FINANCIAL MANAGEMENT POLICY MANUAL

However, the full cost of these items should be budgeted when it is
economically more efficient.
(Change 48)
075325 MULTIYEAR PROCUREMENT
1. GENERAL.
The following guidance pertains to procurement programs. Multiyear
procurement (MYP) is a contractual commitment for support of outyear
end-items. Planning should be conducted sufficiently early in the
acquisition strategy formulation process to permit inclusion of monetary
requirements and the multiyear concept adopted (including any necessary
request for cancellation ceiling authority) in the appropriate Program
Objectives Memorandum (POM) and budget documents. Development of
the strategy involving multiyear concepts shall be the responsibility of
program, system, support or commodity managers in close cooperation
with contracting and financial management specialists. MYP may be used
to contract for the purchase of supplies or services for more than one, but
not more than five years. MYP contracts with a value exceeding $500
million must be specifically provided for in an appropriations act or an act
other than an appropriations act. Proposed legislation and funding must
accompany the MYP request in the President’s budget submission,
requested as a budget amendment, or by the Secretary of Defense
requested in writing to the congressional defense committees. Finally,
USD (C) must certify support costs are fully funded in the future years
defense program (FYDP).
2. CLASSICAL MULTIYEAR PROCUREMENT.
Multiyear procurement contracts will comply with the full funding policy.
A contract may cover more than one year of requirements; however, funds
will be budgeted and the contract will be financed in annual increments
that fully fund only the annual quantity requirements. The full funding
policy will apply to each individual year of the multiyear contract.
Multiyear contracts will not be used as a vehicle for incrementally funding
items across the fiscal year covered by the contract. The production lots
on the contract will be the same as those described in the budget and
advance procurement will not be used to achieve a higher production rate
for the end item. Funds will not be “borrowed” from the amounts
budgeted for items in the early fiscal years of a multiyear contract to begin
work on items not budgeted until later fiscal years of the contract. The
contractor will be protected against the loss resulting from cancellation of
subsequent contract increments to allow reimbursement of unrecovered
nonrecurring costs through a cancellation charge.
Financial Management Policy
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