32.706
Contract clauses
FAR 32.706 mandates the inclusion of specific funding-related clauses in contracts to ensure government liability is limited to available funds and to prevent unauthorized obligations.
Overview
FAR 32.706 outlines the required contract clauses related to contract funding, specifically addressing situations where contracts are awarded in advance of funds, where there are limitations on cost or funds, and where there is a risk of unenforceable unauthorized obligations. This section directs contracting officers to include specific clauses in contracts to ensure compliance with funding regulations and to protect both the government and contractors from financial risks associated with improper funding or unauthorized commitments.
Key Rules
- Clauses for Contracting in Advance of Funds
- Contracts awarded before funds are available must include clauses that address the government's liability and the contractor's rights if funds are not subsequently provided.
- Clauses for Limitation of Cost or Funds
- Contracts must include clauses that limit the government's obligation to the amount of funds allotted and require contractors to notify the government when costs approach the funding limit.
- Clause for Unenforceability of Unauthorized Obligations
- Contracts must include a clause stating that obligations made without proper authorization or funding are unenforceable against the government.
Responsibilities
- Contracting Officers: Must ensure the appropriate funding-related clauses are included in contracts, especially when funds are not yet available or are limited.
- Contractors: Must comply with notification and cost limitation requirements and understand the limits of government liability.
- Agencies: Must oversee contract funding and ensure compliance with funding statutes and regulations.
Practical Implications
- This section exists to prevent unauthorized government spending and to clarify the financial responsibilities of both parties.
- It impacts daily contracting by requiring careful attention to funding clauses and timely communication about funding status.
- Common issues include failure to include required clauses, exceeding funding limits, or misunderstanding the enforceability of unauthorized commitments.