FINANCIAL MANAGEMENT POLICY MANUAL

funded. The inclusion of recurring costs in cancellation ceilings is
an exception to normal contract financing arrangements and must
be approved by the Secretary of the Navy and the USD (C). Such
requests shall be reviewed when specific advantage to the
government can be demonstrated. These procedures are subject to
any limitations or conditions set forth in the annual Department of
Defense Authorization or Appropriations Act.
b. Written notification of the congressional defense committees and a
30-day waiting period before award of a multiyear contract is
required for a contract that employs EOQ procurement exceeding
$20 million in any one year of the contract, employs advance
procurement leading to a MYP contract that employs EOQ
procurement exceeding $20 million in any one year, or includes an
unfunded contingent liability exceeding $20 million. The
congressional defense committees must be notified 10 days prior to
the termination of any MYP contract.
5. CRITERIA.
The approval, initiation and execution of multiyear procurements must
meet the following statutory requirements (10 U.S.C. 2306b, Section 806
of Public Law 105-85, and Section 8008 of Public Law 105-56).
a. Substantial Savings
A multiyear procurement should yield substantial savings of the total
associated costs when compared to conventional annual contracting
methods. MYP structures with greater risk to the Government should
demonstrate increased cost avoidance or other benefits over those with
lower risk. Savings can be defined as significant either in terms of
dollars or percentage of total cost. A present value analysis must be
used to determine the lowest cost compared to an annual procurement.
b. Stability of Requirement
The minimum need (e.g., inventory or acquisition objective) for the
production item is expected to remain unchanged or vary only slightly
during the contemplated contract period in terms of production rate,
fiscal year phasing, procurement rate and total quantities.
c. Stability of Funding
There should be a reasonable expectation that the program is likely to
be funded at the required level throughout the contract period to avoid
cancellation.
d. Stable Design
The item should be technically mature, have completed Research,
Development, Test and Evaluation (RDT&E) (including development
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