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1102pleb

Fully Fund Policy

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1102pleb:

The question you asked at the end of your last post is a distraction and I'm going to ignore it. It was a newbie question and a dumb one. How would the answer help you with your problem? I asked earlier if you are a newbie. I don't recall that you answered. I'm not usually as patient as I have been with people who aren't newbies.

Suggestion: Issue a task order with options to extend the task order period of performance? The basic order could be for services covered by your initial funding. You could include options to extend the service by one week, one month, two months, etc., whatever makes sense, and exercise them as additional funds become available. You would have to comply with FAR 17.207 each time you exercise one of the options, but you wouldn't have to conduct a new competition.

In anticipation of your next question: Yes, you may include options in a task order, unless your agency's policy or local policy forbids.

I think that your problem is simple and that there are any number of things that a competent CO could figure out to do. It's time for someone in your organization to put on a thinking cap or find work that they know how to do.

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1102pleb:

The question you asked at the end of your last post is a distraction and I'm going to ignore it. It was a newbie question and a dumb one. How would the answer help you with your problem? I asked earlier if you are a newbie. I don't recall that you answered. I'm not usually as patient as I have been with people who aren't newbies.

Suggestion: Issue a task order with options to extend the task order period of performance? The basic order could be for services covered by your initial funding. You could include options to extend the service by one week, one month, two months, etc., whatever makes sense, and exercise them as additional funds become available. You would have to comply with FAR 17.207 each time you exercise one of the options, but you wouldn't have to conduct a new competition.

In anticipation of your next question: Yes, you may include options in a task order, unless your agency's policy or local policy forbids.

I think that your problem is simple and that there are any number of things that a competent CO could figure out to do. It's time for someone in your organization to put on a thinking cap or find work that they know how to do.

Vern, you are correct in calling me out on my newbie dumbness. I am just about two years into this career. I've been reading your blog and your posts for more than a year though, so I consider myself ahead of the curve because of it.

The only reason I asked the now shunned question is my interest in trying to figure out why people around here seem to think OPN needs to always be fully funded. My line of thinking being that if a service is always connected to an end item, then it always is a non-severable service and would always need to be fully funded. That seems to be the only explanation. I was simply asking if you know of situations where there is a clear severable services situation that would be funded with procurement dollars.

Thanks for the option suggestion. We currently have 1 year options, but I don't see why we couldn't shorten these so that the customer could provide full funding. It seems so simple, but it just might be the perfect solution to the incremental funding issue.

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The only reason I asked the now shunned question is my interest in trying to figure out why people around here seem to think OPN needs to always be fully funded.

I explained why. They think it because of what the DOD FMR says. The DOD FMR says what it does because of GAO case law. There is nothing more to understand.

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OMG, I would be lost without this website! Thanks! If you charged a small monthly fee, I would gladly pay. I was considering paying (bribing?) my procurement analyst to help me answer some of these questions...but I'm pretty sure she would just laugh and walk out at 7.99 hours. Really, WIFCON has become how I get my job done.

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I wasn't sure if I should start my own post but I thought my question seemed related to the title of the original post.

DFARS 232.703-1 (FFP Incremental Funding)

(1) A fixed-price contract may be incrementally funded only if—

(i) The contract (excluding any options) or any exercised option—

(A) Is for severable services;

(
B)
Does not exceed one year in length; and

© Is incrementally funded using funds available (unexpired) as of the date the funds are obligated; or

(ii) The contract uses funds available from multiple (two or more) fiscal years and—

(A) The contract is funded with research and development appropriations; or

(
B)
Congress has otherwise authorized incremental funding.

(2) An incrementally funded fixed-price contract shall be fully funded as soon as funds are available.

Based on the above and several GAO decisions I would say that one cannot incrementally fund a research and development contract (3600) if it for a non-severable service because non-severable service contracts must be fully funded (B-240264, 73 Comp. Gen. 77, B-238940, 70 comp. Gen. 296).

However, an Inspector General Report (D-2008-079) has made me question my understanding. The title of the cited report is the "Management of Incremental Funds on Air Force Research, Development, Test, and Evaluation Contracts".

The part of the report that has made me question my understanding can be found on page 14 of 74, which states (paraphrased) of the 365 CLINs that were Incrementally Funded RDT&E 212 of the CLINs were nonseverable. The IG chose not to review the funding associated with the nonseverable CLINs. Regardless, the fact the report calls out incrementally funding nonseverable CLINs implies to me that they can be incrementally funded. What am I missing? Let's assume they are not talking about incrementally funding a nonseverable CLIN in a single fiscal year as discussed in the previous post.

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What are you missing? I think you are missing the sentence structure of the the DFARS section. Try reading it this way:

A fixed price contract may be incrementally funded if:

(1) the contract is for severable services that do not exceed one year and is funded with funds available as of the date the funds are obligated,

OR

(2) the contract is an R&D contract using funds from two or more years.

Under this reading, which I believe is correct, there are two separate authorities for incremental funding, and there is no connection between contracts for severable services and contracts for R&D.

Does this make sense?

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Wvanpup, I understand there is no connection between the two references that you cited; however, I am referring to a R&D effort that is non-severable, where according to several sources (see original post), it is a requirement to fully fund nonseverable services at the time of award. Perhaps FFP R&D is the exception to the rule concerning fully funding nonseverable services.

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I can't speak for any of the civilian agencies, but DOD policy is to incrementally fund all RDT&E contracts that cross fiscal years, because that's how the RDT&E appropriation is budgeted. They budget, and fund, RDT&E work based on their best estimate of the amount of RDT&E work that will be performed in a particular fiscal year - severable or non-severable, and fixed-price or cost-reimbursement. The DoD Financial Management Regulation (FMR) is replete with references to incrementally funded RDT&E contracts. This cite from Volume 2A, Chapter 1 is particularly a propos:

"010214. RDT&E - Incremental Programming and Budgeting Basis

A. Purpose

This Chapter specifies the principles to be followed, and establishes the criteria and definitions to be used, in the preparation of the annual Research, Development, Test and Evaluation (RDT&E) budget estimates on an incrementally funded basis. The incremental budgeting policy provides that only those funds required for work in a given fiscal year shall be included in the RDT&E budget request for that fiscal year for most classes of effort.

B. Policy

The annual budget estimates for Research, Development, Test and Evaluation (RDT&E) projects and programs, including developmental and operational test and evaluation programs, are to be prepared on an incrementally programmed basis (as opposed to the fully funded program basis used in preparing procurement budget estimates.) "

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This is not a statutory issue so you won't find anything that scratches the itch in law. However, I think I can answer the Congressional intent and connect the "full funding policy" in the budget with contractual execution. In DoD FMR Volume 2A, Chapter 1, it states at 010202C5:

Relationship of Budgeting and Contracting. An end item is fully funded only when funds are budgeted, programmed and available to cover the total estimated cost of the item at the time the procurement action is begun. Contracting, on the other hand, is a part of the execution phase or acquisition process within the framework of a program. The number of contracts required to procure a defense system, the type of contract awarded, and the timing of the award have no bearing upon whether or not an item is fully funded. In executing a program, no procurement of material or equipment, or work or services, therefore, shall be directed or implemented unless the full program amount is available, except for authorized economical order quantity (EOQ) and advance procurement. Similarly, the value of existing contracts for the procurement of material or equipment shall not be increased (through contract modifications) unless the funds are available to fully fund the new contract price. Limitations of funds clauses shall not be used as a mean of avoiding the requirement to fully fund procurement programs. (Note that this guidance does not affect the proper use of limitations of funds clauses in incrementally funded development contracts.) For multiyear contracts, the test of full funding does not include the cancellation ceiling associated with items in the FYDP to be procured in fiscal years not yet funded (that is, beyond the budget year). Multiyear contracts may not be awarded unless the contract and the multiyear program are fully funded within the approved FYDP funding.

Fully funding an end item is a requirement. The government cannot incrementally fund a "widget" because we can never guarantee that we will receive our full next quarter allocation of funds nor can we guarantee that our reimbursable customer will send his portion of the funding required. So when we contract for an end item, the funding has to be in hand.

For the SeaPorte contract, if the only deliverable is the lot of hours, then the contract specialist doesn't appear to be purchasing an installation as much as they are purchasing a service for the skill set required to perform installation duties. They have no way of guaranteeing that the installation will be complete when the lot of hours runs out. However, if they are asking for something to be done that requires a "report" at the end of the services, they need to fully fund the effort because they just ventured into the "widget" category.

Does this help at all? The concept of fully funding is intended to apply to the purchase of major weapons systems and military construction projects. The desire is to budget appropriately so that the funding to procure the items/buildings/etc. for a given year is appropriated and contracted for in that year with the funds Congress has set aside. When the systems are parcelled out on a zillion contracts, folks tend to lose sight of the intent and/or scope of the entire effort which makes the effort particularly difficult if you never participated in the whole system but just putting some of the pieces together that will eventually fit into the larger system.

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The DOD policy for incremental funding of RDT&E projects is in the Financial Management Regulation, Volume 2A, paragraph 010214, "RDT&E - Incremental Programming and Budgeting Basis. Read the reg. You CAN incrementally fund contracts for non-severable R&D projects.

summerlady51 said:

Fully funding an end item is a requirement. The government cannot incrementally fund a "widget" because we can never guarantee that we will receive our full next quarter allocation of funds nor can we guarantee that our reimbursable customer will send his portion of the funding required. So when we contract for an end item, the funding has to be in hand... The concept of fully funding is intended to apply to the purchase of major weapons systems and military construction projects.

While what summerlady51 said about full funding is generally true, there are few absolutes in this business. The DOD FMR notwithstanding, DOD has sought to incrementally fund the procurement of widgets (capital acquisitions), such as ships and aircraft. See Defense Procurement: Full Funding Policy -- Background, Issues, and Options for Congress, Congressional Research Service (June 15, 2007), and Congress has approved that approach for certain Navy aircraft carriers. See Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress, Congressional Research Service (March 13, 2013). Congress has also approved incremental funding of military construction, even over the objections of OMB. See Military Construction: A Snapshot of the President's FY2013 Appropriations Request, Congressional Research Service (June 22, 2012). See also Senate Report 110-85, Committee on Appropriations, Military Construction and Veterans Affairs and Related Agencies Appropriation Bill, 2008, June 18, 2007, p. 11:

In general, the Committee supports full funding for
military construction projects. However, it has been the
practice of the Committee to provide incremental funding for
certain large projects, to allow the Services to more
efficiently allocate their limited military construction
dollars among projects. Last year, the Office of Management and
Budget [OMB] issued a directive that limits incremental funding
to projects funded through the BRAC process. The Committee
believes that incremental funding for all military construction
projects should be considered on a case-by-case basis, as it
has in the past, and not reserved solely for the BRAC program.
The Committee intends to continue to exercise its
constitutional prerogative to provide incremental funding where
warranted and has recommended incremental funding of several
high cost projects included in the President's fiscal year 2008
request. The Committee urges OMB to reconsider its prohibition
on incremental funding and permit the Services to exercise
their judgment as to the most efficient method to fund large
projects, including the use of incremental funding.

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All true. I just didn't want to muddy the waters. Your financial analysts should know if they are dealing with an exception. It is their job to read the authorization and appropriations bills each year. This is a battle that has been smoldering for years. Congress is adamant that they don't trust us to do the right thing. As a result, for the most part, procurement of major weapons systems and military construction require what they are calling full funding but strangely it isn't due to how it is implemented. DoD wants to do more of the incremental budgeting and procurement and Congress feels they will lose control of the oversight if they allow it to any great degree.

Question: When I do jump in on subjects, do I need to bring up the exceptions and other outlying factors? I can and do have all of the citations on my computer because my job is in financial policy.

Have a good one!

Summerlady51

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When I do jump in on subjects, do I need to bring up the exceptions and other outlying factors? I can and do have all of the citations on my computer because my job is in financial policy.

The main goal should be to answer the question on the table as accurately as possible. You were posting in a thread in which a particular question about RDT&E funding was on the table. You cited the FMR (010102C5) and talked about budgeting and funding for capital assets, but you didn't cite the FMR on RDT&E (010214). I felt that you may have left the impression that you cannot incrementally fund RDT&E, which would not have been correct.

In your discussion about full funding you could have gotten away with saying "with some exceptions" and citing an explanatory reference. I happened to know about incremental funding of some capital asset projects and contracts and so referred interested readers to the CRS reports and the Senate report. But the main thing was to address the question about incrementally funding RDT&E.

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