FY (Fiscal Year)

What is FY (Fiscal Year)?

In government contracting, the Fiscal Year (FY) is the 12-month accounting period used by the U.S. federal government for budgeting and financial management. Understanding the FY is essential for government contractors as it directly impacts the availability of funding for contracts, the timing of solicitations, and the overall procurement cycle.

Definition

The FY runs from October 1st to September 30th of the following calendar year. For instance, FY2024 begins on October 1, 2023, and concludes on September 30, 2024. The federal budget is planned, approved, and executed within these annual cycles. Government agencies receive appropriations from Congress for each fiscal year, which determines the funds available for awarding and administering contracts. Contractors must be aware of these funding cycles because solicitations are often released and contract awards are made dependent on the availability of FY funds. Moreover, contract performance and payments are often tied to the FY, particularly with contracts that have option years or require recurring funding.

Key Points

• Budget Cycle Alignment: Understanding the FY allows contractors to align their business development efforts with agency budget cycles, increasing their chances of success.
• Funding Availability: Contract funding is typically tied to specific FY appropriations; knowing the FY impacts the timing of payments and contract modifications.
• Solicitation Timing: Government agencies often release solicitations and award contracts towards the end of the FY, aiming to obligate remaining funds. This creates both opportunities and challenges for contractors.
• Contract Performance: Some contracts are structured with funding dependent on annual FY appropriations, requiring contractors to adapt to potential funding fluctuations.

Practical Examples

1. End-of-Year Spending: An agency may release a solicitation for IT services in August (towards the end of the FY) to utilize unspent funds before the fiscal year ends on September 30th. Contractors need to be prepared for a quick turnaround on proposal submissions.
2. Multi-Year Contracts: A contract may have a base year and multiple option years, with each year's funding contingent on Congress appropriating funds for that specific FY. The contractor should be aware that funding for option years is not guaranteed.
3. Continuing Resolutions: If Congress fails to pass a budget by October 1st, the government may operate under a Continuing Resolution (CR), which provides temporary funding at the previous FY's levels. This can delay new contract awards or modifications until a full budget is approved.