HHS Reference Tool for Contract Funding, Formation and Appropriations Law Compliance
Case Study - Distinguishing severable and non-severable services
The Centers for Medicare & Medicaid Services want to study the effect of providing Medicare reimbursement for several types of medical procedures over a multiple-year period. In discussing this requirement with the Project Officer (PO), the Contracting Officer (CO) learns that the PO wants to see the results of the study for each procedure before determining whether to study the additional procedures.
In general, the CO needs to know whether the services are severable or non-severable. In this case, the CO also needs to discuss with the PO how flexible the PO might be with how the statement of work (SOW) is written, in part, based on whether it is possible indicate up front the particular medical procedures to be assessed and how the evaluation will be used.
Services are non-severable when they constitute an entire job or a single undertaking, with a defined end product, that cannot feasibly be subdivided for separate performance in each fiscal year.
Services are severable when they are provided on an on-going, as-needed or recuring basis and meet a need of the Government at the time they are delivered (e.g., support services such as janitorial or other housekeeping functions).
- As described by the PO, the services appear to be severable, i.e., while the results of each study may inform the next study or may determine whether the additional studies will be pursued, the study of each procedure stands on its own. Therefore, the project is not an "entire job" and the additional studies would have to be structured as options or incrementally-funded using specialized clauses authorized by the Health and Human Services Acquisition Regulation (HHSAR).
- Alternatively, the CO can work with the PO to structure this requirement as one for non-severable services by reframing this as an entire study to understand the effects of Medicare reimbursement on the enumerated medical procedures. For example, the contract SOW may be structured to define separate phases of the work. The contractor would then have to complete, and the CO would have to approve, each phase before the contractor may begin work on the next phase. A restructured SOW must represent a substantive change in approach from severable to non-severable.
- If the requirements were restructured as non-severable services, the Government would be committed to purchase the complete study for the total contract amount.