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I have a task order that was awarded in FY 11 and funded with annual appropriations; the order also contains options. We are currently in the first option which has been incrementally funded with both FY 12 and FY 13 funds. Based on the antecedent liability rule, (which requires funding change orders with the same type of funding that was used for the "original contract") if I do a change order, do you think it needs to be funded with FY 11, FY 12 or FY 13 funds? I'm already working with Counsel and we are looking to get some feedback as to how others may have handled this situation.

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More facts necessary. What is being purchased? Services? If so, is this a severable service contract or non-severable (the fact that you've got what sounds like optional performance periods with incremental funding of the same period with two different FYs suggests severable, but without addtional information, who knows)? What is the basis of the change order?

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Guest Vern Edwards

Three questions:

1. The contract is funded with annual appropriations. The first option period is incrementally funded. I assume that it is incrementally funded because it is for severable services that cross fiscal years. Is that correct?

2. The option period crosses from FY 12 into FY 13. The work done in FY 12 is funded with FY 12 money. The work in FY 13 is funded with FY 13 money. Is that correct?

3. The change order will be issued in FY 13 and affect services performed in FY 13. Is that correct?

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Sorry for the delay, I had password and computer problems.

It's a CPFF term type TO for management support services that began and was funded in FY 11. Option I was exercised in Aug 2012 and is incrementally funded with FY 12 funding prior to 9/30/12 and FY 13 money after 10/1/12. The change order covers a change of location of services. In response to Vern's questions: (1) Yes, the services are severable. (2) Not necessarily, although funds are properly obligated per FY, i.e. before and/or after 9/30, performance of the work does not necessarily correspond with the FY. Funding is used to pay for hours worked, and once an increment is exhausted, payment is made from the next increment. All increments under each option are used to pay for hours worked during a total duration NTE one year. (3) The change order will affect services performed after the mod is issued, so FY 13 and beyond.

I'm confused by what is meant by "original contract" in the GAO Red Book. Is there a difference between base contract and original contract? I think that I have an antecedent liability. So, do I have to use FY 11 funds since these were used to fund the base period of the TO? Or, FY 12 funds since the change order is against an option CLIN that was in the original TO and initially funded with FY 12 funds. For my remaining options, should funding for this change order match the type of funding that is used when the option is exercised?

Additionally, the following excerpt from 65 Comp. Gen. 741 (1986) is confusing me:

IN THIS INSTANCE, MODIFICATION NUMBER FIVE WAS APPROVED IN MAY 1985. THE MODIFICATION INCREASED THE ORIGINAL CONTRACT AMOUNT BY $218,952. ALTHOUGH THE MODIFICATION WAS BASED ON THE ORIGINAL CONTRACT - EXPANDING THE "PRETEST" DESCRIBED IN THE CONTRACT'S "STATEMENT OF WORK"-- THE INCREASES DID NOT INVOLVE AN ANTECEDENT LIABILITY ENFORCEABLE BY THE CONTRACTOR. SINCE THIS INCREASE IS ABOVE THE CONTRACT CEILING PRICE, WE FIND THAT IT IS PROPERLY CHARGEABLE TO APPROPRIATIONS AVAILABLE WHEN THE INCREASE WAS GRANTED BY THE CONTRACTING OFFICER; THAT IS, THE 1985 FISCAL YEAR APPROPRIATION. SIMILAR MODIFICATIONS MAY BE TREATED ACCORDINGLY.

Since the modification was based on the original contract, it sounds like that the correct authority for Mod #5 (from the above excerpt) would be the changes clause; which would then establish an antecedent liability. However, the reference to the ceiling price makes me wonder if because I am increaseing the ceiling on my CPFF TO as a result of this change order, maybe I can use FY 13 funding.

Here's what I'm thinking:

If the changes clause is your authority, then you have an antecedent liability and must use same type of funding that was used in the original contract. Since each CLIN in the original contract will have its own unique funding, use the type of funding that was used for the CLIN that the change order is being issued against. Change Orders may result in increases to the ceiling price but are always antecedent liabilities.

Increases to the ceiling price that result from a "new procurement" action that is supported by a J&A or other type of supporting documentation would use current funding. Likewise, increases to the ceiling where your authority is either the Limitation of Funds or Limitation of Cost clauses are not antecedent liabilities and would be funded with current money.

Please advise if my logic is not sound. Thanks!

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As your requirement involves severable services, which are the bona fide need of the year in which the service is actually performed, I don't see what antecedent liability (or the "relation back theory") has to do with your question.

Not every change represents the fixing (quantification) of a pre-existing (antecedent) liability. If your agency is DoD, take a look at DoDFMR, Vol. 3, par. 808511. If your agency is the AF, look at AFI 65-601v1, ch. 6. If you're interested in antecedent liability generally, I would encourage you to take a look first at the Red Book (3d Ed. 2004), Vol. I, at ch. 5, § B.7 (at 5-33 – 5-37). For more recent developments, take a look at Nash, Funding Overruns: The Evolving Bona Fide Needs Rule, 23 N&CR ¶ 52 (Oct. 2009), & the pocket part to Nash & Feldman, Government Contract Changes (3d Ed. 2007), sec. 8:14, criticizing the Comptroller General's language in Fin. Crimes Enforcement Network—Obligations under a Cost-Reimbursement, Nonseverable Servs. Contract, B-317139, June 1, 2009, 2009 CPD ¶ 158. For a discussion of antecedent liability before FinCEN, take a look at John D. Schminky, Proper Funding of Contract Modification under the Antecedent Liability Rule, 26 PUB. CONT. L.J. 221 (Winter 1997).

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