1102pleb

Vern, you are correct in calling me out on my newbie dumbness. I am just about two years into this career. I've been reading your blog and your posts for more than a year though, so I consider myself ahead of the curve because of it. The only reason I asked the now shunned question is my interest in trying to figure out why people around here seem to think OPN needs to always be fully funded. My line of thinking being that if a service is always connected to an end item, then it always is a non-severable service and would always need to be fully funded. That seems to be the only explanation. I was simply asking if you know of situations where there is a clear severable services situation that would be funded with procurement dollars. Thanks for the option suggestion. We currently have 1 year options, but I don't see why we couldn't shorten these so that the customer could provide full funding. It seems so simple, but it just might be the perfect solution to the incremental funding issue.

I'm not sure whether you are suggesting a separate task order for each color of money, each task listed in the PWS, or by the amount of funding provided by the customer at issuance of the task order (thereby alleviating the full funding issue). Administrative burden would be my main argument against doing separate task orders. We'd have to conduct a competition for each task order since seaports are ID/IQ MAC. This would mean that we would need to compete a task order as frequent or more frequent then once a year whereas we are only competing them once every five years currently. This would have a tremendous impact on contractor personnel changeover as well (contractors could potentially change every year vice every 5 years). It seems to me that installation support services would always be for a particular installation (even if not clearly defined by the customer at the get go) and, therefore, would always be considered non-severable services. The only reasoning behind this belief is that installation support services are for an end item and would need to be funded in its entirety being an end item. Can you think of a situation where you'd ever use OPN for severable services?

Don, although I?m not very familiar with how we receive funds here, it is my understanding that there isn?t really a choice to fully fund contracts because we have so many funding sources (different appropriations and other customer funds). Maybe no one here has put their foot down and required that full funding be established from the funders, but I just assume it is much too hard to organize multiple funding sources (it is hard enough getting funds from just one source sometimes). Either way, I?m very interested to hear the finance professors thoughts on this matter. Vern, the OPN SLIN for this specific task order does cross fiscal years. Most of our seaport task orders utilize incremental funding and both fund options within the fiscal year and fund options across fiscal years. This issue is not unique to this one task order. It is management and technical support of actual installations on ships. This installation support services is for the scheduling, tracking, monitoring, maintaining baseline documents, updating drawings, etc. I hope this isn?t too general, but the subtasks literally go on for pages. Having read through the requirements a few times now, it isn?t so black and white whether this is non-severable versus severable. While an installation is a service needed in its entirety, it becomes less clear when you start talking about support services of those installations. This could go either way in my mind.

Vern, It took a while for me to digest all the information you gave me, but your explanation makes perfect sense. My first instinct when I read the FMR quote was that it could have two distinct meanings. As you pointed out, the FMR states, "Non-severable services contracts ... must be funded entirely with appropriations available for new obligations at the time the contract is awarded..." If it just said "non-severable services must be funded entirely at contract award", there would be little doubt in my mind about the true meaning of this statement. The fact that it adds the words "with appropriations available for new obligations" leaves doubt about the original meaning. Whatever the FMRs true meaning, the GAO is fairly clear with its interpretation that "nonseverable services contracts must be fully funded at the time of the award of the contract." I have no clue why putting POPs on SLINs became a viable workaround, but it doesn't seem like a compliant alternative to fully funding OPN at contract award. So, if a customer cannot provide full funding for OPN at contract award, what alternative solutions exist? Or does the contracts shop just need to draw a line in the sand with this customer and stop awarding contracts and/or exercising options until full funding can be provided?

Joel, no it is not a chem-demil contract. Vern, this being Seaport-e, it is an ID/IQ contract in which the task order is CPFF (sorry for not making this clear in the first place). CLIN 1000 is the base year and CLINs 1001, 1002, 1003, and 1004 are the option years. Each CLIN ceiling has a total hour amount and dollar amount. The ceiling for each CLIN is approximately 20,000 hours and $6,000,000 total CPFF amount (I cannot recall exact hour or dollar amount). We just exercised one of the option years. Upon exercising the option year, the program office incrementally funded only a portion of this ceiling amount using RDTE, OMN, OPN, and other customer funds. Each line of accounting has its own SLIN under this priced CLIN. The different appropriation types match up with different tasking within the PWS. My primary concern is with the OPN funds and this installation tasking. The first allotment of OPN funding was for only 2 months. The program office eventually sent down two more modifications adding OPN funding which fully funded this effort for the remainder of the fiscal year. This last modification with OPN funding set off red flags in our financial office because OPN is supposedly not allowed to be incrementally funded. In order to get these last funds approved by our financial office, we were told to add period of performance dates to all the OPN SLINs. For example, the first incremental funding modification put funding on SLIN 1000/01 (OPN) and we were required to designate a POP of 10/1/2009-12/31/2009. The next incremental funding modification put funding on SLIN 1000/02 (OPN) and we were required to put a POP of 1/1/2010-3/31/2010. Etc etc. Please note that these dates are different then what is called out in Section F of the Task Order. What regulation requires fully funding OPN? Why are we required to designate separate POPs? I've asked several people in the office these questions and the answers have been sporadic. It seems generally accepted within my office that OPN must be fully funded from the outset, but no one can tell me why. One person told me that the FMR requires OPN to be fully funded from the outset, but I was unable to find it within the FMR. Another person told me it has to do with this "Fully Fund Principle", but this seems to only relate to budget authority as I've mentioned in previous posts. OPN is typically used to buy material or end items, so maybe the fact that we are using it to procure services is obfuscating the situation?

Joel, I wasn't aware of this clause. This specific contract is CPFF though which would make this clause not applicable. This is the sort of thing that I'm looking for though.

I'm buying a "Lot" of installation service hours using procurement type funds. The PWS nor the contract states how many hours per installation. So, there is no way to know if a complete installation is being purchased when funds are added to the contract. Not all the funding is available for obligation from the start because it comes from other commands/agencies, but it will all be fully funded before the year ends. As money does become available (as it dribbles in), funding is added to the contract (which is a CPFF) creating new CLINs with specific periods of performance. The reason that we create new CLINs and POPs is because our financial office requires it. There is supposedly a rule that says procurement type funds must be fully funded, up-front at time of award or at option exercise. When there are situations where funding can't be fully funded (such as this one), then we are advised to create CLINs/POPs and "fully fund" these. This rule just seems so arbitrary to me because: 1) no one knows if we are buying full complete installations with each funding modification; 2) while we may be fully funding a 2 month POP, we are still incrementally funding the entire year it seems.

Vern, thank you for your response. Allow me to provide some background to my question. One of the programs that I support deals with many other customer fund sources. What this means for them is that funding "dribbles" in through the fiscal year and the program is unable to fully fund the specific tasking all at once. The appropriation type is procurement dollars. This puts us in a bind since procurement dollars are connected to an end item which needs to be fully funded since we are "not allowed" to incrementally fund procurement dollars. Hence my original question, "where does this requirement come from to fully fund (obligate) Procurement and/or MILCON on contracts?" Our solution to this specific situation has been to create a CLIN for the procurement dollars that are being funded and designate its own period of performance separate from the period of performance clause in the contract. This allows us to say that this period of performance on this CLIN is being fully funded. When the next batch of procurement dollars is provided, a new CLIN is created with a new period of performance. Keep in mind that these periods of performances are for 3-4 months (each time funding is provided) and are within the period of performance date range as designated in the original contract. I don't know about you, but this seems like a lot of paper work just to be able to say that we are fully funding the requirement. Is this solution effective? Does it violate any regulations? Assuming that we fully fund the task prior to "the statutory deadline", what regulation says that we cannot incrementally fund before this deadline?

It is the established business process in my contracts shop to fully fund Procurement and MILCON type appropriations for the entire fiscal year. My definition of ?fully fund? means obligating all the funds to a contract for a specific fiscal year. However, in researching the origins of this policy, fully funding seems to take on a different definition that refers to budget authority. I?m unable to find any policy that requires fully funding (obligating) a contract for these specific appropriations or any appropriation for that matter. The fully fund policy is indirectly or directly addressed in three laws and regulations: 1.) the Antidefiency and Adequacy of Appropriations Acts; 2.) OMB Circular A-11; and 3.) DOD Directive 7000.14-R. In reviewing these laws and regulations, it seems to me that the fully fund policy refers to budget authority of appropriated funds ? not obligation on a contract. So, where does this requirement come from to fully fund (obligate) Procurement and/or MILCON on contracts? See Appendix B, CRS Report for Congress for detailed policy of the Fully Fund Principle: http://fas.org/sgp/crs/natsec/RL31404.pdf