Procurement Information Circular
August 2, 2011
CAS FUNDED CONTRACTS WHICH CROSS FISCAL YEAR
CLASS DEVIATION to FAR 32.705-1(b) for FY 2011
PURPOSE: To provide instructions on contracts or modifications, which are funded in whole or in part with Fiscal Year (FY) 2011 Cross Agency Support (CAS) funds, and to issue a class deviation to FAR 32.705-1(b) which prescribes 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 in other than IDIQ contracts to address the funding issues created by the FY 2011 CAS appropriation.
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. This restriction first occurred in FY 2010; FY 2011 funding continues to be restricted. This change in funding availability requires NASA to reassess how the bona fide need rule relates to contracts funded with the FY 2011 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. Accordingly, non-severable requirements arising in FY2011 must generally be funded with FY2011 CAS funds and requirements arising in other fiscal years generally cannot be funded with FY2011 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 performance that 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 2011 CAS funds for performance in FY 2012 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:
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 2011 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 32.705-1(b) 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 2011 CAS appropriation and where performance crosses into FY 2012 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. The severability determination dictates how the requirement must be funded in accordance with the bona fide need rule.
a. FY 2011 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 2011 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 2011 CAS Funded Contracts with Requirements Determined to be Severable: Contracting Officers shall take the following steps when an effort is funded with the FY 2011 CAS appropriations and the period of performance crosses into FY 2012 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 2011 CAS appropriations and the requirement for a modification to add FAR 52.232-19, Availability of Funds for the Next Fiscal Year, to the contract. This clause limits the use of FY 2011 CAS funds obligated on the contract to performance in FY 2011. The clause requires the contractor to wait for notification from the contracting officer that FY 2012 funds are available before beginning performance on October 1, 2011 (FY 2012). For those contracts where the clause was already incorporated in FY10, the contracting officer need only comply with steps ii and iii below and a letter is not required just the modification to revise the date to read September 30, 2011.
ii. Prior to sending the letter, insert “September 30, 2011” in the blank in clause, FAR 52.232-19, Availability of Funds for the Next Fiscal Year and ensure this clause appears in full text in the contract.* This date shall remain September 30, 2011 to reflect the last day of the fiscal year 2011 and shall not be further modified as a result of continuing resolutions or treated as a run-out date for funding. Instead, the standard funding clause shall be used to reflect funding run-out date.
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, 2011. Deobligate all FY 2011 CAS funds for severable effort which are not expected to be used for performance in FY 2011.**
Note * and **: for situations where severability determinations are made below the contract level, the contract modification should indicate the portion of the contract to which the clause applies, e.g.: “The following contract clause (52.232-19) applies to [task #(s), CLIN #(s), order #(s), or other descriptor] of this contract.”
d. Contracts funded with another appropriation in addition to FY 2011 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 2011 CAS funds are not used for performance past September 30, 2011, if the effort is severable; and, 2) FY 2011 CAS appropriations to be used for non-severable work are obligated not later than September 30, 2011; however, the funds may be used for performance after the FY 2011 ends.
Future Guidance on the Use of FY 2011 CAS Funding: The Agency intends to issue subsequent guidance on FY 2011 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 2012 performance. This guidance will also explain the procedure to be used to confirm the notification of availability of FY 2012 funds in writing (to contractors) and the anticipated timing of those notifications and obligation of funds on the contract.
REFERENCES: Enclosure 1, Letter to Contractors with Severable CAS Funded Work, Enclosure 2, Bona Fide Need – Terms and Business Rules. 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 September 30, 2012, or until cancelled or superseded, whichever occurs first.
HEADQUARTERS CONTACT: Michael L. Powers, Office of Procurement, Contract Management Division, (202) 358-2346, email: firstname.lastname@example.org.
/s/ Sheryl Goddard
for William P. McNally
Assistant Administrator for Procurement
1. Letter to Contractors with Severable CAS Funded Work
Letter to Contractors with Severable CAS Funded Work
(To be sent with mod adding Avail of Funds for Next Fiscal Year)
Attached to this letter is a modification to your contract to add FAR 52.232-19, Availability of Funds for the Next Fiscal Year. Please sign and return this modification at your earliest convenience. This action is being taken because this contract is funded with money from NASA’s appropriations for Cross Agency Support (CAS). CAS funding has historically been available for obligation and performance for two fiscal years. However, Congress changed the period of availability to one fiscal year beginning in Fiscal Year 2010. This change has a significant impact on Contract No. ______________ because the contract includes severable services, i.e. services that are continuing and recurring in nature, and the CAS funding for FY 2011 cannot be used for performance of severable services continuing into FY 2012. Unlike other agencies, NASA does not have the authority to cross fiscal years with one-year money to obtain severable services.
This change in NASA’s appropriation authority impacts how contracts such as yours must be funded. As a result of the appropriation change, it is necessary for NASA to modify this contract to include the clause at 52.232-19, Availability of Funds for the Next Fiscal Year. Inclusion of this clause in the contract will:
· Impose a limitation that CAS FY 2011 funds presently on the contract cannot be used for performance of severable work beyond September 30, 2011.
· Protect the Government from legal liability to pay for contract performance beyond September 30, 2011, until NASA notifies you that FY 2012 funds are available.
NASA is extremely concerned about maintaining continuity of services and is preparing policy and procedures to facilitate the earliest possible notification to contractors when FY 2012 funds are available for contractor performance in FY 2012. You may receive verbal notification of the availability of FY 2012 funds, which will be confirmed in writing by the contracting officer.
Please sign the modification attached to this letter and return it within 5 business days. If you have any questions, please contact ___________ [Insert the name of the applicable contracting officer at the center.]
*Note to Contracting Officers: Contracting officers may modify the word “contract” for situations where severability determinations are made below the contract level; i.e., the letter may be modified to reflect the level at which the determination is made and funding is delineated (e.g. task, CLIN, work authorization). REMOVE THIS NOTE BEFORE ISSUING THIS LETTER TO CONTRACTOR.