SUPERSEDED BY PIC 10-07A
Procurement Information Circular
CAS FUNDED CONTRACTS WHICH CROSS FISCAL YEAR
CLASS DEVIATION to FAR 32.705
PURPOSE: To provide instructions on contracts or modifications, which are funded in whole or in part with Fiscal Year (FY) 2010 Cross Agency Support (CAS) funds, and to issue a class deviation regarding the use of FAR 52.232-19, Availability of Funds for the Next Fiscal Year. This class deviation allows the use of FAR 52.232-19 to address the funding issues created by the FY 2010 CAS appropriation, permitting use of the clause in situations other than prescribed at 32.705-1. In addition, this class deviation provides the authority to substitute the word “task,” “CLIN” or other division of effort for the word “contract” in the clause at 52.232-19 as appropriate.
BACKGROUND: NASA currently funds most of its operations and maintenance contracts using CAS funding. Historically, CAS funding had a period of availability of two years, but the period of availability was changed to one year for Fiscal Year 2010. This change in funding constraints requires NASA to reassess how the bona fide need rule relates to contracts funded with the FY 2010 CAS appropriation. The bona fide need rule, codified at 31 U.S.C. 1502, provides:
An appropriation or fund limited for obligation to a definite period is available only for payment of expenses properly incurred during the period of availability, or to complete contracts properly made within that period of availability and obligated consistent with section 1501 of this title. That is, the obligation must be to satisfy a need of the agency that arose during the period of availability of the funds (with certain limited exceptions) and must meet the purpose and availability of the funds as established in the appropriation.
The concept of severability is at the heart of the bona fide need rule, a concept the Comptroller General has developed to determine whether a requirement is a bona fide need for the fiscal year for funding purposes. A requirement is severable if it can be separated into components, each of which can be independently performed. When a requirement is severable, its separate components must each be funded by an appropriation available for the period in which the need for each component arises. A non-severable requirement, on the other hand, involves work which cannot be separated into components, but instead must be performed as a single effort to meet a single requirement; this means requirements arising in FY2010 must generally be funded with FY2010 CAS funds and requirements arising in other fiscal years generally cannot be funded with FY2010 CAS funds.
The bona fide need rule requires contracting officers to fund severable efforts with funds available for obligation on the date the contractor performs the services. Non-severable efforts should be funded entirely from the appropriation current at the time of award, notwithstanding that performance may extend into future fiscal years. (Reference Enclosure 2 for further information on severability and the bona fide need rule.) NASA does not have the authority to cross fiscal years with one year money to obtain severable services. Therefore, NASA does not have the authority to permit contractors to use FY 2010 CAS funds for performance in FY 2011 if the effort is severable. FAR 32.703-2, Contracts Conditioned upon Availability of Funds, provides a mechanism to contract for continuing or severable services conditioned on the availability of subsequent-year funds. FAR 32.703-2 permits contracting officers to initiate a contract action in advance of another fiscal year when FAR 52.232-19, Availability of Funds for the Next Fiscal Year, is in the contract; however it does not permit contract performance until funds become available. FAR 52.232-19 provides for:
· The parties to contract for work in advance of an appropriation, conditioned upon the availability of future year funds.
· The contracting officer to notify the contractor when the next fiscal year’s funds are available.
· No legal liability on the part of the Government for performance beyond the current fiscal year until the contractor receives notification from the CO that the next fiscal year’s funds are available, a notification which may be confirmed in writing at a later date.
· Funds presently on the contract cannot be used for performance beyond a specified date.
Only FAR 52.232-19 provides language specifying that funds presently on the contract cannot be used for performance beyond a specified date. Therefore, it is essential this provision be included in existing contracts, funded with FY 2010 CAS funds, for severable services, because NASA does not have the authority to permit contractors to perform across fiscal years with one-year money. FAR 32.705 currently prescribes the use of FAR 52.232-19 in one-year indefinite-quantity or requirements for services that are funded by annual appropriations that extend beyond the fiscal year in which the contract begins, and where the specified minimum quantities have been ordered and funded in the initial fiscal year.
GUIDANCE: With regard to all contracts that are funded in whole or in part using the FY 2010 CAS appropriation and where performance crosses into FY 2011 or beyond, contracting officers must determine, in collaboration with the requirements initiator, supporting Center Financial and Legal personnel, whether the effort is severable or non-severable. This determination shall be made using Enclosures 2, 3, & 4 which include guidance prepared by the Cross Agency Support Transition Team (CATT) and approved for general use by the Office of the Chief Financial Officer, Office of Procurement, and Office of General Counsel, to assist with this severability determination. The severability determination dictates how the requirement must be funded in accordance with the bona fide need rule.
a. FY 2010 CAS Funded Contracts Containing Requirements Determined to be Non-severable: The contracting officer should ensure all non-severable requirements are fully funded using the appropriation current at the time of award. The requirement to fully fund does not preclude the ability to incrementally fund; the requirement to fully fund necessitates all increments be funded with funds that were available when NASA incurred the obligation. (Cost reimbursement contracts, tasks, or CLINS are “fully funded” when the entire amount of estimated cost plus fee is obligated.)
b. FY 2010 CAS Funded Contracts Containing both Severable and Non-severable Requirements: The contracting officer shall fund each requirement in accordance with this PIC when a contract contains both severable and non-severable requirements. Due to the variability in the types of funding (one-year vs. 2-year appropriations) and the differing contract structures in place across the Agency, the Centers are in the best position to determine whether a requirement is severable or non-severable, and at what level (e.g., contract, order, or contract line item number, accounting line item) this determination should be made. This determination should be made by the Centers on a case-by-case basis, and with collaboration among cognizant financial, legal, program and procurement personnel. If a mechanism does not exist to segregate severable effort from non-severable effort, the primary objective of the requirement must be determined and the entire requirement funded accordingly.
c. FY 2010 CAS Funded Contracts with Requirements Determined to be Severable: Contracting Officers shall take the following steps when an effort is funded with the FY 2010 CAS appropriations and the period of performance crosses into FY 2011 or beyond:
i. Send the contractor the letter which is Enclosure 1 to this PIC as soon as possible but no later than two weeks from the effective date of this PIC. This letter informs the contractor about the limitations associated with the FY 2010 CAS appropriations and the requirement for a modification to add FAR 52.233-19, Availability of Funds for the Next Fiscal Year, to the contract. This clause limits the use of FY 2010 CAS funds obligated on the contract to performance in FY 2010. The clause requires the contractor to wait for notification from the contracting officer that FY 2011 funds are available before beginning performance on October 1, 2010 (FY 2011).
ii. Prior to sending the letter, insert “September 30, 2010” in the blank in clause, FAR 52.233-19, Availability of Funds for the Next Fiscal Year and ensure this clause appears in full text in the contract. *
iii. After consultation with resource and financial personnel, ensure the amount obligated on the contract and covered by FAR 52.232-22, Limitation of Funds (or FAR 1852.232-77, Limitation of Funds (fixed-priced contracts) for FP contracts), only funds performance through September 30, 2010. Deobligate all FY 2010 CAS funds for severable effort which are not expected to be used for performance in FY 2010.*
* Note: for situations where severability determinations are made below the contract level, the clause should be modified to reflect the level at which the determination is made (e.g. task, CLIN, work authorization)
d. Contracts funded with another appropriation in addition to FY 2010 CAS: Contracting officers shall follow the guidance in this PIC with regard to funding of severable and non-severable services to the extent the contract segregates effort by the different appropriations used to fund the contract. If the contract does not segregate effort by different appropriations, then the contracting officer shall ensure that 1) FY 2010 CAS funds are not used for performance past September 30, 2010 if the effort is severable; and, 2) FY 2010 CAS appropriations to be used for non-severable work are obligated not later than Sept 30, 2010; however, the funds may be used for performance after the FY 2010 ends.
Future Guidance on the Use of FY 2010 CAS Funding: The Agency intends to issue subsequent guidance on FY 2010 CAS funding. This additional guidance will explain the process the Agency OCFO will use to notify Center Financial Offices, who will in turn, notify Contracting Officers (COs) that new fiscal funding is available, and how COs should communicate to contractors the amount and time period for which funding is available for FY 2011 performance. This guidance will also explain the procedure to be used to confirm the notification of availability of FY 2011 funds in writing (to contractors) and the anticipated timing of those notifications and obligation of funds on the contract.
In addition, the Office of Procurement intends to issue further guidance to explain how future contracts funded with CAS should be structured to facilitate compliance with appropriations law. This guidance cannot be drafted until the details regarding the FY 2011 CAS appropriations are known. However, non-severable CAS-funded contracts awarded after the effective date of this PIC shall be funded entirely from the appropriation current at the time of award, notwithstanding that performance may extend into future fiscal years.
REFERENCES: Enclosure 1, Letter to Contractors with Severable CAS Funded Work, Enclosure 2, Bona Fide Need – Terms and Business Rules; Enclosure 3, PR Guidance for CASX Funds; Enclosure 4, Severability Decision Tree. Additional reference materials are available on the Office of the Chief Financial Officer’s home page, under the Policies & Procedures tab, Guidance on Expiring Appropriations at: http://www.nasa.gov/offices/ocfo/policies/gea.html.
EFFECTIVE DATE: This PIC is effective as dated and shall remain in effect until November 30, 2010, or until cancelled or superseded, whichever occurs first.
HEADQUARTERS CONTACT: Carl C. Weber, Office of Procurement, Contract Management Division, (202)358-1784, email: firstname.lastname@example.org.
William P. McNally
Assistant Administrator for Procurement