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B. 5. Services
Rendered Beyond the Fiscal Year
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(As of 3/12/15)
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(As of 3/12/15)
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Services procured by contract are
generally viewed as chargeable to the
appropriation current at the time the services are rendered.16
38
Comp.
Gen. 316 (1958). However, a need may arise in one fiscal year for
services
that, by their nature, cannot be separated for performance in
separate fiscal
years. The Comptroller General has held that the question of whether
to
charge the appropriation current on the date the contract is made,
or to
charge funds current at the time the services are rendered, depends
upon
whether the services are “severable” or “entire”:
“The fact that the
contract covers a part of two fiscal years
does not necessarily mean that payments thereunder are for
splitting between the two fiscal years involved upon the
basis of services actually performed during each fiscal year.
In fact, the general rule is that the fiscal year appropriation
current at the time the contract is made is chargeable with
payments under the contract, although performance
thereunder may extend into the ensuing fiscal year.”
23 Comp. Gen. 370, 371 (1943). A contract that is viewed as “entire”
is
chargeable to the fiscal year in which it was made, notwithstanding
that
performance may have extended into the following fiscal year. The
determining factor for whether services are severable or entire is
whether
they represent a single undertaking. Thus, in 23 Comp. Gen. 370, a
contract
for the cultivation and protection of a tract of rubber-bearing
plants,
payable on completion of the services, was chargeable against fiscal
year
funds for the year in which the contract was made. Because the
services
necessarily covered the entire growing period, which extended into
the
following fiscal year, the Comptroller General characterized them as
a
single undertaking, which “although extending over a part of two
fiscal
years, nevertheless was determinable both as to the services needed
and
the price to be paid therefor at the time the contract was entered
into.” Id.
at 371.
The rationale of
23 Comp. Gen. 370 was applied in
59 Comp. Gen. 386 (1980)
(requisition for printing accompanied by manuscript sufficient for
Government Printing Office to proceed with job). See, e.g.,
B-317139, June 1,
2009 (contract for the design, development, and deployment of a
financial intelligence data retrieval system); 65 Comp. Gen. 741 (1986)
(contract for study and final report on psychological problems among
Vietnam veterans);
B-257977, Nov. 15, 1995
(contract for 2-year intern training program since interns are
required to complete entire training program to be eligible for
noncompetitive Presidential Management Intern appointment). See also
B-305484, June 2, 2006
(appointment of an arbitrator to hear a case is in the nature of a
nonseverable service and the National Mediation Board should record
an obligation of the current appropriation based on the estimated
cost of paying the arbitrator to submit an award);
73 Comp. Gen. 77 (1994)
(subsequent modifications to Fish and Wildlife Service research work
orders should be charged to the fiscal year current when the work
orders were issued since the purpose of the research is to provide a
final research report and the services under the contract are
nonseverable). The last two decisions are noteworthy because they
pointed out that limitation of funds clauses or subject to
availability clauses do not affect the application of the bona fide
needs rule and the severable test.
B-305484; 73 Comp. Gen. at 80.
However, where the services are continuing and recurring in nature,
the
contract is severable. Service contracts that are “severable” may
not cross fiscal year lines unless authorized by statute. 71 Comp.
Gen. 428 (1992);
58 Comp. Gen. 321, 324 (1979); B-192518, Aug. 9, 1979; B-133001,
Mar. 9,
1979; B-187881, Oct. 3, 1977. See also
B-287619, July 5, 2001 (TRICARE
contractors provide on-going services such as enrolling
beneficiaries,
adjudicating claims, etc., that are severable into components that
independently provide value). Most federal agencies have authority
to
enter into a 1-year severable service contract, beginning at any
time during
the fiscal year and extending into the next fiscal year, and to
obligate the
total amount of the contract to the appropriation current at the
time the
agency entered into the contract.17 10 U.S.C. § 2410a (defense
agencies);
41 U.S.C. § 253l (civilian agencies); 41 U.S.C. § 253l-1
(Comptroller
General); 41 U.S.C. § 253l-2 (Library of Congress); 41 U.S.C. §
253l-3 (Chief
Administrative Officer of the House of Representatives); 41 U.S.C. §
253l-4
(Congressional Budget Office). See also
B-259274, May 22, 1996.
Otherwise,
the services must be charged to the fiscal year(s) in which they are
rendered. 65 Comp. Gen. at 743;
33 Comp. Gen. 90 (1953) (trucking
services); 10 Comp. Dec. 284 (1903) (contract for services of
various
categories of skilled laborers in such quantities and at such times
as may be
deemed necessary is severable). As stated in 33 Comp. Gen. at 92:
“The need for current services, such as those covered by the
contract here under consideration, arises only from day to
day, or month to month, and the Government cannot, in the
absence of specific legislative authorization, be obligated for
such services by any contract running beyond the fiscal
year.”
See also 35 Comp. Gen. 319 (1955), amplified by B-125444, Feb. 16,
1956
(gardening and window cleaning services).
In addition to the recurring nature of the services, another factor
identified
in some of the decisions is whether the contracted-for services are
viewed
as personal or nonpersonal. Personal services are presumptively
severable
by their nature and are properly chargeable to the fiscal year in
which the
services are rendered.
B-174226, Mar. 13, 1972
(performance on an evaluation team). Legal services have been viewed
as either personal or nonpersonal, depending on the nature of the work
to be done. B-122596,
Feb. 18, 1955; B-122228, Dec. 23, 1954.
The distinction appears to have derived from the distinction
inherent in
5 U.S.C. § 3109, which authorizes agencies to procure services of
experts or
consultants by employment (personal) or contract (nonpersonal).
B-174226, supra. In the context of applying the bona fide needs
rule,
however, the distinction is not particularly useful since it is
still necessary
to look at the nature of the services involved in the particular
case. In other
words, characterizing services as personal or nonpersonal does not
provide
you with an automatic answer. In fact, some of the more recent cases
have
merely considered the nature of the work without characterizing it
as
personal or nonpersonal, which would have added nothing to the
analysis.
E.g., 50 Comp. Gen. 589 (1971) (fees of attorneys contracted for
under
Criminal Justice Act chargeable to appropriations current at time of
appointment); B-224702, Aug. 5, 1987 (contract for legal support
services
held severable since it consisted primarily of clerical tasks and
required no
final report or end product).
A 1981 decision applied the above principles to agreements made by
the
Small Business Administration (SBA) with private organizations to
provide
technical and management assistance to businesses eligible for
assistance
under the Small Business Act. The typical agreement covered one
calendar
year and crossed fiscal year lines. Under the agreement, payment was
to be
made only for completed tasks and SBA was under no obligation to
place
any orders, or to place all orders with any given contractor. The
question
was whether the “contract” was chargeable to the fiscal year in
which it
was executed. The Comptroller General found that the services
involved
were clearly severable and that the agreement was not really a
contract
since it lacked mutuality of obligation. Accordingly, SBA created a
contract
obligation only when it placed a definite order, and could charge
each fiscal
year only with obligations incurred during that fiscal year.
60
Comp.
Gen. 219 (1981). The principles were reiterated in
61 Comp. Gen. 184
(1981).
In another 1981 case, GAO considered the District of Columbia’s
recording
of obligations for social security disability medical examinations.
A person
seeking to establish eligibility for disability benefits is given an
appointment for a medical examination and a purchase order is issued
at
that time. However, for a number of reasons beyond the District’s
control,
the examination may not take place until the following fiscal year (for
example, a person makes an application at end of fiscal year or does
not show
up for initial appointment). Nevertheless, the need for the
examination arises when the applicant presents his or her claim for
disability benefits. The decision concluded that the obligation
occurs when
the purchase order is issued and is chargeable to that fiscal year.
60 Comp.
Gen. 452 (1981).
As a general matter, the relevant date
to ascertain whether training is a bona fide need of a particular
fiscal year is the date that the training is delivered.
B-321296, July 13,
2011. Thus, the cost of training ordinarily is properly charged
to the appropriation available in the fiscal year in which the
training is delivered. However, in some limited circumstances,
training may be a bona fide need of the fiscal year prior to the
fiscal year in which the training is delivered.
70 Comp. Gen 296
(1991). For example, the prior year’s appropriation may be used for
training occurring in the subsequent fiscal year, where the training
provider requires the agency to register during the expiring fiscal
year, the training date offered is the only one available, and the
time between the registration and the training is not excessive. Id.
In 70 Comp. Gen 296, training that began the first day of fiscal
year 1990 was held chargeable to 1989 appropriations where the
training had been identified as a need for 1989. Compare
B-321296 (where
training was delivered in January 2011 and registration not required
until October 15, 2010, such training was a bona fide need of fiscal
year 2011 even though the need for training was identified in fiscal
year 2010). Training also tends to be nonseverable. Thus, where a
training obligation is incurred in one fiscal year, the entire cost
is chargeable to that year, regardless of the fact that training may
extend into the following year.
B-233243, Aug. 3, 1989;
B-213141-O.M., Mar. 29,
1984.
After a confusing start, we have determined that the type of
contract does
not affect the severable versus nonseverable distinction. For
example,
“level-of-effort” contracts may be severable or nonseverable. A
level-of-effort
contract is a type of cost-reimbursement contract in which the scope
of work is defined in general terms, with the contractor being
obligated to
provide a specified level of effort (e.g., a specified number of
person-hours)
for a stated time period. Federal Acquisition Regulation, 48 C.F.R.
§ 16.306(d)(2). The bona fide needs determination is based not on
the
contract type but on the nature of the work being performed and is,
in the
first instance, the responsibility of the contracting agency.
B-235678,
July 30, 1990. A 1985 case,
65 Comp. Gen. 154, had implied that all
level-ofeffort
contracts were severable by definition (id. at 156), and to that
extent
was modified by B-235678. See also
B-277165, Jan. 10, 2000
(cost-plus-fixed-fee
contracts are presumptively severable unless the actual nature of
the
work warrants a different conclusion).
The Comptroller General has noted that to some degree an agency can
control whether services are severable or nonseverable by selecting
the
type of contract and crafting the statement of work. B-277165, supra
(“one
might reasonably conclude that the initial agency determination
whether
the contract is for funding purposes severable or nonseverable takes
place
roughly contemporaneously with agency selection of contract type”).
As a final thought, there is a fairly simple test that is often
helpful in
determining whether a given service is severable or nonseverable.
Suppose
that a service contract is to be performed half in one fiscal year
and half in
the next. Suppose further that the contract is terminated at the end
of the
first fiscal year and is not renewed. What do you have? In the case
of a
window-cleaning contract, you have half of your windows clean, a
benefit
that is not diminished by the fact that the other half is still
dirty. What you
paid for the first half has not been wasted. These services are
clearly
severable. Now consider a contract to conduct a study and prepare a
final
report, as in 65 Comp. Gen. 741 (1986). If this contract is
terminated
halfway through, you essentially have nothing. The partial results
of an
incomplete study, while perhaps beneficial in some ethereal sense,
do not
do you very much good when what you needed was the complete study
and
report. Or suppose the contract is to repair a broken frammis.18
If
the
repairs are not completed, certainly some work has been done but you
still
don’t have an operational frammis. The latter two examples are
nonseverable. |
