Funds for Non Severable Services

[thecontractingguy]

If an appropriate is two year funds and the service is non severable, can the current year funds be used to fund services in FY18?  So the example is FY16 funds that expire 9/30/17.  So non severable allows crossing FY16 and into FY17, but not going past the expiration date of the funds 9/30/17?  Myself and a cowork are having a lively discussion on whether we can funding FY18 services right now.  I don't think we can.  I think it becomes a bona fide need issue and anit deficiency issue.  Anyone want to chime in?

[Retreadfed]

I don't understand the bona fide needs issue in this scenario.  To properly obligate FY 16 funds, you have to have a bona fide need that exists now.  The bona fide needs rule deals with obligation of funds, not when the services being acquired are performed or end.  Thus, if a need for a service arises in FY 16, you can write a contract to satisfy that need, although the service may not begin until FY 17.  The fact that the non severable services may not be complete until FY 18 doesn't seem to raise a bona fide needs issue.  Think a NASA mission to Pluto or Jupiter that takes several years to complete.  There may be non-severable services that are needed to support such a mission.   This is not to say that there may not be a better way of obtaining the services, but I don't see the bona fide needs issue in such a scenario.

[Guest Jason Lent]

I think the answer to your question is concerning the Period of Availability.

My copy of the 2015 Fiscal Law Deskbook defines Period of Availability as: "The period of time in which budget authority is available for original obligation. DoD FMR 7000.14-R, Glossary, p. 22. Most appropriations are available for obligation for a limited period of time, e.g., one fiscal year for Operation and Maintenance appropriations. If activities do not obligate funds during the period of availability, the funds expire and are generally unavailable for new obligations thereafter."

It goes on to discuss the limitations regarding time (emphasis mine): "Appropriations are available for limited periods. An agency must incur a legal obligation to pay money within the appropriations period of availability. If an agency fails to obligate funds before they expire, they are no longer available for new obligations. (...) Appropriations are available only for the bona fide need of an appropriations period of availability."

 

[Todd Davis]

2 hours ago, thecontractingguy said:

So non severable allows crossing FY16 and into FY17, but not going past the expiration date of the funds 9/30/17? 

If services are truly non-severable, when the services are performed does not matter (except for possible closure of the appropriation ~5 years down the road which could preclude liquidation of the obligation, if the obligation remained un-liquidated for that long).  What matters is that the bona fide need exists and the obligation is made during the period of availability for the appropriated funds, which appears to be 10/1/2016 to 9/30/2017.  See GAO Red Book, Chapter 5, Sections A and B.

If services are severable, then you would only be able to fund the services using a 16/17 fund through 9/30/2017, then end of that appropriations period of availability

I think you may be confusing what can be done with "severable" services in accordance with FAR 32.703-3 which applies only to "annual appropriations."

 

[DJEarl]

What about the following DFARS section. Does anyone think it is referring to annual appropriations as well:

232.703-3 Contracts crossing fiscal years.

(b) The contracting officer may enter into a contract, exercise an option, or place an order under a contract for severable services for a period that begins in one fiscal year and ends in the next fiscal year if the period of the contract awarded, option exercised, or order placed does not exceed 1 year (10 U.S.C. 2410a).

I interpret this to be for all types of funding not just O&M. 

Also, since the bona need for a service is when the service is performed, how is is accurate to say that it doesn't matter when the service performed? This would clearly be a bona fife need issue. 

[Todd Davis]

12 hours ago, DJEarl said:

Also, since the bona need for a service is when the service is performed, how is is accurate to say that it doesn't matter when the service performed? This would clearly be a bona fife need issue. 

The OP was asking about multi-year funds for non-severable services, not annual (single) year appropriations or severable services.  The DFARS reference you cite only refers to annual appropriations, as it is supplementing the same subsection of the FAR.  If fact, it is nearly identical to para ( b ) of the FAR subsection.

The GAO Red Book defines bona fide needs rule as:

" A fiscal year appropriation may be obligated only to meet a legitimate, or bona fide, need arising in, or in some cases arising prior to but continuing to exist in, the fiscal year for which the appropriation was made." 

The bona fide need rule has to do with what year appropriation to change an obligation to.  If a services is severable, then a single year appropriation can usually be used to fund severable services crossing fiscal years, but not exceeding 1 year.  If the service is non-severable (entire), the issue of crossing fiscal years is not material, and the entire obligation/contract is charged to the FY in which the obligation was made, regardless of the length of the period of performance.  See GAO Red Book, Chapter 5, Section B.5. regarding "services rendered beyond the fiscal year."