32.703-3
Contracts crossing fiscal years
Contracts funded by annual appropriations generally cannot cross fiscal years unless specifically authorized or for certain indivisible end products, with a one-year exception for severable services.
Overview
FAR 32.703-3 addresses the rules for awarding and funding contracts that span across fiscal years when using annual appropriations. Generally, such contracts are prohibited unless specifically authorized by statute or if the contract involves an indivisible end product (such as expert or consultant services). The regulation also provides an exception for severable service contracts: agency heads (except NASA) may enter into, exercise options for, or place orders for severable services that begin in one fiscal year and end in the next, provided the period does not exceed one year. In these cases, funds from the initial fiscal year may be obligated for the entire contract period under this authority.
Key Rules
- Annual Appropriations Limitation
- Contracts funded by annual appropriations generally cannot cross fiscal years unless authorized by statute or if the contract is for an indivisible end product.
- Severable Services Exception
- Agency heads (except NASA) may enter into contracts for severable services that cross fiscal years, as long as the contract period does not exceed one year, and funds from the initial fiscal year may be obligated for the full contract amount.
Responsibilities
- Contracting Officers: Must ensure contracts crossing fiscal years comply with statutory authority or meet the indivisible end product exception; must verify severable service contracts do not exceed one year and are properly funded.
- Contractors: Should be aware of funding limitations and contract period restrictions for contracts spanning fiscal years.
- Agencies: Agency heads must authorize severable service contracts crossing fiscal years and ensure compliance with statutory requirements.
Practical Implications
- This section exists to ensure compliance with appropriations law and prevent improper obligation of funds across fiscal years. It impacts how contracts are structured and funded, especially for services or deliverables that span more than one fiscal year. Common pitfalls include exceeding the one-year limit for severable services or failing to obtain proper statutory authorization for contracts crossing fiscal years.