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FAR 52.232-18


bob7947

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I'm posting this for Dakota who is a new member that mistakenly posted it as a blog entry.

"I have a pending modification to an existing task order for the continuation of range operations effective 1 October. However, the modification has not been issued yet due to the lack of fiscal year funds. The contractor has requested a "guarantee" that it will be paid for performance on 1 October, but has been advised that performance is subject to the availability of funds. The range operations will be shut down if the contractor is not available to perform on the effective date, and the effort has been funded annually with O&M funds since 2004. Given the language at FAR 32.703-2 can a modification be issued on 30 September to for a time-and-materials CLIN for services subject to the availability of funds?"

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Dakota:

Check out FAR 32.001 definition of "contract action" and see if it's applicable to what you propose under FAR 32.703-2. Since you don't have much time - recommend talking to your supervisor and legal to get their determination if you meet FAR 32.703-2 and 32.001 standards, and how they would like you to proceed.

Perhaps this can be avoided in the future by offsetting your periods of performance from the fiscal year cycle.

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Guest Vern Edwards
Given the language at FAR 32.703-2 can a modification be issued on 30 September to for a time-and-materials CLIN for services subject to the availability of funds?

For the services that you described, the answer is yes.

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This post highlights a problem inherent with aligning service contracts to the fiscal year. Hundreds (thousands?) of COs around the country cite "availability of funds" for services that we need on 10/1 each year and the contractors perform with the assumption they'll get paid. What happens when a contractor, citing the language of 52.232-18, "No legal liability on the part of the Government for any payment may arise until funds are made available..."?

The cruz of Dakota's problem is...

"The contractor has requested a "guarantee" that it will be paid for performance on 1 October, but has been advised that performance is subject to the availability of funds."

As Vern has confirmed, 32.703-2 applies and 52.232-18 can be cited, but that leads us back to the plain language of the clause which offers no guarantee of payment.

If I may....
Can 52.232-18 be used in the exercise of an option effective 10/1?
I believe any option that obligates funds must comply with 17.207( c)(1), "( c)The contracting officer may exercise options only after determining that -- (1) Funds are available;", and thus we lack authority to exercise until funds are available.

So, 32.703-2 and 17.207( c)(1) seem to conflict. Which prevails?

Thanks.

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Guest Vern Edwards

Questions like these that come during the last days of the U.S. fiscal year are inexcusable. There is no excuse in 2015 for uncertainty and confusion about Government shutdowns.

A CO cannot allow a contractor to perform a service contract in the absence of funds or in advance of funds and cannot guarantee payment to any contractor who works notwithstanding. Any contractor that has done business with the Government for any length of time ought to know this by now, and any contractor representative who asks for such a guarantee is a jackass.

This problem comes with the territory when doing business with the U.S. Government, which cannot manage its affairs. So as the end of a fiscal year approaches and the Government must get a new appropriation in order to pay for continued work, a contractor is stupid and irresponsible for not having a plan to shutdown its operations and lay off (furlough, whatever) its employees. Have a plan!

Even if the Government has an appropriation for your contract, a shutdown may curtail an agency's operations for a period and you may be unable to work. Have a plan!

Consult an attorney about your contractual obligations and rights if your operations are affected and don't expect your contracting officer to have any answers to your questions, much less reliable answers. Have a plan!

HAVE A PLAN, DAMMIT!!!! Have answers to your questions before you need them.

As for the last question asked, you have to read the FAR as a whole and integrate its parts. It's not either/or. You can take certain contract actions without funds conditioned upon the availability of funds, including the exercise of options for O&M service contracts. How can anyone working annually funded O&M service contracts not know that? All you have to do is write a special contract clause that says 52.232-18 applies not only to the initial contract award, but also to the exercise of options. If the contract is IDIQ or requirements, use 52.232-19.

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When I was a CO with any type of real authority, I offset my service contracts from the FY. I had a plan and implemented it.

Now I'm a glorified data-entry clerk filling in data values in a cumbersome contract writing system designed solely for the purposed of oversight without consideration to writing good contracts. Our option-year contracts currently require three steps: 1) preliminary written notice; 2) contract modification exercising option BEFORE 9/30 citing 52.232-18; 3) contract modification advising funds are available when the funds become available (sometime after 10/1).

COs around the country routinely allow (and encourage) contractors to perform under 52.232-18 starting 10/1 and until funds become available. Why would we exercise an option subject to 52.232-18 instead of waiting for the funds to become available and then exercising? To ensure no interruption of service! Yet we're not supposed to allow them to perform during that period lacking funds. It's a Catch-22.

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Step 2 is usually avoidable, or at least can be combined with step 3, with a little imagination. Actually, I take it back - step 2 is usually avoidable by limiting the imagination to a literal reading of 52.217-9's use of the term 'within'.

'Within' can be Sep 1 or Oct 30 using the standard 30 day language. I've tried to get my leaders to see it as I have explained here with varying success.

Saves a contract action.

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As if the lack of funds at the beginning of a fiscal year does not cause enough contracting problems regarding compliance with the FAR, in my experience, many contracting officers are not familiar with this statute, which carries potential criminal penalties for its violation

https://www.law.cornell.edu/uscode/text/31/1342

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Guest Vern Edwards
Why would we exercise an option subject to 52.232-18 instead of waiting for the funds to become available and then exercising?

Because if you don't and the contract expires, you might not be able to exercise the option. By exercising the option subject to the availability of funds you preserve your contractual rights.

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C'mon, Vern, do you really believe that's applicable to the majority of options being exercised subject to funds?
There's plenty of time in the new FY for funds to become available and subsequently exercise the option if folks give themselves any time in the first 52.217-9 fill-in.

In my experience, options get exercised subject to availability of funds for two reasons:

1) The CS/CO and/or leadership misread the clause and FAR references and believe they must exercise before the current period expires. There are too many in our series who wrongly believe "before the contract expires" applies to both fill-ins in 52.217-9. They are unable to properly interpret the plain language of the clause and are ignorant of 17.204.

2) The govt expects the contractor to perform immediately in the new FY, regardless of when funds become available and disregarding much of clause 52.232-18, "No legal liability...until funds are made available...". We want performance without guarantee we can pay, contrary to fundamental contracting rules and fairness.

I'd really like to know if any contractors have been adversely affected by refusing to perform under 52.232-18. This applies directly to the OP's original query. We can't compel them to perform, right?

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Clearly, in this scenario, you can't exercise a clause that's not in the contract and case law says you can't add a clause in the same modification that exercises the option.

So what could Dakota do? Dakota could read the language in the specific contract's option clause and determine if the modification to exercise could be issued post 'expiration' when funds were available. Dakotas contract could already include 52.232-18, but the question likely would not have been raised if it did; so, Dakota could modify the contract, to include 52.232-18, in advance of the option to exercise.

None of these things answer the question regarding the contractors desire for a guarantee of payment. Sounds like the government will have them render services in advance of appropriations. Maybe the organization has an authority using an exception under cases of emergency involving the safety of human life or the protection of property...doubt it.

Maybe Dakota isn't interested in options at all and was asking if they could modify the contract by adding a new T&M CLIN to c continue services subject to the availability of funds.

Any other thoughts? I'm sure there are.

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Guest Vern Edwards

C'mon, Vern, do you really believe that's applicable to the majority of options being exercised subject to funds?

There's plenty of time in the new FY for funds to become available and subsequently exercise the option if folks give themselves any time in the first 52.217-9 fill-in.

illzoni:

What did I say that suggests to you that I didn't believe what I said?

You cannot exercise an option if the underlying contract has expired. NVT Technologies, Inc., EBCA C-0401372, 04-2 BCA ¶ 32660, June 29, 2004. That case involved the untimely exercise of the -9 option.

I don't know what you mean by "applicable" to the majority of options being exercised subject to funds. What I said is true of all contracts. If you take measures to prevent the underlying contract from expiring before the option is exercised, then you should be okay.

You asked:

I'd really like to know if any contractors have been adversely affected by refusing to perform under 52.232-18. This applies directly to the OP's original query. We can't compel them to perform, right?

FAR 52.232-18 does not require a contractor to perform before funds availability, and the Anti-deficiency Act makes it illegal to require the contractor to perform before funds are available. See http://www.gao.gov/legal/anti-deficiency-act/about:

The Antideficiency Act prohibits federal employees from

  • making or authorizing an expenditure from, or creating or authorizing an obligation under, any appropriation or fund in excess of the amount available in the appropriation or fund unless authorized by law. 31 U.S.C. § 1341(a)(1)(A).
  • involving the government in any obligation to pay money before funds have been appropriated for that purpose, unless otherwise allowed by law. 31 U.S.C. § 1341(a)(1).
  • accepting voluntary services for the United States, or employing personal services not authorized by law, except in cases of emergency involving the safety of human life or the protection of property. 31 U.S.C. § 1342.
  • making obligations or expenditures in excess of an apportionment or reapportionment, or in excess of the amount permitted by agency regulations. 31 U.S.C. § 1517(a).

If contractors perform anyway, not sure that they'll be paid, it's probably because they want the job and because they act more responsibly than the politicians who run our government.

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  • 1 month later...

I am glad to see that others have suffered under the burden of the recurring new FY trick bag. No matter what we do, there is suffering. As long as the services must go on, and we are censored for letting contractors work without funds, there will be suffering. It is not logical, but it happens every year. We can read the clause until we fall asleep.

The clause was intended to let contractors work. The immediate problem is that they might start invoicing us before the funds arrive.

This conundrum can't be fixed with the current rules. If we want to make the auditors "happy", we must not let the contractors provide services for any customers who have not provided us with funds. And if we let them work and the funds arrive in time, the auditors will look to see if they invoiced us for services rendered while we were waiting for the funds.

It cannot be fixed with current "mis-rules". The availability of funds clause must be used as was intended. Oh, no Promises to Pay or Guarantees of Funds are enough, either.

Let's smile and continue to suffer next 1 October when once again we have customers with needed services and the funds are "on their way"....

HAPPY TRAILS!

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