Clauses for contracting in advance of funds
Always include the appropriate availability of funds clause in contracts initiated before funds are available or that may extend into a new fiscal year to ensure compliance and avoid unauthorized commitments.
Overview
FAR 32.706-1 outlines the requirements for including specific contract clauses when contracting in advance of available funds. This section ensures that government contracts properly address the availability of appropriated funds, particularly when contracts are initiated before funds are available or when contracts may extend into a new fiscal year. The regulation mandates the use of designated clauses to protect both the government and contractors from obligations that exceed available appropriations.
Key Rules
- Clause 52.232-18, Availability of Funds
- Must be included in solicitations and contracts if the contract will be charged to funds from a new fiscal year and is initiated before those funds are available.
- Clause 52.232-19, Availability of Funds for the Next Fiscal Year
- Required in solicitations and contracts for one-year indefinite-quantity or requirements contracts for services that are funded by annual appropriations and may extend beyond the initial fiscal year.
Responsibilities
- Contracting Officers: Must ensure the correct clauses (52.232-18 or 52.232-19) are inserted into solicitations and contracts as required by the funding situation and contract type.
- Contractors: Should review contracts to confirm the presence of these clauses and understand the limitations on government obligations prior to fund availability.
- Agencies: Must oversee compliance with these requirements to avoid unauthorized commitments.
Practical Implications
This section exists to prevent the government from making financial commitments before funds are legally available, reducing the risk of Anti-Deficiency Act violations. Contractors should be aware that the government is not obligated to pay or continue performance until funds are officially available, which can impact project planning and cash flow. Common pitfalls include failing to include the required clauses or misunderstanding the limitations imposed by them.