Use of Annual Appropriations for FFP K Performance Over Multiple Years

[NavyKGuy]

The U.S. Navy has awarded a firm fixed price indefinite delivery indefinite quantity contract (base plus options) for architecture/engineering (A/E) services associated with the revision of technical manuals dealing with environmental issues.

Task orders have been issued specifying performance over multiple years using annual operations & maintenance, Navy (O&M,N) funds.

The KO considers the services to be non-severable and the obligation of funds in this fashion acceptable because it is for A/E services. I have the following questions:

1. Can non-severable task orders using annual appropriations have a performance period greater than 1 year? FAR 32.703-3(a) provides an exception for crossing fiscal years for end products that cannot be feasibly divided (i.e. non-severable) and DFARS 232.703-3 permits severable contracts to cross fiscal years as long as performance doesn't exceed 1 year. The duration of non-severable contracts doesn't appear to be discussed.

2. Is this in reality a "multi-year" contract?

3. As a side question, can a firm fixed price contract that permits "progress payments" be considered non-severable?

I'd argue that if you can pay for progress on a FFP contract (i.e. "this portion of the work is definitively done and I am paying you for it"), the services are severable? Does this make sense (I ask because the KO is calling the services "non-severable", but permitting partial/progress payments?

Tx,

NavyKGuy

[Guest Vern Edwards]

Generally, these topics are discussed in 1 Principles of Federal Appropriations Law 3d, Ch. 5.

1. Yes. GAO refers to nonseverable services as "entire," which they describe as follows:

The determining factor for whether services are severable or entire is whether they represent a single undertaking. Thus, in 23 Comp. Gen. 370, a contract for the cultivation and protection of a tract of rubber-bearing plants, payable on completion of the services, was chargeable against fiscal year funds for the year in which the contract was made. Because the services necessarily covered the entire growing period, which extended into the following fiscal year, the Comptroller General characterized them as a single undertaking, which ?although extending over a part of two fiscal years, nevertheless was determinable both as to the services needed and the price to be paid therefor at the time the contract was entered into.? Id. at 371.

The rationale of 23 Comp. Gen. 370 was applied in 59 Comp. Gen. 386 (1980) (requisition for printing accompanied by manuscript sufficient for Government Printing Office to proceed with job). See, e.g., 65 Comp. Gen. 741 (1986) (contract for study and final report on psychological problems among Vietnam veterans); B-257977, Nov. 15, 1995 (contract for 2-year intern training program since interns are required to complete entire training program to be eligible for noncompetitive Presidential Management Intern appointment). See also 73 Comp. Gen. 77 (1994) (subsequent modifications to Fish and Wildlife Service research work orders should be charged to the fiscal year current when the work orders were issued since the purpose of the research is to provide a final research report and the services under the contract are nonseverable). The last opinion is noteworthy because it pointed out that a limitation of funds clause does not affect the application of the bona fide needs rule and the severable test. 73 Comp. Gen. at 80.

2. No. See the definition of "multi-year contract" at FAR 17.103.

3. If you mean progress payments based on costs, as discussed in FAR Subpart 32.5, then the answer is yes. But if you mean monthly payments, that raises a question about whether the services are truly "entire." If you mean partial payment for work that has been completed, or performance-based payments as discussed in FAR Subpart 32.10, then you are not talking about "progress payments." If you are talking about partial payments or performance-based payments, they would be consistent with the contract being "entire."