52.232-22
Limitation of Funds
Contractors must closely monitor costs and promptly notify the government as funding thresholds are approached to avoid performing work without guaranteed reimbursement.
Overview
FAR 52.232-22, Limitation of Funds, is a clause used in incrementally funded cost-reimbursement contracts. It establishes procedures and obligations for both contractors and the government regarding the use and notification of available funds. The clause ensures that contractors do not exceed the funds allotted by the government and provides mechanisms for notification, additional funding, and contract termination if funds are not increased. It also clarifies the government's and contractor's responsibilities regarding costs, notifications, and the consequences of insufficient funding.
Key Rules
- Estimated Cost and Allotted Funds
- Contractors must not exceed the estimated cost or the amount allotted by the government, as specified in the contract Schedule.
- Notification Requirements
- Contractors must notify the Contracting Officer in writing when costs are expected to reach 75% of the allotted funds within the next 60 days, and again 60 days before the end of the performance period if more funds are needed.
- No Obligation Beyond Allotted Funds
- The government is not obligated to reimburse costs beyond the allotted amount, and contractors are not required to continue work or incur costs beyond this limit unless additional funds are allotted.
- Termination Procedures
- If additional funds are not provided, the contractor may request termination, and the Contracting Officer will terminate the contract as appropriate.
- Change Orders and Funding Increases
- Change orders do not authorize exceeding allotted funds unless they specifically increase the funding.
Responsibilities
- Contracting Officers: Must monitor funding, respond to contractor notifications, and process funding increases or terminations as needed.
- Contractors: Must track incurred costs, provide timely written notifications, and cease work if funds are not increased.
- Agencies: Ensure compliance with incremental funding procedures and proper contract administration.
Practical Implications
- This clause protects both parties from unauthorized expenditures and ensures fiscal discipline in cost-reimbursement contracts. Contractors must have robust cost-tracking and communication systems to avoid overruns and maintain compliance. Failure to notify or exceeding funds can result in non-reimbursement and contractual disputes.