Recent Changes to USACE's Continuing Contract ... - U.S. Army

Recent Changes toUSACE’s s ContinuingContract AuthorityU.S. Army Corps of EngineersNational Dredging MeetingJune 13, 2007Outline• Continuing Contract Authority• Continuing Contract Clause• Reprogramming Authority• Congressional Criticism of USACE’s s use ofContinuing Contract and Reprogramming authority• FY 06 Changes to Continuing Contract andReprogramming Authorities.• Interim Continuing Contract Clauses• Continuing Resolution and FY 07 Legislation1

Continuing Contract Authority• As as general rule, agencies:• Must obligate the full amount of the contract at thetime of award.• May not allow the contractor to work beyond theamount of funds awarded for that contract.• Continuing contract authority allows USACE to:• Award a contract for a civil works projects withouthaving all funds available at the time of award.• In other words, USACE may award the full amountof a civil works contract even when it has less thanthe full amount of funds available for that contract.Continuing Contract Clause• Under USACE’s s traditional continuing contractclause:• USACE “reserved” the government estimate ofcontractor earnings for the fiscal year.• Once the funds reserved were exhausted, the contractorcould work beyond the amount reserved and earn simpleinterest on the self-financed financed amount.• If USACE failed to reserve additional funds for thecontract in the following FY, the contractor could treatthe contract as having been terminated for convenience.2

Reprogramming• Reprogramming is the movement of funds from oneobject to another in the same appropriation account.• Authority to reprogram is inherent in lump sumappropriations, unless otherwise limited by law.• Prior to the FY 06 Energy and Water DevelopmentAppropriations Act, requirements for reprogrammingwere contained in the Conference Reportaccompanying the annual appropriations acts andrequired only notice to the committees ofreprogrammings that exceeded specified dollaramounts.Operation of the Civil WorksProgram prior to the FY 06E&WDAA• Continuing contract authority andreprogramming authority allowed USACE to:• Start more projects• Carryover fewer funds from year to year• Reprogram funds from projects with low fundingneeds in an FY to a project with high needs in thatFY.3

Congressional Criticism ofContinuing Contracts andReprogramming• Allowing the contractor to work beyond the fundingreserved permits the contractor, , not USACE orCongress, , to decide rate that funds are expended on theproject.• Obligating the Government in advance of currentappropriations requires future appropriation or hightermination costs.• USACE uses reprogramming authority too liberally,thwarting Congressional prerogatives.• USACE uses continuing contracts when otheracquisition methods would be more appropriate (e.g.,fully funded, base plus options, etc.)Congressional Goals for ContinuingContracts and Reprogramming• Fully fund contracts with low dollar value orcontracts that cross only one fiscal year.• Reprogram funds less and with closercoordination with the AppropriationsCommittees.4

2006 Energy and Water DevelopmentAppropriations Act• Section 108 prohibits awarding new ormodifying existing continuing contracts tocommit an amount in excess of what wasappropriated for that project plus funds carriedover from prior fiscal years and fundsreprogrammed to the project.• Section 101 restricts reprogramming.Impact of Section 101 and 108• USACE may not permit the contractor to work beyondthe amount appropriated for the project for the FYplus funds carried over from the prior fiscal year andfunds reprogrammed to the project.• Reprogramming authority is severely constrained.• Bottom line: : Continuing contracts must now beperformed through a series of funding incrementsestablished for the most part by Congress.5

New USACE Policies• Continuing Contracts must be approved by HQUSACE and the ASA(CW)• Seek approval to use a continuing contract only afterrejecting all other acquisition methods.• All continuing contracts must use one of the twointerim clauses unless approval is granted to use thetraditional continuing contract clause.Interim Continuing Contract Clauses• To comply with the law, USACE published twointerim continuing contract clauses:• Special Continuing Contract Clause (Budgetedprojects)• Incremental Funding Clause (Off Budget projects)• These clauses are used on an interim basis andare in the DoD process for publication in theFederal Register to solicit public notice andcomment.6

Continuing Resolution and FY 07Legislation• The limitations of Section 108 apply even duringthe Continuing Resolution.• The House Energy and Water DevelopmentAppropriations Bill, 2007 includes essentially thesame language.• Democratic congress?• USACE expects to have these limitations for theforeseeable future.7