CPFF contract and the option year 1 CPFF CLIN has an estimated cost of $1,000 but is only funded to $800. Fast forward to option year 2, can that $200 cost remaining be used in option year 2 on a CPFF CLIN?

14 hours ago, Birdsong said:

CPFF contract and the option year 1 CPFF CLIN has an estimated cost of $1,000 but is only funded to $800. Fast forward to option year 2, can that $200 cost remaining be used in option year 2 on a CPFF CLIN?

Lots of unknowns to your simple question as in part it is confusing. More specifically "funded". Are you saying the option has exercised and obligated? And what kind of "funded" are you referrring to or in other words do the "funded" (monies, funding of the contract and its possible options) have any limitations?

My best suggestion is that you might want to take a deep dive into the GAO Redbook https://www.gao.gov/legal/appropriations-law/red-book especially the about availability of appropriations.

16 hours ago, Birdsong said:

can that $200 cost remaining be used in option year 2 on a CPFF CLIN?

In addition to what Carl wrote, this is confusing. Does the option year 2 CLIN have an estimated cost? If so, are you wanting to increase that estimated cost by $200? Going back to OY 1, is it incrementally funded? Are you asking if funds that could have been used to fund the $200 estimated cost in OY 1 be used in OY2? Lots of questions.

Yes, OY2 does have an estimated cost. Yes, I’m asking about increasing the estimated cost CLIN in OY2. The contract is incremental funded. Not talking about any funding. Asking if the remaining “ceiling” of $200 from OY1 that was never funded be moved to OY2?

1 hour ago, Birdsong said:

Yes, OY2 does have an estimated cost. Yes, I’m asking about increasing the estimated cost CLIN in OY2. The contract is incremental funded. Not talking about any funding. Asking if the remaining “ceiling” of $200 from OY1 that was never funded be moved to OY2?

I would suggest doing so is a change. As a contemplated change you would then analyze the change with regard to the specific contract to determine if the change is or is not a change in scope.

@Birdsong , without more applicable facts, my answer is, "no,"

On 7/17/2025 at 6:03 PM, Birdsong said:

CPFF contract and the option year 1 CPFF CLIN has an estimated cost of $1,000 but is only funded to $800. Fast forward to option year 2, can that $200 cost remaining be used in option year 2 on a CPFF CLIN

19 hours ago, Neil Roberts said:

@Birdsong , without more applicable facts, my answer is, "no,"

What more information would you need? OY1 underburned, OY 2 is over burning. This is CPFF, the contract is incrementally funded.

4 hours ago, Birdsong said:

  On 7/17/2025 at 4:03 PM, Birdsong said:

CPFF contract and the option year 1 CPFF CLIN has an estimated cost of $1,000 but is only funded to $800. Fast forward to option year 2, can that $200 cost remaining be used in option year 2 on a CPFF CLIN

What more information would you need? OY1 underburned, OY 2 is over burning. This is CPFF, the contract is incrementally funded.

Facts that contradict what I see:

A CPFF contract type normally includes an estimated cost and a fixed fee for the value of the work. The amount of the fee can be equated to a % when compared to the estimated cost. It appears from your post that the actual cost is underrunning the contract estimated cost for an item? Underruns of actual costs can't be contractually transferred anywhere. You seem to indicate that there is an overrun of the estimated cost on another item? Overruns of actuals also can not be contractually transferred anywhere. No current contract estimated cost or fixed fee of a seller can be increased unless the buyer receives consideration. Perhaps you can also explain the contract elements of a "ceiling" CPFF?

It looks like only $800 was funded for some effort to be performed during the first option year. Appears that CLIN is now complete and not applicable to the second option year.

Second option year includes a CPFF CLIN to perform estimated $1000 of effort. You say that the cost for that CLIN will likely exceed the $1000 estimate. Ok, so you can increase the CLIN, can’t you? What does that have to do with “$200” from a previous year CLIN??

Thank you for the feedback. Correct, $800 was funded for an effort to be performed in OY1, OY2 continued the same work. The CLIN can be increased, it is an estimated cost CLIN with a fixed fee. My concern is the total lifecycle of the contract. If the $200 remaining is unfunded could it be de-scoped from OY1? Then could that $200 be used in OY2 so there wouldn’t be a change in the total lifecycle of the contract?

It sounds like you are talking about realigning ceiling from a completed LOE CLIN. I don't see any reason that would keep you from realigning unused ceiling from a previous year's CLIN.

You can adjust the CLIN ceiling from the previous Out Year.

You can increase the CLIN ceiling for the current out year due to expected overrun…

Just to make sure of the issue. You are talking about the estimated cost of the CLIN. You would not be increasing the fee associated with the CLIN?

has the option been exercised and if so, what is the current "ceiling" and fee?

taking the OPs question at face value this is a common question that I get from folks that I work with. You have a contract for a job or a task, ie the Government wants the performer to do or deliver something. In this case we can assume the assume the something is repetitive and that’s why there are options. The something has such risk involved with it that do not permit us to come up with a set price, so we estimate a price and say the KTR is going to get a fixed fee for it. Each year, the estimated price was $1,000. In the first year we obligated $800 toward that $1,000 price. Based on the nature of the OPs question I’m going to assume 52.232-22 is in the contract which would limit the known expenditures to no more than $800 for the task. We are now in year 2. The question I would have for the OP is based on what you know for the situation, do you believe that the cost to do the task in this new year is going to be higher or lower or about the same as last year (the $800) or closer to the current estimated price of $1000 or even more than that.

The CR contract type is not a blank check spend the money contract just because it cost us less one year and we can spend more for the same work this year. The govt hired the KTR to do something specific. Now if we want to talk about the something being less expensive and now we want more of the something’s to spend our budget because we over estimated the actual price of the something, I would say what does your contract say about that. I knew many CR type contracts that allowed for an increase in quantity of the contract was under running up to a certain delta between the original requirement and what can be afforded and stay within the awarded estimated cost but if the terms of the contract don’t have that, then I would say the OP needs to consider the reason for increasing the estimated cost of the line item and whether that is because it’s new work, the costs are higher or something else. If the costs are estimated to be higher for the exact same work, then have the KTR follow the process outlined in 52.232-20.

On 7/26/2025 at 12:55 PM, uva383 said:

The something has such risk uncertainty involved with it that do not permit us to come up with a set price, so we estimate a price and say the KTR is going to get a fixed fee for it.

See Knight, Risk, Uncertainty, and Profit, Chapter VII, The Meaning of Risk and Uncertainty.

https://fraser.stlouisfed.org/files/docs/publications/books/risk/riskuncertaintyprofit.pdf

See also https://www.theisrm.org/what-is-uncertainty-and-how-it-differs-from-risk/

Frank Knight, one of the prolific theorists of risk, distinguished the differences between “risk” and “uncertainty” in his seminal book Risk, Uncertainty and Profit, by arguing that whilst ”risk” is observable and measurable, “uncertainty” operates in the limits of our knowledge, making assigning probabilities impossible. The term “risk” can thus be said to refer to situations where probability and impact of an undesirable event can be determined, because the possible outcomes can be identified, and the past frequency of their occurrence can be determined through observations of past events. Hence, following Knight’s thesis, “uncertainty”, suggests that possible outcomes are not known to us, or that decision-makers do not hold adequate knowledge or experience concerning the situation, in order to assign probabilities for the possible outcomes or to understand their possible impacts. This in turn leads to the inability to determine the appropriate response based on rational calculations, as well as making decisions following the standard risk management process to either accept, mitigate or transfer the risk.

15 hours ago, Vern Edwards said:

See Knight, Risk, Uncertainty, and Profit, Chapter VII, The Meaning of Risk and Uncertainty.

https://fraser.stlouisfed.org/files/docs/publications/books/risk/riskuncertaintyprofit.pdf

See also https://www.theisrm.org/what-is-uncertainty-and-how-it-differs-from-risk/

Thank you Vern, good articles appreciate you sharing. I like those definitions of risk vs uncertainty and agree the term “uncertainty” is a better fit.