52.232-22
Limitation of Funds
On an incrementally funded contract, do not rely on expected future funding—track costs closely, give the required written notices, and stop before exceeding the amount the Contracting Officer has formally allotted.
Overview
- FAR 52.232-22, Limitation of Funds, governs incrementally funded cost-reimbursement and cost-sharing contracts by capping the Government’s reimbursement obligation at the amount currently allotted to the contract.
- Its purpose is to require early funding notifications, prevent unauthorized overrun costs, and define what happens if additional funds are not provided.
Key Rules
- Estimated cost and allotted funding
- The contractor must use its best efforts to perform within the estimated cost stated in the Schedule, while recognizing that only the amount currently allotted is available for payment.
- Notice thresholds and timing
- The contractor must notify the Contracting Officer in writing when projected costs for the next 60 days, plus prior incurred costs, will exceed 75% of allotted funds (or the Government allotment plus the contractor’s share in cost-sharing contracts).
- The contractor must also provide a written notice 60 days before the end of the funded performance period stating any additional funds needed and when they will be required.
- No obligation beyond allotted funds
- The Government is not required to reimburse costs above the allotted amount, and the contractor is not required to continue performance beyond that amount unless the Contracting Officer increases funding in writing.
- Funding changes and termination
- Change orders do not authorize spending above allotted funds unless they expressly increase the allotment. If additional funds are not provided, the contractor may request termination.
Responsibilities
- Contracting Officers: allot funds in writing, control incremental funding, respond to notices, and terminate when appropriate.
- Contractors: monitor burn rate, provide timely written notices, avoid exceeding allotted funds without written authorization, and request termination if funding is not continued.
- Agencies: ensure funding actions are documented and aligned with estimated cost, period of performance, and any cost-sharing formula.
Practical Implications
- This clause exists to manage fiscal risk on incrementally funded contracts and to prevent Anti-Deficiency Act concerns.
- Contractors must maintain strong cost tracking and forecasting because informal direction, change orders, or assumptions about future funding do not create reimbursement rights.
- A common pitfall is continuing work after funds are nearly exhausted without obtaining a written allotment increase from the Contracting Officer.