52.232-22
Limitation of Funds
Contractors must not exceed the funds allotted by the government and must provide timely written notifications as costs approach specified thresholds to ensure compliance and continued contract performance.
Overview
FAR 52.232-22, Limitation of Funds, is a mandatory clause for incrementally funded cost-reimbursement contracts. It establishes procedures and obligations for both contractors and the government regarding the use and management of funds allotted to a contract. The clause ensures that contractors do not exceed the funds currently allotted by the government and provides mechanisms for notification, additional funding, and contract termination if funds are not increased. It also outlines the contractor’s responsibilities to notify the contracting officer when costs approach certain thresholds and clarifies that the government is not obligated to reimburse costs beyond the allotted amount unless formally increased.
Key Rules
- Notification of Funding Thresholds
- 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 funded period if more funds are needed.
- No Work Beyond Allotted Funds
- Contractors are not required to continue work or incur costs beyond the amount allotted unless the government formally increases the funding.
- Termination for Lack of Funds
- If additional funds are not provided, the contractor may request termination of the contract, and the government must act accordingly.
- No Unauthorized Increases
- Only written notification from the contracting officer can increase the amount allotted; change orders do not automatically authorize more spending unless specified.
- Fee Adjustment
- If the contract is not fully funded, the contractor is entitled to a fee proportional to the work completed.
Responsibilities
- Contracting Officers: Must monitor funding, respond to contractor notifications, and formally increase funds when necessary.
- Contractors: Must track costs, provide timely notifications, and not exceed allotted funds.
- Agencies: Ensure compliance with incremental funding procedures and proper contract administration.
Practical Implications
- This clause protects both parties from unauthorized expenditures and ensures clear communication about funding status. Contractors must have robust cost tracking and notification systems to avoid noncompliance. Failure to notify or exceeding allotted funds can result in non-reimbursement and contract disputes.