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Am I correct that a contract for a nonseverable service must be fully funded when awarded or when an option is exercised, but that a contract for severable services may be incrementally funded?


If a contract has line items for both nonseverable and severable services, can the line items be treated independently even though under one 'severable' contract?


Does the 2410a exemption apply equally to annual and multi-year appropriations?


Thanks.
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That's better. Since you referred to 2410a, I assume you work for DoD. According to Volume 3, Chapter 8, of the DoD Financial Management Regulation, nonseverable services must be fully funded at the time of award. See 080303 ( C )(2):

Non-Severable Services. Non-severable services contracts (such as services to produce a single or unified outcome, product, or report) are “entire” and must be
funded entirely with appropriations available for new obligations at the time the contract is awarded, and the period of performance may extend across fiscal years.

It's possible to have a line item for a nonseverable service and another line item for a severable service in the same contract (don't say "severable contract). In such a contract, you would be required to fully fund the line item for the nonseverable service at award, but not the line item for the severable service.

I'm not sure what you're asking with your last question. If you had multi-year appropriations, you wouldn't need the authority at 10 USC 2410a, right? Also, are you sure that you are funding a severable service with a multi-year appropriation?

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I'm not sure what you're asking with your last question. If you had multi-year appropriations, you wouldn't need the authority at 10 USC 2410a, right? Also, are you sure that you are funding a severable service with a multi-year appropriation?

Yes, I am DoD, Navy civilian.

The question comes in when using prior-year multi-year dollars (OP-N in this case) to fund a task with a PoP that extends past the expiration date of the funding. For example, the contract option year begins in mid-September 2014 and FY12 funds are added to the contract prior to 30 September. Does 2410a apply to extend their viability to the end of the one year PoP?

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Yes, I think it does. The authority granted by 10 U.S.C. 2410a is not specific to a particular type of appropriation. Here's what the statute says:

(a) Authority.—
(1) The Secretary of Defense, the Secretary of a military department, or the Secretary of Homeland Security with respect to the Coast Guard when it is not operating as a service in the Navy, may enter into a contract for a purpose described in paragraph (2) for a period that begins in one fiscal year and ends in the next fiscal year if (without regard to any option to extend the period of the contract) the contract period does not exceed one year.
(2) The purpose of a contract described in this paragraph is as follows:
(A) The procurement of severable services.
(B ) The lease of real or personal property, including the maintenance of such property when contracted for as part of the lease agreement.
(b ) Obligation of Funds.— Funds made available for a fiscal year may be obligated for the total amount of a contract entered into under the authority of subsection (a).
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Don, I'm not sure I follow your post #4. Are you saying that you cannot incrementally fund a non-severable services contract using the same appropriation? The way I read the FMR all that is required is that such a contract be funded with the same appropriation. It doesn't say that the contract cannot be incrementally funded using the same appropriation.

Sherlock, what type of services are you obtaining using OPN funds?

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Don, I'm not sure I follow your post #4. Are you saying that you cannot incrementally fund a non-severable services contract using the same appropriation? The way I read the FMR all that is required is that such a contract be funded with the same appropriation. It doesn't say that the contract cannot be incrementally funded using the same appropriation.

Sherlock, what type of services are you obtaining using OPN funds?

Retreadfed,

The FMR can be read the way you are reading it. However, I don't think that's the correct interpretation. In Matter of: Financial Crimes Enforcement Network, B-317139, June 1, 2009, the GAO stated:

The general rule is that a nonseverable service is considered a bona fide need at the time the agency orders the service and, therefore, should be charged to an
appropriation current at the time the agency enters into the contract. B-305484, June 2, 2006, at 6--7; 65 Comp. Gen. 741, 743 (1986). A nonseverable service is one that requires the contractor to complete and deliver a specified end product (for example, a final report of research). 65 Comp. Gen. at 743--744. Severable services, which are recurring in nature, are bona fide needs at the time the service is completed, and obligations for severable services should be charged to appropriations current at that time. B-287619, July 5, 2001, at 6. A severable service is a recurring service or one that is measured in terms of hours or level of effort rather than work objectives. B-277165, Jan. 10, 2000, at 5; 60 Comp. Gen. 219, 221--22 (1981). Whether a contract is for severable or nonseverable services affects how the agency may fund the contract; severable services contracts may be incrementally funded, while nonseverable services contracts must be fully funded at the time of the award of the contract. 73 Comp. Gen. 77; 71 Comp. Gen. 428 (1992).

See also Matter of Incremental Funding of U.S. Fish and Wildlife Service Research Work Orders, B-240264, February 7, 1994:

In our opinion, the sample research work order described above appears entire in nature, Upon execution of the research work order, the university cooperator is committed to the completion of the stated research project, The study is to culminate in a publishable report which the research work order refers to as a "final product." The cooperator agrees to perform all work set forth in the research work order during the specified period of performance, the objectives of which are described with specificity, and the total cost estimated with reasonable accuracy. The work product envisioned in the research work order is the completed study, nothing less. Since it represents a single bona fide need, the sample research work order is entire, and, consequently, the appropriation current at the time the research work order was executed should have been charged rather than funds current at the time services are rendered. See 65 Comp, Gen, 741 (1986), Thus, the Service should have obligated the full estimated cost of the sample research work order at the time it was issued.
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Thanks, Don. I read both the decisions you cited. However, I do not find that either addressed he specific issue I posed. While the GAO used broad statements in the decisions, they appear to be appropriate for the circumstances presented. In both cases, the agency used different appropriations to fund nonseverable services. In each case, some of the funds used were not available for obligation when the contract was awarded. Reading the decisions as a whole, I do not think that they would prohibit the incremental funding of a nonseverable services contract so long as all the funds used were available for obligation at the time the contract was awarded.

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I am going from memory here, without access to research materials, so you may want to check some of this.

The FMR and the DFARS have different definitions of incremental funding. The FMR definition refers to funding from different fiscal years, not fully obligating (funding) the contract value at the time of award. Under this definition, it is not incremental funding to award a $100M contract in Nov 2013 (FY 14) and fund $50M at time of award (from a continuing resolution), $50M in Feb 2014 after an appropriations act is finalized. The DFARS definition (232.001) defines incremental funding as the partial funding of a contract at time of award with additional funding to be provided later. Incremental funding for fixed-price contracts is prohibited by the DFARS except for limited circumstances involving severable services or research and development.

Could the different definitions affect how you are interpreting what is permitted?

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