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jdm843

Appropriate use of the clause at FAR 52.232-18 Availability of Funds

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When is it appropriate to use the clause, FAR 52.232-18 'Availability of Funds' in solicitations? Working for the Army it has been observed that often times, especially for O&M requirements towards the end of the FY, a contracting office may issue solicitations without express assurance from a requiring activity that a certain, reasonable amount of funds are available for and will be commited to the specific requirement being solicited. In such cases Contracting Officers include the clause, FAR 52.232-18 'Availability of Funds' in the solicitation with the expectation that the requirement may not make it to contract award (could be because the requiring activity doesn't like the price, or has decided to re-prioritize it's funds elsewhere). This practice has been questioned, however, since that clause is prescribed by by FAR 32.705-1(a) for use 'in solicitations and contracts if the contract will be chargeable to funds of the new fiscal year and the contract action will be initiated before the funds are available.' And further, the Army has an agency specific restriction found at AFARS 5101.602-2(a)(1) that states, 'Except as authorized in FAR Subparts 17.1 and 32.7.., before issuing a solicitation, the contracting officer must have a written statement (or equivalent) indicating that sufficient funds are available.' One interpretation of this is that the exceptions at FAR Subparts 17.1 and 32.7 apply to multi-year and/or incrementally funded contracts, and outside those types of requirements, 52.232-18 is inappropriate and the Contracting Officer should have express funding assurance before issuing a solicitation. Another interpretation is that the FAR allows wide latitude in many cases (this being one of them), and the prescription at FAR 705-1(a) only suggests some but not all potential appropriate situations for including FAR 52.232-18 and soliciting without specific funding assurance. It has also been argued that using FAR 52.232-18 while operating under a CRA is almost always appropriate, since, essentially, all solicitations meet the presription at 32.705-1(a) and are 'subject to availablity of funds'. While investigating this issue other pertinent regulations & policy guidance has been consulted, including FAR subparts 1.6, 17.1 & 32.7 (and associated DFARS/AFARS regs), the DoD FMR (vol14 ch2), and the JAG fiscal law deskbook (ch4).

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as someone who bids on small government jobs,

I assume that a requirement is funded if it is advertised as an RFP or IFB.

I understand 52.232-18 to mean that funding was requested and is expected to be appropriated for that specific requirement, effective at the start of the new fiscal year.

I don't assume that when an RFQ is issued.

In my parochial view,

if you don't have the money, or have the

"... express assurance from a requiring activity that a certain, reasonable amount of funds are available for and will be commited to the specific requirement being solicited,"

you got no bizness asking for a proposal, or even a bid. Issuing an RFP or an IFB implies more than market research.

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My Army experience goes back a long way (1987-1991), and was in Germany, so it may no longer be relevant. However, the goal at the end of the year was to award contracts under two criteria: (1) ensure the most important work was awarded first, and (2) use all the available funding. Solicitations included an availability of funds provision (I do not recall if it was the standard clause or a locally approved clause) saying we would award a contract either in the last quarter of the year of the first quarter of the next year, subject to availability of funds. Every solicitation was issued with the expectation of an award, and I believe that it was very rare (if ever) that we did not award a contract at some point. I do not know if your situation mirrors what I experienced back then.

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I tend to agree that, if a requiring activity won't commit the funds, the KO shouldn't issue the solicitation. Using the S.A.F clause outside its prescription seems a little reckless to me. I've encountered differing opinions, however, & so I'm seeking some outside perspective.

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You should read FAR Subpart 32.703-2 closely. It clearly describes the situaitons in which you are authorized to condition a contract on the availabliity of funds. If you do not understand after reading, then come back with specific questions regarding the aspect you do not understand. Agencies often slap this phrase on solitictiations and resultant contracts without understanding the proper application.

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Thanks all for the input so far.

HCuffage, I am familiar with FAR 32.703-2. My reading of that further confirms that the SAF clause is only applicable for (O&M) req'ts that will be (at least partially) funded by YET TO BE APPROPRIATED funds (e.g. FY13 award will be obligated with (at least some) FY14 dollars.) I have seen this clause included in solicitations when the funds for award have been appropriated (e.g. FY13 funds for an FY13 award), usually when the requiring activity either a) hasn't delivered the funds through the proper finance channels yet, or b ) isn't totally sure it will fund the requirement due to shifting priorities and/or uncertainty as to what the final price may be.

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Where in 32.703-2 do you read anything about shifting priorities? The availability of funds is about charging the proper fiscal year funds. It is the authority to solicit a contract in this fiscal year that will start in the next fiscal year and be chargeable to next year's funds. Generally, if an agency issues such a solicitation it should be sure it will award that contract unless the funds for that purpose are not approriated for the new fiscal year. Did you read the section about Congress having previously consistently appropriated funds for the purpose?

The other application of the availability of funds clause is for IDIQs that cross the FY and that associated clause puts the offerors on alert that funds for task orders beyond the fiscal year of award are not available and no task orders can be issued after the FY until the funds are made available.

The availability of funds applications are about fiscal law, not agency discretion on how or on what to spend its money. An agency should not exercise the resources of industry with solicitations under which it is highly likely that no award will be made. If an agency wants to put a disclaimer on a solcitation that it is not entirely committed to awarding a contract based upon shifiting priorities, then put such a statement on the solicitation and industry has fair warning that it will be exercising its B&P budget in a higher risk environment than usual. But do not mislead industry by using the availability of funds clause.

Availability of funds is about the funds not being appropriated yet, not about having them but not being sure where you want to spend them.

I have been in your shoes. I worked for an agency that wanted to issue 40 construction solicitiations at the end of the year to use up all of their O&M budgeted funds and then fund, say for example, the 20 they could based on offers received and wanted to always do that by using the Availability of funds clause in an improper and misleading manner. COs have to remember that not only is it a matter of fiscal law, but you are required to deal fairly with industry. It is not fair dealing to try and mislead them into spending B&P costs unnecessarily - my opinion.

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Let me add one point to tie it all together. The availability of funds clause for contracts to be awarded this year for services to start in the next fiscal year is only authorized for O&M, as you acknowledged, but that is "necessary for normal operations,." according to FAR. Requirements that are discretionary, such as the small construction projects I cited in my example, do not come under the definition of "necessary for normal operations." Point being is that we should understand the scope of the availability of funds authority and not let agency indecision about discretionary items direct our actions. If an agency issues two appropriate solicitations for O&M using the availabiltiy of funds clause and then has to make decisions about service levels based on final appropriations, that is another story. The awarded contracts can be modifided using the T4C authority of the government which invokes certain protections for the contractor.

In the case of IDIQs crossing fiscal years, if funds are not appropriated, the government is not obligated to order beyond the minimum guarantee, which should have been for requirements of the award year which were already funded by appropriations in place at the time of solicitation and award.

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I am in complete agreement with you. And thanks for your interpretation--it helps sharpen my perspective.

Clearly there is no mention of "shifting priorities" at FAR 32.703. And, ironically, it is the part about congress previously appropriating funds (FAR 32.707-2(a)(2)) that might, hypothetically, influence the opinion of a KO that while operating under a CRA nearly all O&M req'ts fit that bill. As for the "necessary for normal operations" vs. discretionary requirements... again I agree with you. But being that "necessary for normal operations" is left undefined, that can, potentially, leave the matter not any less convoluted. But again, I agree: FAR 52.232-18 is about fiscal law (consistent with it's part 32 prescription) and shouldn't be used as permission for an agency to go shopping for something it might not want or might not be able to afford. My personal opinion is that doing so is not only unfair to industry in terms of B&P costs, but also may potentially promote somewhat a careless acquisition planning environment on the inside.

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jdm843,

You are on point about a careless acquisition planning environment on the inside. It is not just potentially promoted, it has been occuring for years. I shared that I had been in your shoes - asked to issue solicitations for end of year awards using the availability of funds clause. How much clearer can the language in FAR get?

First test - if the requirement is to start in this FY and you are soliciting in this FY, the only Availability of Funds authority that might be applicable is if you are issuing an IDIQ that crosses the FY with a minimum guarantee certain to be ordered in this FY (FY of award) and funded with this year's funds. If your requirement is not for an IDIQ that wil cross FYs and will start this FY, then that Availability of Funds authority does not apply.

Second test - if the requirement is to start next FY and is properly chargeable to next year's funds, but you need to solicit and award now (this FY) in order to have the contract in place so work can start on time next FY, then use of the Availability of funds authority may be appropriate.

Next test - is the requirement for O&M or continuing services that are both (1) necessary for normal operations, and (2) for which Congress previoiusly had consistently appropriated funds (unless other specific statutory authority exists). If the requirements cannot pass these tests, then use of the Availability of Funds condition cannot be used.

The fact that many contracting offices allow program managers and, more often, finance and budget managers to insist on using the availabiltiy of funds conditon has already led to the careless planning process that we all see: wating until last minute to make decisions on competing priorities and request funds. Everyone is victim to the broken budget process where many agencies' components may not even know their authorized funding levels until late second or even third quarter. Then everyone scrambles to do a year;s worth of planning in two to three months to be able to execute a year's worth of requirements in the last quarter of the FY. This is not to say they are justified in using the lack of express funding authority as an excuse not to plan because they certainly could develop a priority list and then draw a line where funding stops once the budget is known. It is to say that too many federal employees are tired of the process that jerks them around every year and have simply given up on trying to be ahead of the curve and effectively plan.

Also, many government finance and budget managers stamp the phrase "subject to availability of funds" conditon on every purchase request as they do not understand the FAR application of that condition and believe it means they can be non-commital until they have resolved all conflict between competing program managers and senior management in terms of where the agency should spend its dollars available for obligation.

So you are on point on the careless acquisition planning process observation. It is a challenge for Contracting Officers, but understanding the proper applicaiton of the Availability of Funds conditoning on solicitations and resultant contracts should not be a challenge.

In your original post, you made one statement that I would challenge:

... since, essentially, all solicitations meet the presription at 32.705-1(a) and are 'subject to availablity of funds'.

It has been my experience that most of the solicitations issued by many contracting offices are for requirements (bona fide needs) of the current FY. While most offices also issue solcitations in each FY for replacement contracts and option modifications for recurring severable services that will renew in the next FY (new performance period to start after September 30), I doubt if the volume of those equates to "essentially all solcitiations, except in the rare case of contracting offices whose only function is to award those types of actions. Even then, many of those recurring severable service contracts are now crossing fiscal years, which means they can be funded with funds appropriated to the same FY of solicitation. So I would not agree that esentially all solicitations satisfy the prescription ar FAR 32.705-1(a).

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We are having a similar discussion in my agency right now, and I find that a common point of confusion is the difference between SOLICITING without funds being currently available, and AWARDING without funds being currently available. 52.232-18 applies to contracts awarded without funds being available, not a solicitation being issued without funds being available.

I'm not aware of anything that prohibits issuing a solicitation without funds being available. I know it is not preferred, but as long as you put potential offerors on notice that funds are not currently available, and the solicitation may be cancelled without an award, I don't see how that is prohibited. If someone is aware of a law, reg, or court decision that says otherwise please let me know as this is a hot topic. Thanks!

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Working for the Army our instruction at AFARS 5101.602-2 is clear. Not sure what agency you work for but HCuffage's analysis above seems pretty spot on to me. I queried my Legal Office same as you did above but got nothing specific as far as court cases or statutory citations.

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The question on the table is whether issuing a solicitation without funds available is improper, or illegal. The inference from the question is that if law or regulations do not specifically prohibit this action then it must be okay.

That inference suggests that anything not specifically proscribed is acceptable. I would suggest that similar to the principle that a contract does not have to specify every single detail of a requirement to convey an expectation, law and regulation do not have to proscribe with specificity (e.g. thou shalt not issue a solicitation without having funds available) every action that should or must not be taken.

Let’s examine existing regulation and policy to see if we can advance a line of reasoning that leads to the conclusion that you should not issue a solicitation without having funds available, excepting the situation already discussed – situations where you are authorized to issue a solicitation, and indeed award a contract as a result, by conditioning both the solicitation and contract award on the availability of funds. As we examine existing regulation and policy, let’s also interweave prudent business practices to balance our examination.

The guiding principles set forth in FAR subpart 1.102 establish that the vision for the Federal Acquisition system, in part, is that it will maintain the Public’s trust. FAR also establishes here that the system will (emphasis added), among other things, promote competition; minimize administrative operating costs; and conduct business with integrity, fairness, and openness. It will do these things to meet the end of satisfying the customer in terms of cost, quality, and timeliness of the delivered product or service.

The FAR goes on to lay out performance standards (see 1.102-2) against these guiding principles. The System must provide uniformity where it contributes to efficiency or where fairness or predictability is essential. Each member of the Team is responsible and accountable for the wise use of public resources as well as acting in a manner which maintains the public’s trust.

Industry, especially small businesses, can ill afford to waste bid and proposal (B&P) dollars on solicitations where there is no probability of an award, no matter the quality or competitiveness of their proposal. Predictability of an award as a result of fair competition is essential to the efficiency of the Federal Acquisition system. Agencies that engage in a practice of issuing multiple solicitations without funds available to support an award thwart that predictability and undermine the Federal Acquisition system. Keep in mind that the Small Business Act is a primary source of the requirement to post public notices of proposed contracting actions in order to give Small Businesses access to opportunities.

You waste industry resources through this practice and eventually these wasted resources will be reflected in higher bid and offer prices, ultimately increasing the unit cost to the taxpayer. Once industry detects this practice, you can expect the number and quality of offers to decline and rather than promoting competition you will be stifling competition. How will industry know which solicitations are for real and which are due to the Government’s inability to make up its mind? The Government will quickly lose the public trust of Industry, a critical partner in the acquisition system. What value will the few responses you may get then really provide for the customer in making decisions?

Not only do you waste industry resources, you waste the taxpayers’ resources and increase the operating cost of the Acquisition function. All the costs associated with issuing solicitations where no funds are available represent resources that could have been applied to improving the quality and efficiency of the acquisition processes for those requirements for which funds are available, i.e., that management has decided it will fund. You have just failed the accountability test for wise use of the public’s resources. Again, I am not talking about the proper use of the availability of funds clauses to award contracts in this fiscal year that will be properly chargeable to the funds of the next fiscal year.

Over time, a continuation of this practice will alert industry that it cannot trust the public notices and the system will suffer degradation. Also, you increase the risk of a successful protest and claim for proposal cost recovery.

The FAR does not specifically proscribe issuing solicitations when funds are not available as such a proscription would conflict with the authority in FAR 32.703 to properly condition a solicitation and the resultant contract on the availability of funds in very specific situations where it serves the Government’s critical interests to use this authority. I would posit that, here, FAR in prescribing the specific situations in which you are allowed to solicit without funds being available that it is proscribing all other situations.

FAR Subparts 14.105 and 15.201 (e) provide authority to use RFIs when the Government does not presently intend to award a contract, but wants to obtain price, delivery, other market information, or capabilities for planning purposes. Arguably, if an agency does not currently have funds it is willing to commit to any specific requirement, or is not sure where and how it would like to apply its dollars available for obligation among multiple competing requirements, the sum of which cannot all be funded, then it does not “presently intend to award a contract.” Therefore, the use of RFIs in these situations is the appropriate course of action, remembering that industry is on notice that it will be expending B&P budget dollars without any expectation that an award will result…in other words, its B&P dollars will be applied to fostering an environment where an opportunity for competition in the future may evolve. That is, if the Government gets information of value, it may be influenced to issue a solicitation for a bid or proposal.

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Guest Vern Edwards

Industry, especially small businesses, can ill afford to waste bid and proposal (B&P) dollars on solicitations where there is no probability of an award, no matter the quality or competitiveness of their proposal.

You say "no" probability, by which I suppose you to mean that the probability is 0. Well, under that circumstance it's pretty hard to take issue with what you say. I cannot imagine why a CO would issue a solicitation knowing that the probability of an award is 0. But these are times of great budgetary uncertainty. What if the probability of an award is .7 or .5? What then?

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Guest Vern Edwards

I'm not aware of anything that prohibits issuing a solicitation without funds being available. I know it is not preferred, but as long as you put potential offerors on notice that funds are not currently available, and the solicitation may be cancelled without an award, I don't see how that is prohibited. If someone is aware of a law, reg, or court decision that says otherwise please let me know as this is a hot topic. Thanks!

Mike: I think you misread FAR 32.703-2. It is very clear about when a CO can "initiate a contract action" without funds:

(a) Fiscal year contracts. The contracting officer may initiate a contract action properly chargeable to funds of the new fiscal year before these funds are available, provided that the contract includes the clause at 52.232-18, Availability of Funds (see 32.705–1(a)). This authority may be used only for operation and maintenance and continuing services (e.g., rentals, utilities, and supply items not financed by stock funds) (1) necessary for normal operations and (2) for which Congress previously had consistently appropriated funds, unless specific statutory authority exists permitting applicability to other requirements.

Note that the definition of "contract clause" in FAR 2.101 says that a contract clause applies "after contract award or both before and after award." Note, too, that FAR 32.705-1 prescribes the use of 52.232-18 as follows:

(a) Insert the clause at 52.232-18, Availability of Funds, in solicitations and contracts if the contract will be chargeable to funds of the new fiscal year and the contract action will be initiated before the funds are available.

In light of the language at FAR 32.703-1, which says that the authority to initiate a contract action that is chargeable to the next fiscal year without present fund availability may be used "only" in specified circumstances, use in any other circumstance would be a FAR deviation pursuant to FAR 1.401(a) (a procedure). Any use of FAR 52.232-18 in any other circumstance would also be a deviation pursuant to FAR 1.401(a). Use of any home-grown clause would be a deviation pursuant to FAR 1.401(a) and ( c).

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