FINANCIAL MANAGEMENT POLICY MANUAL

of a contract and may apply to the total quantity or to a partial quantity of
items.
Termination Liability
The maximum cost the Government would incur if a contract is
terminated.
Termination Liability Funding
A budgeting technique that would provide funds on a contract to cover the
maximum value of outlays that could be incurred for work accomplished
by the end of the budget year plus the maximum cost to the Government
associated with termination of the contract at the end of the budget year.
(Change 59)
075322 FULL FUNDING
1. GENERAL.
It is the preferred policy of the Department of Defense and its Oversight
Congressional Committees that the procurement and construction accounts
are to fully fund in one fiscal year the total cost of end-items and
construction projects to be acquired. The objective is to ensure that the
Congress and the public can see the full dimensions and cost of an
acquisition program when presented in the budget. Accordingly, each
program budget request will encompass all of the cost associated with the
acquisition of an approved quantity of distinguishable usable end-items
through completion of deliveries or completion of construction. Timephased
procurement, advance procurement, multiyear procurement and
incremental construction are approved derivatives of the full funding
policy as discussed in paragraphs 075323 through 075326 and paragraph
075385.
2. COST ESTIMATES.
Full funding applies to an initial estimate. Estimates will change, and full
funding of an item can exist only at a point in time. However, the Future
Years Defense Program (FYDP) shall be a consistently reliable foundation
for stating the total cost of acquiring defense systems. Thus, the FYDP
will reflect the Department of the Navy’s (DON) best estimate of end cost.
Program estimates will be kept current and fully financed through the
Planning, Programming, and Budgeting System (PPBS) process and
reprogramming procedures established within the DON.
3. RELATIONSHIP OF BUDGETING AND CONTRACTING.
An end-item is fully funded in a budgetary sense only when funds are
programmed and available to cover the total estimated cost of the item at
the time when procurement action is to begin. Contracting, on the other
Financial Management Policy
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