36.609-1 Design within funding limitations
Source: FAR 36.609-1 on acquisition.gov
Architect-engineer contractors must design projects within negotiated funding limits and, if construction bids exceed these limits, are generally required to redesign at no additional cost unless exceptions apply.
Overview
FAR 36.609-1 outlines requirements for architect-engineer (A-E) contractors to design projects within specified funding limitations set by the Government. The regulation ensures that construction costs do not exceed a contractually agreed-upon dollar limit, and details the responsibilities of both the contractor and the Government if costs surpass this limit. It also provides guidance on establishing the funding limitation during contract negotiations and mandates the inclusion of a specific contract clause, except in certain circumstances.
Key Rules
- Design Within Funding Limitation
- A-E contractors must design projects so construction costs do not exceed the funding limitation specified in the contract. If bids exceed this limit, the contractor must redesign at no additional cost, unless the overage is due to factors beyond their control.
- Establishing the Funding Limitation
- The construction funding limitation is negotiated and excludes Government overhead, supervision, and contingency allowances. The Government must share relevant cost estimate information with the contractor.
- Clause Inclusion Requirements
- The clause at 52.236-22 must be included in fixed-price A-E contracts, with exceptions for projects where cost is secondary, standard structures, or minimal design effort.
Responsibilities
- Contracting Officers: Must negotiate and document the funding limitation, provide cost estimate information, and ensure proper clause inclusion or document exceptions.
- Contractors: Must design within the funding limit and, if necessary, redesign at no extra cost unless exceptions apply.
- Agencies: Must document reasons if redesign is not required and oversee compliance with funding limitations.
Practical Implications
- This section ensures fiscal discipline in A-E contracts and protects the Government from cost overruns. Contractors must be diligent in cost estimation and design, while contracting officers must clearly communicate funding limits and exceptions. Common pitfalls include failing to account for all cost drivers or not documenting exceptions properly.
(a) The Government may require the architect-engineer contractor to design the project so that construction costs will not exceed a contractually specified dollar limit (funding limitation). If the price of construction proposed in response to a Government solicitation exceeds the construction funding limitation in the architect-engineer contract, the firm shall be solely responsible for redesigning the project within the funding limitation. These additional services shall be performed at no increase in the price of this contract. However, if the cost of proposed construction is affected by events beyond the firm’s reasonable control (e.g., if there is an increase in material costs which could not have been anticipated, or an undue delay by the Government in issuing a construction solicitation), the firm shall not be obligated to redesign at no cost to the Government. If a firm’s design fails to meet the contractual limitation on construction cost and the Government determines that the firm should not redesign the project, a written statement of the reasons for that determination shall be placed in the contract file.
(b) The amount of the construction funding limitation (to be inserted in paragraph (c) of the clause at 52.236-22) is to be established during negotiations between the contractor and the Government. This estimated construction contract price shall take into account any statutory or other limitations and exclude any allowances for Government supervision and overhead and any amounts set aside by the Government for contingencies. In negotiating the amount, the contracting officer should make available to the contractor the information upon which the Government has based its initial construction estimate and any subsequently acquired information that may affect the construction costs.
(c) The contracting officer shall insert the clause at 52.236-22, Design Within Funding Limitations, in fixed-price architect-engineer contracts except when-
(1) The head of the contracting activity or a designee determines in writing that cost limitations are secondary to performance considerations and additional project funding can be expected, if necessary;
(2) The design is for a standard structure and is not intended for a specific location; or
(3) There is little or no design effort involved.