FAR Subpart 32.7

FAC 2005–17 JUNE 14, 2007
SUBPART 32.7—CONTRACT FUNDING

Subpart 32.7—Contract Funding
32.700 Scope of subpart.
This subpart (a) describes basic requirements for contract
funding and (b) prescribes procedures for using limitation of
cost or limitation of funds clauses. Detailed acquisition funding requirements are contained in agency fiscal regulations.
32.701 [Reserved]
32.702 Policy.
No officer or employee of the Government may create or
authorize an obligation in excess of the funds available, or in
advance of appropriations (Anti-Deficiency Act,
31 U.S.C. 1341), unless otherwise authorized by law. Before
executing any contract, the contracting officer shall—
(a) Obtain written assurance from responsible fiscal
authority that adequate funds are available or
(b) Expressly condition the contract upon availability of
funds in accordance with 32.703-2.
32.703 Contract funding requirements.
32.703-1 General.
(a) If the contract is fully funded, funds are obligated to
cover the price or target price of a fixed-price contract or the
estimated cost and any fee of a cost-reimbursement contract.
(b) If the contract is incrementally funded, funds are obligated to cover the amount allotted and any corresponding
increment of fee.
32.703-2 Contracts conditioned upon availability of
funds.
(a) Fiscal year contracts. The contracting officer may initiate a contract action properly chargeable to funds of the new
fiscal year before these funds are available, provided that the
contract includes the clause at 52.232-18, Availability of
Funds (see 32.705-1(a)). This authority may be used only for
operation and maintenance and continuing services
(e.g., rentals, utilities, and supply items not financed by stock
funds)—
(1) Necessary for normal operations; and
(2) For which Congress previously had consistently
appropriated funds, unless specific statutory authority exists
permitting applicability to other requirements.
(b) Indefinite-quantity or requirements contracts. A oneyear indefinite-quantity or requirements contract for services
that is funded by annual appropriations may extend beyond
the fiscal year in which it begins; provided, that—
(1) Any specified minimum quantities are certain to be
ordered in the initial fiscal year (see 37.106) and
(2) The contract includes the clause at 52.232-19, Availability of Funds for the Next Fiscal Year (see 32.705-1(b)).

32.704
(c) Acceptance of supplies or services. The Government
shall not accept supplies or services under a contract conditioned upon the availability of funds until the contracting
officer has given the contractor notice, to be confirmed in
writing, that funds are available.
32.703-3 Contracts crossing fiscal years.
(a) A contract that is funded by annual appropriations may not
cross fiscal years, except in accordance with statutory authorization
(e.g., 41 U.S.C. 11a,
31 U.S.C. 1308,
42 U.S.C. 2459a, 42 U.S.C. 3515, and paragraph (b) of this
subsection), or when the contract calls for an end product
that cannot feasibly be subdivided for separate performance in each fiscal year (e.g., contracts for expert or
consultant services).
(b) The head of an executive agency, except NASA, may
enter into a contract, exercise an option, or place an order
under a contract for severable services for a period that begins
in one fiscal year and ends in the next fiscal year if the period
of the contract awarded, option exercised, or order placed
does not exceed one year (10 U.S.C. 2410a and
41 U.S.C. 253l). Funds made available for a fiscal year may
be obligated for the total amount of an action entered into
under this authority.
32.704 Limitation of cost or funds.
(a)(1) When a contract contains the clause at 52.232-20,
Limitation of Cost; or 52.232-22, Limitation of Funds, the
contracting officer, upon learning that the contractor is
approaching the estimated cost of the contract or the limit of
the funds allotted, shall promptly obtain funding and programming information pertinent to the contract’s continuation
and notify the contractor in writing that—
(i) Additional funds have been allotted, or the estimated cost has been increased, in a specified amount;
(ii) The contract is not to be further funded and that
the contractor should submit a proposal for an adjustment of
fee, if any, based on the percentage of work completed in relation to the total work called for under the contract;
(iii) The contract is to be terminated; or
(iv)(A) The Government is considering whether to
allot additional funds or increase the estimated cost—
(B) The contractor is entitled by the contract
terms to stop work when the funding or cost limit is reached;
and
(C) Any work beyond the funding or cost limit
will be at the contractor’s risk.
(2) Upon learning that a partially funded contract containing any of the clauses referenced in paragraph (a)(1) of
this section will receive no further funds, the contracting
officer shall promptly give the contractor written notice of the
decision not to provide funds.
32.7-1

FAC 2005–17 JUNE 14, 2007
32.705
(b) Under a cost-reimbursement contract, the contracting
officer may issue a change order, a direction to replace or
repair defective items or work, or a termination notice without
immediately increasing the funds available. Since a contractor
is not obligated to incur costs in excess of the estimated cost
in the contract, the contracting officer shall ensure availability
of funds for directed actions. The contracting officer may
direct that any increase in the estimated cost or amount allotted to a contract be used for the sole purpose of funding termination or other specified expenses.
(c) Government personnel encouraging a contractor to
continue work in the absence of funds will incur a violation
of Revised Statutes section 3679 (31 U.S.C. 1341) that may
subject the violator to civil or criminal penalties.
32.705 Contract clauses.
32.705-1 Clauses for contracting in advance of funds.
(a) Insert the clause at 52.232-18, Availability of Funds, in
solicitations and contracts if the contract will be chargeable to

32.7-2

FEDERAL ACQUISITION REGULATION
funds of the new fiscal year and the contract action will be initiated before the funds are available.
(b) The contracting officer shall insert the clause at
52.232-19, Availability of Funds for the Next Fiscal Year, in
solicitations and contracts if a one-year indefinite-quantity or
requirements contract for services is contemplated and the
contract—
(1) Is funded by annual appropriations; and
(2) Is to extend beyond the initial fiscal year (see
32.703-2(b)).
32.705-2 Clauses for limitation of cost or funds.
(a) The contracting officer shall insert the clause at
52.232-20, Limitation of Cost, in solicitations and contracts if
a fully funded cost-reimbursement contract is contemplated,
whether or not the contract provides for payment of a fee.
(b) The contracting officer shall insert the clause at
52.232-22, Limitation of Funds, in solicitations and contracts
if an incrementally funded cost-reimbursement contract is
contemplated.