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What is the "Bona Fide Needs" Rule? correct answer The Bona Fide Needs Rule basically means that a federal agency must have a legitimate or bona fide need for the requirement during the time period that the appropriation is available. Pursuant to 31 U.S.C. 1502(a), "The balance of an appropriation limited for obligation to a definite period is available only for payment of expenses incurred during the period of availability, or to complete contracts properly made during the period of availability and obligated consistent with Section 1501 of this title.." In other words, the basic rule states that a fiscal year's (FY) appropriation may be obligated to meet a legitimate or bona fide need existing in the FY for which the appropriation was made. This aspect of fund availability seeks to ensure that only appropriations, which are available for a specific FY are used to meet the legitimate needs of that FY. The bona fide needs rule applies to both multiple year and annual appropriations. TIME, PURPOSE, AMOUNT References: 31 U.S.C. 1502(a); Principles of Federal Appropriations Law (GAO-04-261SP), the "Red Book" What is the requirement for obligating funds when awarding indefinite- quantity contracts? correct answer For ID/IQ contracts all supplies and services to be furnished shall be obtained via delivery order(s) or task order(s) issued by individuals designated in the contract. Upon execution of the contract, an obligation shall be recorded based upon the issuance of a delivery or task order for the cost/price of the minimum quantity specified. Obtaining a certification of availability of funding from the finance office does not satisfy the requirement to record an obligation in the official accounting records of the Government for the minimum order amount established by the award
of an IDIQ contract. The Government's actual obligation must be recorded at the time of contract award. Recording and subsequently reporting the required obligation using anything other than a delivery or task order will result in the action not being reported in FPDS-NG. The Recording of Obligations Act is implemented in the DoD Financial Management Regulation (FMR) (DoD 7000.14-R) (See paragraph 080504 of the FMR). The Defense Finance and Accounting Service (DFAS) is responsible for recording contractual obligations in the Air Force accounting records. Paragraph 080504: Where the quantity required under a contract is indefinite, the ultimate amount of obligation is determined by subsequent orders; the amount of any required minimum order specified in the contract, however, shall be recorded as an obligation upon execution of the contract. For contracts that require the contractor to perform unilaterally placed orders above the required minimum, record an obligation in the amount of the order price or ceiling at the time the order is placed. An order in excess of the required minimum that has to be negotiated or accepted by the contractor under terms of the contract shall be recorded as an obligation upon contractor's acceptance of the order in the amount of the agreed price or ceiling. In the case of orders for services where a contractor cannot undertake performance without direction from an authorized Government official, order amounts may be consolidated periodically (at least monthly) into a list of orders placed with the contractor identifying the estimated dollar amount of each. On definite-quantity contracts, obligate the full amount of the definite quantity at the time of contract award. References: DoD 7000.14-R, Volume 3, para 080504; FAR 16.504.
upon contract award. Are there any fiscal issues here? correct answer ANSWER: Authority: 31 USC 1502(a) "Bona Fide Needs Rule" Yes. O&M (3400) funds are for one year. You cannot cross FYs unless there is an exception. This could be considered a violation of the bona fide need rule. The lead-time exception does not apply since the delivery delay is based on the government's request and not the reality of when the contractor could actually deliver the computers. What is the difference between contract price and contract obligation? When is the value of the contract price equal to the value of the contract obligation? Under what circumstances would these two not be equal? correct answer ANSWER: Contract price is the same as the face value of the contract. It describes how much was agreed to be paid for the supplies or services being acquired. Contract price is the sum of the CLIN prices established in Section B of the contract. Contract obligation describes how much money has been set aside to pay bills or invoices for the particular contract. Contract obligation is the sum of the ACRN amounts in Section G of the contract. Contract price and contract obligation are equal when the contract is fully funded. Contract price and contract obligation are not equal when the contract is incrementally funded. In no circumstances can the contract obligation be more than the contract price You are a PCO and a new trainee comes to you seeking advice. She says she just had a conversation with a Financial Manager who referred to funds categorized by status as either active, expired, or cancelled. She doesn't understand the differences. Can you explain the differences
between the 3 status categories? correct answer ANSWER: Authority: 31 U.S.C. 1551-1558. Active means the period of time that you are permitted to use funds for obligation on a contract. Usually that period of within the 12 months of a fiscal year, but there are multi-year appropriations, such as R&D (3600) money, that has a two-year life span in active status. All appropriations are cancelled 5 years after they cease to be active, and are no longer available for any purpose, and are returned to the Treasury. Under PL 101-510, any use of cancelled funds is prohibited and results in a violation of the Anti-Deficiency Act. The period of time between when the appropriate is no longer active, and when it cancels, it is expired, and it is only available to pay obligations that are properly chargeable to that account. So for example...FY09 - 3600 money can be obligated on R&D requirements in FY09 and FY10. Once you hit Oct 1, 2010, your 3600 money from FY09 will expire. Once it expires you cannot use it for new efforts, only for those efforts that have an overrun, etc., where the obligation was incurred in FY09 or FY10. It stays expired for a period of five more years, and then on Oct 1, 2015, it is cancelled. When it is cancelled, it goes back to the U.S. Treasury and cannot be used for any purpose. You are the PCO on the new Ajax Sensor program. The development contract was awarded a year ago using FY08 funds. The Ajax sensor will be used to sense a list of hazardous chemicals that might be emitted from factories. It was reported in the news last week that a certain rouge nation has developed a new deadly chemical weapon. Your
situation this quarter. He has been trying to locate funding and thinks he has come up with a solution. He explains to you that he can get enough procurement funding to cover the effort for the rest of the year. Previously, the effort was funded with RDT&E funding. As the PCO, what issues would you consider before taking action to obligate the procurement funds? correct answer ANSWER: Authority: 31 USC 1341 "Anti-deficiency Act" You cannot pay for RDT&E efforts with Procurement funds. This would be a violation of the Anti-deficiency Act, which creates a Bona-fide need that deals with time, purpose and amount. You would be augmenting the RDT&E appropriation with procurement funds. The only way that this would be permitted is if the program has moved to a production capability. If what you had put on contract before was RDT&E, and now you are past Milestone C and have moved into production, you will be using production money to accomplish your requirement. This is the only way your Program Manager can use such funds. Taking into account the Anti-Deficiency Act, please advise what you would do as a PCO in the following scenario. In response to a solicitation you issued, you have received a proposal from the Widget Company to provide the Government 10,000 high-strength plastic widgets. In order to take advantage of a quantity price break on high- strength plastic, the Widget Company needs to place an order immediately with their high-strength plastic vendor. The Widget Company Contract Administrator contacts you as the PCO and explains the situation. The Contract Administrator knows that you won't have the money to award the contract until 1 Oct. The CA explains that if she can get you to give her a letter stating that contract award is imminent;
her manager will allow her to order the high-strength plastic at a substantial savings. Would you issue the letter? Why or why not? correct answer Taking into account the Anti-Deficiency Act, please advise what you would do as a PCO in the following scenario. In response to a solicitation you issued, you have received a proposal from the Widget Company to provide the Government 10,000 high-strength plastic widgets. In order to take advantage of a quantity price break on high- strength plastic, the Widget Company needs to place an order immediately with their high-strength plastic vendor. The Widget Company Contract Administrator contacts you as the PCO and explains the situation. The Contract Administrator knows that you won't have the money to award the contract until 1 Oct. The CA explains that if she can get you to give her a letter stating that contract award is imminent; her manager will allow her to order the high-strength plastic at a substantial savings. Would you issue the letter? Why or why not? The end of the fiscal year '09 is coming up and you get a phone call from HQ. HQ tells you that several million dollars just became available. They didn't want the money to go to waste so they gave you a call. You call up a program director for a recon program who urges you to use the money to buy spare parts for his 4 recon aircraft, which have been operating "round the clock". He estimates that several million dollars will buy enough replenishment spares for the remainder of the "war." Do you have any concerns? correct answer ANSWER: Authority: 31 USC 1502(a) "Bona Fide Needs Rule" & Authority: 31 USC 1341 "Anti- deficiency Act" There are two issues. The Anti-Deficiency Act deals with time, purpose and amount. We don't know from the facts what kind of money just
· Procurement Funds (3010, 3020, 3080) - active/current for 3 years; expired for 5; cancelled after that Construction Funds/ MILCON (3300) - active/current for 5 years; expired for 5; cancelled after that The only subcontract who makes a part is closing. Should you stockpile? Or is there another solution? (check stock exception) correct answer ANSWER: You may not stockpile, but you may replenish missing stock for future use. Authority: 31 USC 1502(a) "Bona Fide Needs Rule" & Authority: 31 USC 1341 "Anti-deficiency Act"
- Is there a substitute part?
- Can another subcontractor redesign a suitable replacement?
- What will the cost/schedule effects of redesign be? If you use FY08 production money to fund an in-scope FY09 modification to an FY08 production contract, have you violated an in-scope modification to an FY08 contract? correct answer ANSWER: No. FY08 funding is appropriate to fund an in-scope modification to an FY contract. Random You are the PCO on a contract for the production of a cargo transport aircraft. You are told by your contractor that a particular piece of equipment on the aircraft is made by a subcontractor who is going to stop production of that particular item and there are no other suppliers
for that item. Describe what this problem is called, what questions you need to ask and possible solutions and authorities for solutions. correct answer ANSWER: The situation is referred to as Diminishing Manufacturing Sources and Materiel Shortages (DMSMS) AKA DIMINISHING SUPPLIERS. Among the questions you will need to ask is whether there is an available substitute for the equipment; can it be redesigned, and the cost and time for such a redesign compared to the cost of the current item; how many of these items do you need and for how long. DoD 4140.1-R entitled "DoD Supply Chain Materiel Management Regulations" has the purpose of establishing requirements and procedures for DoD materiel managers and others who need to work within or with the DoD supply system. Paragraph C3.6 specifically identifies procedures relevant tot DMSMS including the two processes normally pursued when a substitute or redesign is not feasible - bridge buys and Life of Type buys. This regulation states that you must establish the most cost-effective solution consistent with mission requirements when an item is identified as DMSMS. However, there is currently no specific statutory authority for DMSMS buys for items for which the Government doesn't already maintain a stock level. Because of the void in definitive guidance in this area, currently, these situations have to be addressed on a case-by-case basis via coordination through your chain of command, through SAF level, with the support of your staff.
