limits.
- Agencies: Oversee compliance with multi-year contracting procedures and ensure funding availability.
Practical Implications
- This section ensures that multi-year contracts are structured to manage risk, funding, and cancellation effectively. It impacts daily contracting by requiring careful calculation of cancellation ceilings, clear communication of contract terms, and strict adherence to funding limits. Common pitfalls include miscalculating nonrecurring costs, failing to update cancellation ceilings, or exceeding payment obligations.