50.102-3 Limitations on exercise of authority
Source: FAR 50.102-3 on acquisition.gov
FAR 50.102-3 strictly limits the use of extraordinary contractual authority, requiring adherence to competition, funding, and approval requirements to protect government interests and ensure legal compliance.
Overview
FAR 50.102-3 outlines strict limitations on the use of extraordinary contractual authority under Public Law 85-804, which allows agencies to enter into, amend, or modify contracts to facilitate national defense. The section prohibits certain contracting practices, sets conditions for approval, and imposes dollar thresholds and procedural safeguards to prevent abuse. It also addresses requirements for formalizing informal commitments, correcting mistakes, and the use of indemnification authority, especially regarding anti-terrorism technologies.
Key Rules
- Prohibited Practices
- The authority cannot be used for cost-plus-a-percentage-of-cost contracts, violating profit/fee limits, bypassing competition, or waiving legally required bonds.
- Approval Conditions
- Actions must facilitate national defense, lack other legal authority, stay within appropriated funds (with some exceptions), and require Congressional notification for obligations over $150 million.
- Contract Amendments/Modifications
- Contractors must request changes before contract obligations are complete, and price increases are limited by prior bids.
- Formalizing Informal Commitments
- Contractors must submit written payment requests within 6 months, and normal procedures must have been impracticable.
- Additional Limitations for Lower-Level Officials
- Restrictions on releasing obligations or increasing costs over $90,000, addressing GAO matters, or disposing of surplus property.
- Mistake Corrections
- Corrections over $1,000 require notice before final payment and cannot exceed the next lowest offer.
- Indemnification Authority
- Special requirements apply for anti-terrorism technologies, including approvals from DHS and OMB or DoD determinations.
Responsibilities
- Contracting Officers: Ensure all actions comply with these limitations, obtain necessary approvals, and document justifications.
- Contractors: Submit timely requests for amendments or payment, especially for informal commitments or mistakes.
- Agencies: Oversee compliance, ensure Congressional notifications, and coordinate with DHS/OMB for indemnification actions.
Practical Implications
This section exists to prevent misuse of extraordinary contracting authority, ensuring transparency, fiscal responsibility, and adherence to competition and legal requirements. Contractors and agencies must be vigilant about procedural steps, documentation, and statutory thresholds to avoid invalid or non-compliant contract actions.
(a) Pub. L. 85-804 is not authority for-
(1) Using a cost-plus-a-percentage-of-cost system of contracting;
(2) Making any contract that violates existing law limiting profit or fees;
(3) Providing for other than full and open competition for award of contracts for supplies or services; or
(4) Waiving any bid bond, payment bond, performance bond, or other bond required by law.
(b) No contract, amendment, or modification shall be made under Pub. L. 85-804’s authority-
(1) Unless the approving authority finds that the action will facilitate the national defense;
(2) Unless other legal authority within the agency concerned is deemed to be lacking or inadequate;
(3) Except within the limits of the amounts appropriated and the statutory contract authorization (however, indemnification agreements authorized by an agency head (50.104-3) are not limited to amounts appropriated or to contract authorization); and
(4) That will obligate the Government for any amount over $150 million unless the Senate and House Committees on Armed Services are notified in writing of the proposed obligation and 60 days of continuous session of Congress have passed since the transmittal of such notification. However, this paragraph (b)(4) does not apply to indemnification agreements authorized under 50.104-3.
(c) No contract shall be amended or modified unless the contractor submits a request before all obligations (including final payment) under the contract have been discharged. No amendment or modification shall increase the contract price to an amount higher than the lowest rejected bid of any responsible bidder, if the contract was negotiated under 14.404-1(f).
(d) No informal commitment shall be formalized unless-
(1) The contractor submits a written request for payment within 6 months after furnishing, or arranging to furnish, supplies or services in reliance upon the commitment; and
(2) The approving authority finds that, at the time the commitment was made, it was impracticable to use normal contracting procedures.
(e) The exercise of authority by officials below the secretarial level is subject to the following additional limitations:
(1) The action shall not-
(i) Release a contractor from performance of an obligation over $90,000;
(ii) Result in an increase in cost to the Government over $90,000;
(iii) Deal with, or directly affect, any matter that has been submitted to the Government Accountability Office; or
(iv) Involve disposal of Government surplus property.
(2) Mistakes shall not be corrected by an action obligating the Government for over $1,000, unless the contracting officer receives notice of the mistake before final payment.
(3) The correction of a contract because of a mistake in its making shall not increase the original contract price to an amount higher than the next lowest responsive offer of a responsible offeror.
(f) No executive department or agency shall exercise the indemnification authority granted under paragraph 1 A of E.O. 10789 with respect to any supply or service that has been, or could be, designated by the Secretary of Homeland Security as a qualified anti-terrorism technology unless-
(1) For the Department of Defense, the Secretary of Defense has determined that the exercise of authority under E.O. 10789 is necessary for the timely and effective conduct of the United States military or intelligence activities, after consideration of the authority provided under the SAFETY Act (Subtitle G of title VIII of the Homeland Security Act of 2002, http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title6-section44&num=0&edition=prelim" target="_blank">6 U.S.C. 44 1-444); or
(2) For other departments and agencies that have authority under E.O. 10789-
(i) The Secretary of Homeland Security has advised whether the use of the authority under the SAFETY Act would be appropriate; and
(ii) The Director of the Office of Management and Budget has approved the exercise of authority under the Executive order.