32.703-1
General
Contractors must ensure work performed does not exceed the funds obligated by the government, whether the contract is fully or incrementally funded.
Overview
FAR 32.703-1 outlines the general requirements for obligating funds on government contracts, distinguishing between fully funded and incrementally funded contracts. For fully funded contracts, the total contract price (for fixed-price contracts) or the estimated cost plus any fee (for cost-reimbursement contracts) must be obligated at the time of award. For incrementally funded contracts, only the amount allotted and the corresponding portion of any fee are obligated, with additional funds provided as needed through contract modifications. This section ensures that contractors and contracting officers understand the funding obligations required to legally bind the government to pay for contract performance.
Key Rules
- Fully Funded Contracts
- The government must obligate funds to cover the entire contract price or estimated cost plus fee at award.
- Incrementally Funded Contracts
- Only the allotted amount and the corresponding increment of fee are obligated initially, with further funding provided incrementally.
Responsibilities
- Contracting Officers: Must ensure proper obligation of funds based on contract type and funding method.
- Contractors: Should verify funding status and ensure work does not exceed obligated amounts.
- Agencies: Must monitor funding and ensure compliance with obligation requirements.
Practical Implications
- This section exists to prevent unauthorized commitments and ensure the government does not exceed its available funding.
- Contractors must be vigilant about the amount of funds obligated to avoid performing work without guaranteed payment.
- Common pitfalls include misunderstanding the difference between fully and incrementally funded contracts, leading to potential funding shortfalls or unauthorized work.