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2Bitgreenhorn

Limitation of funds notice requirements

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I would respectfully request some assistance interpreting FAR 52.232-22. Recently, we had some CLIN's go cost in excess on a large contract with numerous other CLIN's. We requested additional funding on these CLIN's but the PCO balked at the request and is maintaining that we should have sent a limitation of funds notice on those CLIN's. There is no special notice requirement in the PWS related to funds expenditure, however FAR 52.232-22 is present in the contract. My reading of the clause is that the contractor is required to notice the government only when total contract dollars will exceed 75% in 60 days as opposed to interpreting the clause to mean that notice is required when ANY given CLIN would exceed 75%. For the record, we are nowhere close to 75% expended on the total contract. Thanks for any input.

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My interpretation of the clause language is the same. However, does the contract specify funding by CLIN? Also, your post seems to be worded as if you are concerned with line items, not total funding under the contract. It is also not clear what "we had some CLIN's go cost in excess" means or is relevant. Does your contract have estimated cost amounts per line item???  I would have expected that you send a notice when costs expected plus actual cost incurred under the contract exceed the total funding allotted to the contract. The clause does not contemplate line item estimated cost or line item funding. Perhaps your actions (talking about CLINs) are confusing the PCO or your contract specifies line item funded amounts.

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I agree generally with Neil.  However, I am a little fuzzy on why you are asking for additional funding for a CLIN.  If the contract is not funded at the CLIN level, why would you need additional funding for a single CLIN if there is adequate funding for the contract as a whole?

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Thank you for the replies, I just realized that you can select notification when a reply comes in. The contract is a Repair and Return type of service contract and is funded at the CLIN level. For each period of performance the USG decides how much funding they want to add for each CLIN. It is also funded with FMS funds. Availability of these funds is dependent on the funding available on the FMS case established for each country, and which information we are not privy. So basically, the contract has country specific CLIN's which are separately funded. So to answer the "why" we need more funding on a given CLIN,  repairs may come in against a specific CLIN that may max out or exceed funding available. Thanks again for responses!

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PepeTheFrog agrees with your interpretation, but the real question is what to do about it.

If you're feeling froggy, play dumb and try to get the government to send, in writing, their request for you to perform additional actions (which cost time and money) which are not covered by FAR 52.232-22 or other parts of the contract. Then, call them on the phone to discuss the change order they just sent you and how much money they owe you for an equitable adjustment. Maybe their requests will go away or become less burdensome. This might not get your CLINs replenished and might ruin the client relationship. 

If you're feeling less froggy, ask the government to explain, in writing, how the word "contract" in FAR 52.232-22 actually means "(any) contract line item number."

If you're feeling not froggy at all, just lean back and take this nonsense from the government and eat the costs of extra-contractual reporting, like so many other contractors would do. 

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It appears that the contractor is aware of the fact that separate and distinct  appropriations or separate funding is used for each line item “on a large contract”.

It also appears that 2  bit is aware that funding is line item specific and might not be able to be interchanged between CLINs. 

Could there be a patent error or ambiguity that the contractor should have inquired about?

i find it difficult to believe that the government would have never told the contractor to manage costs by the line item or why it has to manage the contract per line item or that the contractor isn’t managing by the line item. 

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The SF 1408 establishes the requirements for an "adequate" contractor accounting system. There are 12 criteria. One criterion states that an adequate accounting system must be able to provide "identification of costs by contract line item and by units (as if each unit or line item were a separate contract) if required by the proposed contract."

Thus, the key question is what does the contract require? Another question (as Joel posted above) is what did the parties intend?

If, as 2bit posted, there is no express requirement in the contract to manage funds at the CLIN level, then he might have an argument. But as Joel has noted, there may well have been a patent ambiguity that should have been resolved before performance started. 

Given the various colors of money (e.g., FMS funding by CLIN) it seems fairly obvious that the correct level for funds management should be the CLIN. But who knows? Seems like the contractor and CO need to get together and resolve this quickly.

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Thank you for the excellent responses, as they have validated my reading of the clause. As I have stated there is no specific CLIN level notice requirement in the contract. However, I do want to resolve this amicably with the contracting officer. For what it is worth, in my view the clause is onerous and problematic as evidenced by the number of times it appears in ASBCA decisions. It is difficult enough to track total funds on an entire project let alone drill them down to specific CLIN's. in this case, what usually happens is that a large repair comes in that drives cost unexpectedly. In the end, the CO has the leverage to get additional funds on the case, and that is the end I hope to accomplish.

 

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