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Exercise option SAF


RachelleR

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52.232-18 is clear; however, the clause prescription is the center of the office discussion.

What does "contract will be chargeable to funds of the new fiscal year and the contract action will be initiated before the funds are available" mean in this scenario?

In my judgment, this means the contract or CLIN (see FAR 2.101 definition of contract) will be chargeable to a new fiscal year (e.g., following, upcoming, or other than when the action is initiated) and the action will be initiated before the new fiscal year funds are available.

Does the prescription fit the scenario usage?

It could. For example, contract/CLIN is chargeable to FY 19 (12 Oct 2018, Option 1) and the contract action to exercise the option could have been initiated in FY 18 depending on option terms (e.g., first part of 52.217-9(a)).

*Surely, we all know what we would do so I am not interested in that (hopefully, that's not to wait until the day of and to read and understand our clauses) … I am merely interested in Rachelle's original post and assigning meaning to the prescription 52.232-18(a).

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When discussing appropriations, the term “availability” or “available” is a term of art that means an organization has legal authority to obligate the funds in question, i.e., the prerequisites of purpose, time, and amount have been satisfied.  Per the OP, the funds were available; the PR was certified by the budget office but could not be routed through the IT system.  The fact that the budget office had technical issues routing the PR does not render otherwise available funds “unavailable.”

An appropriation is a type of budget authority that allows an agency to incur obligations and make payments out of the Treasury for specified purposes. 

Below an appropriation is the “apportionment,” which is a distribution by the OMB of amounts available in an appropriation into amounts available for specified time periods, activities, projects, or programs. The OMB apportions funds to prevent obligation at a rate that would create a need for a deficiency or supplemental appropriation.

Administrative subdivisions imposed by an agency are the third level of fiscal control.  These administrative subdivisions are divided into “formal” and “informal” administrative subdivisions.  Formal administrative subdivisions consist of allocations and allotments.  Informal administrative subdivisions are created by agencies at lower levels and are considered funding targets, or “allowances.”

The Antideficiency Act, 31 U.S.C. §§ 1341-42, 1511-19, prohibits any government officer or employee from:

    a. Obligating, expending, or authorizing an obligation or expenditure of funds in excess of the amount available in an appropriation, an apportionment, or a formal subdivision of funds.

    b. Incurring an obligation in advance of an appropriation, unless authorized by law.

    c. Accepting voluntary services, unless otherwise authorized by law.

Exceeding an allowance or other informal subdivision of funds does not violate the ADA unless to do so would also cause a formal subdivision, an apportionment, or an appropriation to be exceeded.

The purpose of 52.232-18 is to prevent a contracting officer from violating the Antdeficiency Act when it is necessary to take a contract action (e.g., contract award or option exercise) in one fiscal year but funds will not be available (i.e., they will not be appropriated, apportioned, and formally subdivided) until the next fiscal year. 

With regard to the issue raised by RachelleR’s original post, I’ll need to speculate a bit, so take the following with a grain of salt.  RachelleR stated that the budget office had certified the funds as available.  This leads me to believe that funds had been appropriated, apportioned, allocated, and allotted as needed.  However, an IT glitch prevented the routing of the funded PR.  I do not know the administrative ramifications are of routing the PR in RachelleR’s agency.  It could simply be a technical notification process with no impact on the funds at all.  But at most, it involved a transfer of funds authority between informal subdivisions, i.e., an allowance, and obligating in excess of that allowance does not implicate the ADA.

Therefore, while the KO might have committed an internal, administrative violation, the exercise of the option was valid.  It was not necessary to exercise the option “subject to availability of funds” because the funds were legally available and exercising the option did not violate the ADA.  Stating the option was being exercised pursuant to 52.232-18, while not technically accurate or necessary, did not cause any harm, assuming unbroken service was not needed.

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Lionel:

Solid post! (Reminds me of a discussion I had with a lawyer about some myth-information regarding ADA)

As I read it, the OP seemed to say that funds were commited (commitment being an administrative reservation of funds in advance of an obligation). All the contracting officer needed was a written assurance from the financial authority that adequate funds were available (e.g., commited).

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16 hours ago, Lionel Hutz said:

When discussing appropriations, the term “availability” or “available” is a term of art that means an organization has legal authority to obligate the funds in question, i.e., the prerequisites of purpose, time, and amount have been satisfied.  Per the OP, the funds were available; the PR was certified by the budget office but could not be routed through the IT system.  The fact that the budget office had technical issues routing the PR does not render otherwise available funds “unavailable.”

An appropriation is a type of budget authority that allows an agency to incur obligations and make payments out of the Treasury for specified purposes. 

Below an appropriation is the “apportionment,” which is a distribution by the OMB of amounts available in an appropriation into amounts available for specified time periods, activities, projects, or programs. The OMB apportions funds to prevent obligation at a rate that would create a need for a deficiency or supplemental appropriation.

Administrative subdivisions imposed by an agency are the third level of fiscal control.  These administrative subdivisions are divided into “formal” and “informal” administrative subdivisions.  Formal administrative subdivisions consist of allocations and allotments.  Informal administrative subdivisions are created by agencies at lower levels and are considered funding targets, or “allowances.”

The Antideficiency Act, 31 U.S.C. §§ 1341-42, 1511-19, prohibits any government officer or employee from:

    a. Obligating, expending, or authorizing an obligation or expenditure of funds in excess of the amount available in an appropriation, an apportionment, or a formal subdivision of funds.

    b. Incurring an obligation in advance of an appropriation, unless authorized by law.

    c. Accepting voluntary services, unless otherwise authorized by law.

Exceeding an allowance or other informal subdivision of funds does not violate the ADA unless to do so would also cause a formal subdivision, an apportionment, or an appropriation to be exceeded.

The purpose of 52.232-18 is to prevent a contracting officer from violating the Antdeficiency Act when it is necessary to take a contract action (e.g., contract award or option exercise) in one fiscal year but funds will not be available (i.e., they will not be appropriated, apportioned, and formally subdivided) until the next fiscal year. 

With regard to the issue raised by RachelleR’s original post, I’ll need to speculate a bit, so take the following with a grain of salt.  RachelleR stated that the budget office had certified the funds as available.  This leads me to believe that funds had been appropriated, apportioned, allocated, and allotted as needed.  However, an IT glitch prevented the routing of the funded PR.  I do not know the administrative ramifications are of routing the PR in RachelleR’s agency.  It could simply be a technical notification process with no impact on the funds at all.  But at most, it involved a transfer of funds authority between informal subdivisions, i.e., an allowance, and obligating in excess of that allowance does not implicate the ADA.

Therefore, while the KO might have committed an internal, administrative violation, the exercise of the option was valid.  It was not necessary to exercise the option “subject to availability of funds” because the funds were legally available and exercising the option did not violate the ADA.  Stating the option was being exercised pursuant to 52.232-18, while not technically accurate or necessary, did not cause any harm, assuming unbroken service was not needed.

Appreciate your thoughtful and informative response. 

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18 hours ago, Jamaal Valentine said:

As I read it, the OP seemed to say that funds were commited (commitment being an administrative reservation of funds in advance of an obigation). All the contracting officer needed was a written assurance from the financial authority that adequate funds were available (e.g., commited).

I agree.

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