So we have multiple new service contracts and option periods that started 1 Oct. We received certified funding documents covering the entire option period or base periods for these contracts on 1 October and awarded or exercised options at that time, fully funding the year.  Recently, the customers came back, asking to have the obligated funds reduced down to the CR authority that they received, and to incrementally fund for the rest of the year as they receive more funding. We are unsure what happened in the decision process that these were certified when they weren't sure how much would be received. None of these contracts were awarded with the appropriate clauses or CLIN structure for incremental funding.

My questions are:

Is there anything stopping us from reducing the obligation to the CR amount after the fact? (besides the many hours of overtime I'll have to requests for my folks to complete such an undertaking).

If not, would we need to work out the incremental funding (CLIN structure, clauses etc) on each contract before making the reduction, or could we complete it all in one action?

 

Further:

Is it possible this is an ADA violation on the person certifying the funds? I would think that the entire Wing/MAJCOM and possible, the AF would have to be over spent for there to be a true ADA violation, but am I wrong?

 

Thanks in advance for any guidance you can lend!

 

All legitimate concerns and considerations. 

There are missing facts/info that would help in unwinding your particular situation but I would propose that doing so via Forum may actually cause more winding that unwinding.  To this overarching point my suggestion would be that you gather the customer, the finance folks, possibly your legal counsel and other appropriate folks together and hash out a solution.  I say this as the CR matter as almost a yearly occurrence has much history and based on this history what agencies at the highest level may expect and advise individual offices to do may differ from that which a "customer" believes is necessary.

I am supposing the agency did nothing wrong -- no ADA violation — under a CR, it is permissible to fully fund a twelve-month contract with annual appropriations even though the period for making obligations ends on Nov. 21.  Anyone errs who suggests that a contract cannot be funded beyond the CR end date.

But, the agency will do what the agency will do.   

(1) The agency could unilaterally do a partial termination for convenience for everything after Nov. 21.

(2) The agency could try to re-negotiate the contract for a base period ending on Nov. 21 and then ten one-month options after that (or something similar).  This would require a bilateral agreement.  This new arrangement will introduce notable risks and other real costs (so the contractor may reasonably want the total price to go up), and it would make sense that the new base period price will have to cover 100% of the fixed or non-recurring costs (so the contractor may reasonably want to front-load the price).  For example, if the contract as awarded looks like this--

• 001  SERVICES        12 MO  $ 10,000   $120,000
• .    OCT-SEP
• TOTAL:                                 $120,000

 

the contract as re-negotiated might look like this--

• 001  SERVICES         2 MO  $ 57,500   $115,000
• .    OCT-NOV
• .
• 101  SERVICES/OPTION  1 MO  $  1,000   $  1,000
• .    DEC
• .
• 102  SERVICES/OPTION  1 MO  $  1,000   $  1,000
• .    JAN
• .
• 103  SERVICES/OPTION  1 MO  $  1,000   $  1,000
• .    FEB
• .
• 104  SERVICES/OPTION  1 MO  $  1,000   $  1,000
• .    MAR
• .
• 105  SERVICES/OPTION  1 MO  $  1,000   $  1,000
• .    APR
• .
• 106  SERVICES/OPTION  1 MO  $  1,000   $  1,000
• .    MAY
• .
• 107  SERVICES/OPTION  1 MO  $  1,000   $  1,000
• .    JUN
• .
• 108  SERVICES/OPTION  1 MO  $  1,000   $  1,000
• .    JUL
• .
• 109  SERVICES/OPTION  1 MO  $  1,000   $  1,000
• .    AUG
• .
• 110  SERVICES/OPTION  1 MO  $  1,000   $  1,000
• .    SEP
• TOTAL                                  $125,000

 

(3) The agency could try to re-negotiate the contract to allow for incremental funding by adding something like the DoD's LOGO clause.  This would require a bilateral agreement.  Again, this new arrangement would introduce notable risks and other real costs, so one would reasonably expect the contract price to go up.

(4) It is entirely possible that "the customer" simply doesn't understand the rules for funding contracts during a CR, and is acting in good faith but in ignorance.  A meeting as Carl suggested with experienced players from the contracting, comptroller, and other offices might be helpful and might avoid all this messiness by simply leaving the already-awarded contract alone.  After all, under a CR, it is permissible to fully fund a twelve-month contract with annual appropriations even though the period for making obligations ends on Nov. 21.  Anyone errs who suggests that a contract cannot be funded beyond the CR end date.

Edited October 29, 20196 yr by ji20874
Edited to show four possible scenarios, with (4) as the leave-everything-alone scenario.

On ‎10‎/‎25‎/‎2019 at 2:46 AM, ContractNinja said:

Is it possible this is an ADA violation on the person certifying the funds? I would think that the entire Wing/MAJCOM and possible, the AF would have to be over spent for there to be a true ADA violation, but am I wrong?

An ADA violation occurs when there are not sufficient funds to cover an obligation.  This does not necessarily mean that there are not sufficient funds in an appropriation.  A violation can also occur when an activity makes an obligation that exceeds funds allocated to it.  For example, you make an obligation for $12K but only have an allocation of $10K, you likely have committed an ADA violation.  In this regard, the person who commits the violation is the person who made the obligation, not the person who certified the funds availability, although this may be a mitigating factor.

An example of why I provided the advice that I did.  No doubt something more current is available via say the Air Force Intranet.  This is not to say I disagree with the thoughts provided but in reality as noted everything depends on wording of a CR and in this current atmosphere of Congressional actions I would not want to be the one to second guess what you may or may not be directed to do.  Again seek internal guidance is the best option to your questions.

 

https://static.e-publishing.af.mil/production/1/saf_fm/publication/afi65-601v1/afi65-601v1.pdf

"2.7. Executing the Annual Budget. Air Force activities may begin incurring obligations when SAF/FMB/NGB/FMA/AFR/FMA issues budget authority. After Congress enacts the Department of Defense (DoD) Appropriation Act and SAF/FMB/NGB/FMA/AFR/FMA receives its allotment from the Office of the Secretary of Defense Comptroller, SAF/FMB/NGB/FMA/AFR/FMA will issue OBADs to MAJCOMs/units. When Congress hasn't passed the new fiscal year's appropriation act by the start of the new fiscal year, SAF/FMB will provide interim guidance based on Congressional passage of Continuing Resolution Authority and Emergency Authority) which allows DoD activities to spend money pending passage of the DoD Appropriations Act. (T-0)"

Maybe this isn’t complicated.  Agencies get a certain amount of money during a CR.  They have latitude on what they fund.  They can do contracts in whole or in part, largely based on the type of contract.  The appropriation and OMB determine the amount of money available.  

Without knowing details, one guess is the agency erred in this case and went beyond what was available.  So now they are backtracking.    It’s not that unusual.

On 10/25/2019 at 1:46 AM, ContractNinja said:

So we have multiple new service contracts and option periods that started 1 Oct. We received certified funding documents covering the entire option period or base periods for these contracts on 1 October and awarded or exercised options at that time, fully funding the year.  Recently, the customers came back, asking to have the obligated funds reduced down to the CR authority that they received, and to incrementally fund for the rest of the year as they receive more funding. We are unsure what happened in the decision process that these were certified when they weren't sure how much would be received. None of these contracts were awarded with the appropriate clauses or CLIN structure for incremental funding.

My questions are:

Is there anything stopping us from reducing the obligation to the CR amount after the fact? (besides the many hours of overtime I'll have to requests for my folks to complete such an undertaking).

If not, would we need to work out the incremental funding (CLIN structure, clauses etc) on each contract before making the reduction, or could we complete it all in one action?

 

Further:

Is it possible this is an ADA violation on the person certifying the funds? I would think that the entire Wing/MAJCOM and possible, the AF would have to be over spent for there to be a true ADA violation, but am I wrong?

 

Thanks in advance for any guidance you can lend!

 

Is it possible that sufficient funds for these awards were available but the agency is now requesting deobligation of some funding to be used for other needs during the CR period?