FINANCIAL MANAGEMENT POLICY MANUAL

c. Multiple-Year Contracts.
In many projects, especially those involving a major weapons system
or complex components or subsystems, the contract(s) with private
concerns normally are awarded for the full development effort or for
phases of the development effort and cover a performance period
longer than 1 year. In these cases, the budget estimate for the contract
effort shall not exceed that necessary to cover "costs to be incurred"
for contract performance for an incremental period not to exceed 12
months. Budget estimates for multiyear contracts, wherever possible,
should be structured so that as soon as possible in the life of the
contract the funded increment will be coincident with the 12-month
period beginning in October (Example 6 on chart). Where budget
estimates cannot anticipate contract award in October, the initial
incremental period should be less than 12 months (Example 7 on
chart). On an exception basis, the first budget increment may extend
no more than 3 months beyond the fiscal year (Example 8 on chart).
In addition, there may be rare exceptional cases where extraordinary
factors prevent the prescribed phasing so that it is necessary that each
12-month increment extend beyond the end of each fiscal year
(Example 9 on chart). In all such exceptional cases, approved
specifically by the Secretary of the Navy, the period of the budget
estimate for a major weapon system may extend up to 3 months
beyond the fiscal year.
d. By Educational Institutions.
In cases of projects included within the research category which are to
be performed by educational institutions, or by institutions affiliated
with educational institutions, where it is considered in the best interest
of both the Government and the institution to provide necessary
stability to attract and retain the required skilled personnel to work on
problems of vital interest to the Department of the Navy, the budget
estimate may provide for initial financing of such research projects up
to a maximum increment of 36 months from date of contract award
(Example 11 on chart). Subsequent to the initial increment, budget
estimates for renewal increments of such projects will be limited to not
more than 12 months from date of renewal (Example 12 on chart).
e. Government-Owned RDT&E Installations.
The budget estimates covering the cost of operation and maintenance
of Government-owned research, development, test and evaluation
installations which are funded on an institutional basis under operating
budgets (block funded) will provide for financing of such installations
on an annual basis coincident with the fiscal year of appropriation
(Example 13 on chart). In the case of multiyear tasks and projects to
be awarded to Government installations by reimbursable work order,
the budget estimate for the initial and each subsequent increment will
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