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Interim HHSAR Revisions (based on 4/26/10 version of the HHSAR)

Attachment 1 to Acquisition Alert 2013-01  

(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 the satisfactory performance/completion of 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.]

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 

    (ii)       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


    (c) When using multi-year contracting procedures to acquire services and annually fund program requirements, 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);

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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 options (not to exceed 1 year), when severable services will cover more than 1 year. This approach is: (1) required when sufficient funds are available to fully fund a 1-year base period, unless the services are acquired using multi-year contracting procedures pursuant to FAR Subpart 17.1 and Subpart 317.1; (2) preferred, when sufficient funds are not available to fully fund a 1-year base period, over structuring contracts using increments instead of options. 

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

(d) Allow Contracting Officers to use incremental funding for cost-reimbursement contracts as prescribed in 332.703-1 when sufficient funds are not available to fully fund a 1-year base period, provided that no funding increment crosses fiscal years.  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


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 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 of the contract, including all planned 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 increments of performance. The resultant contract shall also include the corresponding amount of funds planned for obligation for each increment of performance. The separate increments of performance must be defined to independently meet an HHS need, such that the services rendered during each 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 proposals for the entire project, and shall require distinct technical and cost break-outs of the planned increments of performance. 

     (4) Proposals shall be evaluated and any discussions and negotiations shall be conducted based upon the total project, including all planned 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 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. 

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* * * * * (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 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 increment of performance covered by the funding provided; and (iii) specify the start and end dates for such increment of performance, as required by the “Limitation of Funds” clause at FAR 52.232-22. 


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




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.



 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 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)

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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 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).



(July 2013)

(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:




Task Number, or Description


Start Date of Period or Increment of Performance


End Date of Period or Increment of Performance


Estimated Cost



Fee ($)

(as appropriate)



Estimated Cost

Plus Fee


(as appropriate)







* 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)


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