Bona Fide Needs Rule
B. 9. Specific Statutes
Providing for Multiyear and Other Contracting Authorities
As we noted at the beginning of our discussion of the
a fixed-term appropriation is available only “to complete contracts
made within that period of availability.” See 31 U.S.C. § 1502(a).
multiyear contracts, “properly made” means that the bona fide needs
is satisfied if an agency has statutory authority to obligate its
funds for a contract that crosses fiscal years or is for multiple
these statutes are sometimes referred to as exceptions to the bona
needs statute, it is clear that by using the phrase “contracts
the bona fide needs statute anticipates that Congress may authorize
agencies to obligate funds across fiscal years, either generally or
particular agency or program. In so doing, Congress defines the bona
need in the particular statute.
a. Severable Services Contracts
(As of 3/12/15)
There are several general authorities to
contract across a fiscal year or to enter into multiyear contracts.
For example, 41 U.S.C. § 3902 authorizes the heads of executive
agencies to enter into procurement contracts for severable services
for periods beginning in one fiscal year and ending in the next
fiscal year as long as the contracts do not exceed one year. It
permits agencies to obligate the total amount of the contract to
appropriations of the first fiscal year. Without specific statutory
authority such as this, such action would violate the bona fide
needs rule (see section
B.5 of this
chapter). Section 3902, in effect, redefines for an agency that
elects to contract under authority of section 3902 its bona fide
need for the severable services for which it is contracting. Related
statutes extend this authority to various legislative branch
entities.29 Similarly, 10 U.S.C. § 2410a authorizes the military
departments to use current fiscal year appropriations to finance
severable service contracts into the next fiscal year for a total
period not to exceed one year. GAO states in
B-259274, May 22,
1996, that “[t]he purpose of 10
U.S.C. § 2410a is to overcome the bona fide needs rule,” which is
another way of saying that Congress has provided the military
departments with authority to properly enter into a contract not to
exceed one year that crosses fiscal years. The statute specifically
authorizes the departments to obligate “[f]unds made available for a
fiscal year . . . for the total amount of a contract entered into”
under section 2410a(a). Cf.
B-317636, Apr. 21, 2009 (an agency
using multiple year or no-year appropriations rather than fiscal
year appropriations to fund a severable services contract does not
need to refer to 41 U.S.C. § 3902 or 10 U.S.C. § 2410a to achieve
this same flexibility).
B-259274, May 22, 1996, the Air Force took full advantage of this
authority to maximize efficient use of fiscal year appropriations.
Force had intended to award a 12-month severable services contract
vehicle maintenance beginning on September 1, 1994 (fiscal year
running until August 31, 1995 (fiscal year 1995). Using 10 U.S.C. §
the Air Force had planned to obligate the contract against its
1994 appropriation, until it learned that it did not have sufficient
unobligated amounts to cover the contract. To avoid Antideficiency
problems, but taking advantage of section 2410a, the Air Force
a 4-month contract, beginning September 1, 1994, and running until
December 31, 1994, and included an option to renew the contract at
time. The option, as in the Leiter decision we discussed in section
could be exercised only by the Air Force, not the contractor, by
written notification to the contractor. GAO concluded that the Air
obligation was only for 4 months, and under authority of section
constituted a bona fide need of fiscal year 1994 and was properly
chargeable to fiscal year 1994. Also, GAO found no Antideficiency
violation. GAO said that with the option to renew for 8 months, the
Force had incurred “a naked contractual obligation that carries with
financial exposure to the government.”
b. 5-year Contract Authority
(As of 3/12/15)
(1) 10 U.S.C. §§ 2306b, 2306c
In addition to the severable services contracting authority,
provided executive, legislative, and judicial entities substantial
for multiyear contracting for goods and services using annual funds.
military departments are authorized by 10 U.S.C. §§ 2306b and 2306c
enter into multiyear contracts for goods and services, respectively,
periods of not more than 5 years if certain administrative
are made. Section 2306b applies not only to routine supplies, but
also to the
military departments acquisition of weapon systems and items and
associated with such systems. Section 2306c, enacted in response to
Wake Island decision (see
67 Comp. Gen. 190, 193 (1988)), applies to
services as installation maintenance and support, maintenance or
modification of aircraft and other complex military equipment,
training, and base services. Sections 2306b and 2306c permit the
departments to obligate the entire amount of the 5-year contract to
fiscal year appropriation current at the time of contract award,
though the goods or services procured for the final 4 years of the
contract do not constitute needs of that fiscal year. Alternatively,
sections 2306b and
2306c permit the military departments to obligate the amount for
the 5 years against appropriations enacted for each of those years.
are not made available for continuation in a subsequent fiscal year,
cancellation or termination costs may be paid from appropriations
originally available for the contract, appropriations currently
the same general purpose, or appropriations made specifically for
payments. 10 U.S.C. §§ 2306b(f) and 2306c(e). The authority
sections 2306b and 2306c is also available to the Coast Guard and
National Aeronautics and Space Administration. 10 U.S.C. § 2303.
A multiyear contract entered into under authority of 10 U.S.C. §§
2306c is binding on both parties for the full term of the contract
terminated as provided in the statute. See Beta Systems, Inc. v.
States, 838 F.2d 1179, 1183 n.2 (Fed. Cir. 1988); Beta Systems,
Velcon Filters, Inc.v. United States, 16 Cl. Ct. 219, 228 (1989).
A contract under sections 2306b or 2306c must relate to the
needs of the contract period as opposed to the need only of the
year of the contract period. The statute does not authorize the
procurement of materials not needed during the 5-year term of the
contract. See 64 Comp. Gen. 163 (1984); B-215825-O.M., Nov. 7, 1984.
also 35 Comp. Gen. 220 (1955).
(2) 41 U.S.C. § 3903
The Federal Acquisition Streamlining Act of
1994 (FASA) and related statutes extended multiyear contracting
authority with annual funds to nonmilitary departments.30
FASA authorizes an
executive agency to enter into a multiyear contract for the
acquisition of property, which includes leases of real property, or
services for more than one, but not more than five years, if the
agency makes certain administrative determinations. 41 U.S.C. §
Aug. 16, 2013;
B-316860, Apr. 29, 2009. Related laws extend this
authority to various legislative branch agencies.31
Through FASA and the related laws, Congress has relaxed the
constraints of the bona fide needs rule by giving agencies the
flexibility to structure contracts to fund the obligations up front,
incrementally, or by using the standard bona fide needs rule
B-277165, Jan. 10, 2000. To the extent an agency elects to
obligate a five-year contract incrementally, it must also obligate
termination costs. Cf.
B-302358, Dec. 27, 2004 (since the
contract at issue was an indefinite-delivery, indefinite-quantity
contract, it was not subject to the requirements of FASA and the
agency did not need to obligate estimated termination costs at the
time of contract award).
authorizes agencies to enter into a multiyear contract for the
acquisition of both nonseverable and severable services.
an agency wants to contract for an annual report, which we
previously established was a nonseverable service.31a
FASA allows an agency to enter into a multiyear
contract for both a report this year and a report for the next four
years. The agency can either: (1) obligate funds upfront to cover
the costs of all five reports or (2) obligate funds for the first
fiscal year, plus estimated termination costs. 41 U.S.C. §
3903(b)(1). Now suppose an agency wants to contract for window
washing services, which are severable services.31b
FASA permits an agency to enter into a multiyear
contract for up to five years worth of window washing services.
Similarly, the agency can either obligate funds upfront or obligate
funds on a fiscal-year basis, plus estimated termination costs. Id.
stressed that FASA requires agencies to establish a bona fide need
for some services at the time of the contract, despite the fact that
additional services will be rendered in future fiscal years.
B-322455, at 5–9. Generally, an agency will violate the bona fide
needs rule if it enters into a multiyear contract in one fiscal year
for services that do not begin until the next fiscal year.
Similarly, an agency would violate the bona fide needs rule if it
modified a contract in one fiscal year to acquire services to be
rendered in a future fiscal year.31c
The enactment of FASA satisfied the GAO recommendation for the
enactment of legislation to authorize all federal agencies to engage
limited multiyear procurement. See U.S. General Accounting Office,
Federal Agencies Should Be Given General Multiyear Contracting
Authority For Supplies and Services, PSAD-78-54 (Washington, D.C.:
Jan. 10, 1978). See also B-214545, Aug. 7, 1985 (comments on
c. Examples of Agency- Specific
Multiyear Contracting Authorities
An example of a specific authority is
41 U.S.C. § 11a, which
Secretary of the Army “to incur obligations for fuel in sufficient
to meet the requirements for one year without regard to the current
year,” and to pay from appropriations either for the fiscal year in
obligation is incurred or for the ensuing fiscal year. See
(1949) (construing the term “fuel” in that statute to include
other petroleum fuel products).
Another example is 31 U.S.C. § 1308, which permits charges for
and other utility services for a time period beginning in one fiscal
ending in another to be charged against appropriations current at
of the covered time period. In addition, 42 U.S.C. § 2459a
National Aeronautics and Space Administration to enter into
certain “services provided during the fiscal year following the
fiscal year in
which funds are appropriated.”
A further example of statutory authority for multiyear contracting
40 U.S.C. § 481(a)(3), which authorizes contracts for public utility
for periods not exceeding 10 years. The purpose of the statute is to
the government to take advantage of discounts offered under
contracts. 62 Comp. Gen. 569, 572 (1983);
35 Comp. Gen. 220, 222–3
For purposes of applying this statute, the nature of the product or
and not the nature of the provider is the governing factor. 70 Comp.
Gen. 44, 49 (1990). Thus, the statute applies to obtaining utility
from other than a “traditional” form of public utility. 62 Comp.
When entering into a contract under 40 U.S.C. § 481(a)(3), the
agency needs to have sufficient budget authority only to obligate
years costs. 62 Comp. Gen. at 572;
44 Comp. Gen. 683, 687–88 (1965).
Other examples of specific multiyear authority are 40 U.S.C. §
which authorizes the General Services Administration (GSA) to enter
leases for periods of up to 20 years; 40 U.S.C. § 757(c), which
GSA to use the Information Technology Fund for contracts up to 5
information technology hardware, software, or services; and 10 U.S.C.
§ 2828(d), under which the military departments may lease family
united in foreign countries for periods up to 10 years, to be paid
(As of 3/12/15)
29 For example, the Comptroller General (41 U.S.C. § 253l-1),
Library of Congress (41 U.S.C.
§ 253l-2), Chief Administrative Officer of the House of
Representatives (41 U.S.C. § 253l-3),
and Congressional Budget Office (41 U.S.C. § 253l-4). (BACK)
L. No. 103-355, § 1072, 108 Stat. 3243, 3270 (Oct. 13, 1994).
31 For example, the General Accounting Office (41 U.S.C. § 253l-1),
Library of Congress
(41 U.S.C. § 253l-2), Chief Administrative Office of the House of
Representatives (41 U.S.C.
§ 253l-3, and Congressional Budget Office (41 U.S.C. § 253l-4).
31a Despite the
fact that a contractor will develop and draft the report throughout
the fiscal year, the agency does not receive the full benefit of the
report until it is delivered. (Back)
services are severable because the agency receives the full benefit
of the service every time the contractor cleans the windows. (Back)
31c In addition
to the bona fide needs rule, the agency would violate the
Antideficiency Act, which prohibits the obligation or expenditure of
funds in advance of available appropriations. 31 U.S.C. §
1341(a)(1)(B). We discuss the Antideficiency Act in Chapter 6.