Attachment to APM 2010-01: Interim HHSAR Coverage

INTERIM HHSAR COVERAGE (based on 4/26/10 version of the HHSAR)

(1) Subpart 307.7. Revise HHSAR 307.7108(c) as follows:

307.7108—Statement of Work

* * * * * (The paragraphs preceding 307.7108(c) are unchanged.)

(c) Phasing. When appropriate, the SOW and the associated delivery schedule may be divided into phases representing stages of accomplishment. Based upon written performance evaluation criteria for each phase, the Government must approve in writing each phase before performance of the next phase.

(2) Subpart 317.1. Under 317.105-1, revise paragraph (c) and add a new paragraph (d) as follows:

[This entire section is reprinted below for ease of reference and understanding. All of the content, with the exception of paragraphs (c) and (d), was added to the HHSAR as published in the Federal Register on November 27, 2009, and updated by the Technical Corrections published on April 26, 2010. Paragraph (c) below, as struck through, was added by the Technical Corrections published on April 26, 2010, but is changed as shown.] 317.105-1 Uses.

(a) Each HCA determination to use multi-year contracting, as defined in FAR 17.103, is limited to individual acquisitions where the full estimated cancellation ceiling does not exceed 20 percent of the total contract value over the multi-year term or $11.5 million, whichever is less. Cancellation ceiling provisions shall conform to the requirements of FAR 17.106-1(c). The determination is not delegable and shall address the issues in FAR 17.105-1(a) and the following:

1. The amount of, and basis for, the proposed cancellation ceiling;
2. Identification and assignment of a Contracting Officer holding a FAC-C Level III certification or, alternatively, one familiar with the application of this contracting method;
3. Availability of appropriations to fund the obligation of total contract costs for the first year of performance plus the estimated amount of the full cancellation ceiling;
4. Reasonable expectation that, throughout the contemplated contract performance period, the OPDIV, through its annual budget request, will seek funding for the contract at the level necessary to avoid contract cancellation; and
5. Program requirements are reasonably stable and the associated technical risks are not excessive--i.e., not of the nature or level to jeopardize contract completion or result in its cancellation.

Upon SPE request, the HCA shall provide a copy of each determination (other than those specified in 317.105-1(b) below).

(b) (1) SPE approval is required for any—

1. Individual determination to use multi-year contracting with a cancellation ceiling in excess of the limits in 317.105-1(a); or
2. Class determination (see FAR Subpart 1.7).

(2) A determination involving a cancellation ceiling in excess of the limits in 317.105-1(a) shall present a compelling justification for the estimated cancellation ceiling. When the estimated cancellation ceiling exceeds $11.5 million, the determination shall be accompanied by a draft congressional notification letter pursuant to FAR 17.108 and 317.108.

(c) When using multi-year contracting procedures to acquire non-severable services and annually fund program requirements, such funding must be provided in full at the start of each program year from a then-current appropriation. Use of this type of multi-year contract also requires that a cancellation ceiling be established and fully funded at the time of contract award.

(d) The use of incremental funding in the manner prescribed in 332.7 is prohibited in any acquisition using multi-year contracting procedures.

(3) Subpart 332.7. Under Subpart 332.7, add sections 332.702, 332.702-70, 332.703-71, and 332.703-72, and paragraphs 332.703(b) and 332.705-2(b);

PART 332—CONTRACT FINANCING

Subpart 332.7—Contract Funding

332.702 Policy

Departmental employees shall report any suspected violation of the Anti-Deficiency Act (31 U.S.C. 1341) immediately to the OPDIV Chief Financial Officer (CFO), who in turn will report the matter to the HHS Deputy CFO.

332.702-70 Contract funding policy

It is HHS policy to--

(a) Fully fund, upon execution, any contract for non-severable services, unless the services are acquired using multi-year contracting procedures pursuant to FAR Subpart 17.1 and Subpart 317.1.

(b) Structure contracts with a base period (not to exceed 1 year) and annual options, when severable services will cover more than 1 year. This approach is preferred over the use of incremental funding.

(c) Fully fund the base period (not to exceed 1 year) and each option, when using options for any contract for severable services.

(d) Allow Contracting Officers to use incremental funding as prescribed in 332.703-1, when full funding is not possible -- notwithstanding (c) above. An incrementally funded contract is a multiple-year contract in which funds are allocated to cover specific periods or increments of performance consistent with the requirements of 332.703-1.

(e) Prohibit the use of incremental funding in contracts for non-severable services. Guidance on distinguishing between severable and non-severable services is available in the Government Accountability Office’s publication Principles of Federal Appropriations Law (“GAO Red Book”) at http://www.gao.gov/special.pubs/redbook1.html.

332.703 Contract funding requirements.

332.703-1 General.

(There is no paragraph (a) in the HHSAR, because HHS is not supplementing FAR 32.703-1(a))

(b) The following requirements govern all solicitations and contracts using incremental funding, as appropriate:

1. The Contracting Officer shall consider the estimated total cost/price of the contract, including all planned periods (including options) or other increments of performance when determining the requirements that must be met before contract execution − e.g., JOFOC, clearances, approvals.
2. The solicitation and resultant contract shall include a SOW/PWS that describes the total project, covers the proposed multiple-year period of performance, and contains a schedule of planned periods (including options) or other increments of performance. The resultant contract shall also include the corresponding amount of funds planned for obligation for each planned period or other increment of performance. The separate periods or other increments of performance must be defined to independently meet an HHS need, such that the services rendered during each period or increment of performance provide a specific material benefit that can stand alone if the remaining effort is not funded.
3. The Contracting Officer shall request that offerors respond to the solicitation with technical and cost/price proposals for the entire project, and shall require distinct technical and cost/price break-outs of the planned periods or other increments of performance.
4. Proposals shall be evaluated and any discussions and negotiations shall be conducted based upon the total project, including all planned periods or other increments of performance.

* * * * * (332.703-70 is unchanged)

332.703-71 Incrementally funded cost-reimbursement contracts.

Incremental funding may be used in cost-reimbursement contracts only as provided in 332.702-70(d) and when all of the following circumstances are present:

(a) Funding of future periods beyond the initial year or increment of performance is provided from the appropriation account available for obligation at that time;

(b) The project represents a bona fide need of the fiscal year in which the contract is awarded and initially funded (i.e., the initial period or increment of performance) and is also a bona fide need of each subsequent fiscal year whose appropriation will be used; and

(c) The project’s significance provides reasonable assurance that subsequent year appropriations will be made available to fund the project’s continuation and completion.

332.703-72 Incrementally funded fixed-price, time and materials, and labor-hour contracts.

(a) Fixed-price, time and materials, and labor-hour contracts may be incrementally funded only if—

1. The contract is not for commercial items as defined in FAR 2.101; and

2. The contract base period or any option period—

   1. Is for severable services;
   2. Does not exceed 1 year; and
   3. Is funded using the appropriation in effect on the date the funds are obligated.

(b) Upon receipt of the contractor’s notice under paragraph (c) of the clause at 352.232-72, Limitation of Government’s Obligation, the Contracting Officer shall promptly provide written notice to the contractor that the Government is taking one of the following actions:

1. Allotting additional funds for continued performance and increasing the Government’s limitation of obligation in a specified amount;
2. Terminating the contract for convenience; or
3. Considering whether to allot additional funds. In this case the written notice shall further state that, in the interim: the contractor is entitled by the contract terms to stop work when the Government’s limitation of obligation is reached; and any costs expended beyond the Government’s limitation of obligation are at the contractor’s risk.

(c) If the contract will receive no further funds, the Contracting Officer shall promptly give the contractor written notice of the Government’s decision and terminate the contract for convenience.

(d) The Contracting Officer shall ensure that, in accordance with paragraph (b) of the clause at 352.232-72, Limitation of Government’s Obligation, sufficient funds are allotted to the contract to cover the total amount payable to the contractor in the event of termination for the convenience of the Government.

(e) Although incremental funding may be used as outlined above, the Department’s preference is to provide full funding when awarding fixed-price, time and materials and labor-hour contracts. If incremental funding is used, full funding is required as soon as funds become available.

* * * * * (332.704 is unchanged)

332.705 Solicitation provision and contract clauses.

332.705-2 Provision and clauses for limitation of cost or funds

(There is no paragraph (a) because HHS is not supplementing FAR 32.705(a))

(b) In addition to the clause at FAR 52.232-22, Limitation of Funds, the Contracting Officer shall insert:

1. The provision provided at 352.232-70, “Incremental Funding,” in all solicitations when a cost-reimbursement contract for severable services using incremental funding is contemplated. The provision provides a means for the Contracting Officer to insert a specific period or increment of performance that the initial funding is expected to cover.
2. The clause provided at 352.232-71, “Estimated Cost – Incrementally Funded Contract,” in all cost-reimbursement contracts for severable services using incremental funding. The clause provides a means for the Contracting Officer to: (i) insert the initial funding obligated by the award; (ii) identify the period or increment of performance covered by the funding provided; and (iii) specify the start and end dates for such period or increment of performance, as required by the “Limitation of Funds” clause at FAR 52.232-22.
3. The clause at 352.232-72, “Limitation of Government’s Obligation,” in all solicitations and resultant incrementally funded fixed-price, time and materials or labor-hour contracts for severable services. The Contracting Officer may revise the contractor’s notification period, in paragraph (c) of the clause, from “90” to “60” or “30” days, as appropriate.

(4) Subpart 352.2. Under Subpart 352.2, add new sections 352.232-70, 352.232-71 and 352.232-72 as follows:

PART 352 SOLICITATION PROVISIONS AND CONTRACT CLAUSES

SUBPART 352.2 Texts of Provisions and Clauses

352.232-70 Incremental Funding.

As prescribed in 332.705-2(b)(1), the Contracting Officer shall insert the provision provided below in all solicitations when a cost-reimbursement contract for severable services using incremental funding is contemplated.

INCREMENTAL FUNDING (June 2010)

The Government intends to negotiate and award a cost-reimbursement contract using incremental funding as described in the clauses at FAR 52.232–22, “Limitation of Funds,” and 352.232-71, “Estimated Cost – Incrementally Funded Contract.” The initial obligation of funds under the contract is expected to cover [insert the appropriate period or increment of performance]. The Government intends to obligate additional funds up to and including the full estimated cost of the contract for the remaining years of performance by unilateral contract modification. However, the Government is not required to reimburse the Contractor for costs incurred in excess of the total amount obligated, nor is the Contractor required to perform beyond the level supported by the total amount obligated.

(End of provision)

352.232-71 Estimated Cost - Incrementally Funded Contract.

As prescribed in 332.705-2(b)(2), the Contracting Officer shall insert the clause provided below in “Section B: Supplies or Services and Prices/Costs” in all cost-reimbursement contracts for severable services using incremental funding. The Contracting Officer must insert applicable information as shown below, including information about the planned periods or other increments of performance and their associated funding. The Contracting Officer also may revise the language to reflect the specific type of cost-reimbursement contract awarded (e.g., cost-plus-fixed-fee, cost-plus-award-fee).

ESTIMATED COST - INCREMENTALLY FUNDED CONTRACT

(June 2010)

(a) The total estimated cost to the Government for full performance of this contract, including all allowable direct and indirect costs, is $______[insert full amount].

(b) The following represents the schedule* by which the Government expects to allot funds to this contract:

* To be inserted after negotiation

(c) Total funds currently obligated and available for payment under this contract are $______[insert amount funded to date].

(d) The Contracting Officer may issue unilateral modifications to obligate additional funds to the contract and make related changes to paragraphs (b) and/or (c) above.

(e) Until this contract is fully funded, the requirements of the clause at FAR 52.232–22, Limitation of Funds, shall govern. Once the contract is fully funded, the requirements of the clause at FAR 52.232-20, Limitation of Cost, govern.

(End of clause)

352.232-72 Limitation of Government’s Obligation. As prescribed in 332.705-2(b)(3), insert the following clause in solicitations and resultant incrementally funded fixed-price, time and materials or labor-hour contracts for severable services:

LIMITATION OF GOVERNMENT’S OBLIGATION (June 2010)

(a) Contract line items * through * are incrementally funded. For these items, the sum of $ * of the total price is the amount currently obligated, available for payment, and allotted to this contract. A projected allotment schedule is set forth in paragraph (i) of this clause. However, the Government may at any time allot additional funds for the performance of these contract line items.

(b) For items identified in paragraph (a) of this clause, the Contractor agrees to perform up to the point at which the total amount payable by the Government, including reimbursement in the event of termination of those item(s) for the Government’s convenience, approximates, but does not exceed, the total amount currently allotted to the contract. The Contractor is not required to continue work on those items beyond that point. The Government shall not be required in any event to pay the Contractor in excess of the amount allotted to the contract for those items notwithstanding anything to the contrary in the clause entitled “Termination for Convenience of the Government.” As used in this clause, the total amount payable by the Government in the event of such termination of the contract line item(s) identified in paragraph (a) above includes costs, profit, and estimated/negotiated termination settlement costs for those item(s).

(c) Notwithstanding the dates specified in the allotment schedule in paragraph (i) of this clause, the Contractor shall notify the Contracting Officer in writing at least 90 days prior to the date when, in the Contractor’s best judgment, the work will reach the point at which the total amount payable by the Government, including any cost for termination for convenience, will approximate 85 percent of the total amount then allotted to the contract for performance of the applicable items. The Contractor notification shall provide: (1) the estimated date when that point will be reached; and (2) an estimate of additional funding, if any, needed to continue performance of applicable line items up to the next scheduled date for allotment of funds identified in paragraph (i) of this clause, or up to a mutually agreed upon substitute date. The notification shall also advise the Contracting Officer of the estimated amount of additional funds that will be required for the timely performance of the items funded pursuant to this clause, for a subsequent period as may be specified in the allotment schedule in paragraph (i) of this clause or otherwise agreed to by the parties. If, after such notification, additional funds are not allotted by the date identified in the Contractor’s notification, or by a mutually agreed substitute date, the Contracting Officer will terminate any item(s) for which additional funds have not been allotted, pursuant to the clause of this contract entitled “Termination for Convenience of the Government.”

(d) When additional funds are allotted for continued performance of the contract line items identified in paragraph (a) of this clause, the parties will agree to the period of contract performance which will be covered by the funds. The provisions of paragraphs (b) and (c) of this clause will apply in like manner to the additional allotted funds and mutually agreed date, and the contract will be modified accordingly.

(e) If, solely by reason of failure of the Government to allot additional funds by the dates indicated below in amounts sufficient for timely performance of the contract line items identified in paragraph (a) of this clause, the Contractor incurs additional costs or is delayed in the performance of the work under this contract and if additional funds are subsequently allotted, an equitable adjustment will be made in the price or prices (including appropriate target, billing, and ceiling prices where applicable) of the items, or in the time of delivery, or both. Failure to agree to any such equitable adjustment hereunder will be a dispute concerning a question of fact under the clause entitled “Disputes.”

(f) The termination provisions of this clause do not limit the rights of the Government under the clause entitled “Default.” This clause no longer applies once the contract is fully funded except with regard to the rights or obligations of the parties concerning equitable adjustments negotiated under paragraphs (d) and (e) of this clause.

(g) Nothing in this clause affects the right of the Government to terminate this contract pursuant to the clause of this contract entitled “Termination for the Convenience of the Government.” Furthermore, in the event of a termination for convenience of the contract, for line item(s) identified in paragraph (a) of this clause, the Government’s liability is limited to the total amount allotted and obligated for those line item(s) as of the date of such termination.

(h) Nothing in this clause shall be construed as authorization of voluntary services whose acceptance is prohibited under 31 U.S.C. 1342.

(i) The following represents the mutually-agreed schedule* by which the Government will allot funds to this contract. [The illustrated schedule may be revised as necessary to suit the specific circumstances of the contract.]

* To be inserted after negotiation.

(End of clause)

ALTERNATE I (June 2010)

If only one contract line item will be incrementally funded, substitute the following paragraph (a) for paragraph (a) of the basic clause:

(a) Contract line item ___*___ is incrementally funded. For this item, the sum of $ * of the total price is currently available for payment and allotted to this contract. A projected allotment schedule is set forth in paragraph (i) of this clause. However, the Government may at any time allot additional funds for the performance of this contract line item.

* To be inserted after negotiation.