Several sections of this chapter, beginning with B.4, examine the application of the good faith requirements rule in various aspects of government procurement where transactions cover more than one fiscal year. We have these sections largely based on a comprehensive and well-researched article by Captain Dale Gallimore entitled Legal Aspects of Funding Department of the Army Procurements, 67 Mil. L. Rev. 85 (1975). It follows that the bona fide application rule does not apply to funds without a year. 43 Comp. Gen. 657, 661 (1964).

See also B-279886 of 28 April 1998. Without a prescribed period of availability, there is no fixed period during which the need for good faith must arise, and therefore no fixed period during which funds must be committed and spent. It is not entirely logical that it can be argued that a multi-year allocation can be committed at any time during its availability, but only to cover a bona fide need in the year in which the funds were approved. For example, suppose an agency receives a 2-year stipend each year. For the 1989 financial year, it receives appropriations for the 1990 financial year; For the 1990 financial year, it receives appropriations for the 1991 financial year, etc. It is possible to apply the rule of bona fide requirements, according to which appropriations for the 1990 financial year may be used only for purposes arising during the 1990 financial year, although commitments may arise at any time before the end of the 1991 financial year. The Comptroller General rejected this approach in the 68th Comp. Gen.

170 (1989) and considered that the Defence Logistics Agency could use its 2-year research and development appropriations for the 1987 financial year for a need arising during the 1988 financial year. “It is not necessary that the 2-year funds be used only for the needs of the first year of their availability.” Id. at 172. In 1994, Congress and the President adopted flexibilities within FASA. Pub. L. No. 103-355, 108 Stat. 3243 (October 13, 1994). HHS OIG is requesting a section of FASA which is now codified in 41 U.S.C.

§ 3903. [5] Article 3903 empowers an executive agency to conclude a multiannual contract[6] for the purchase of immovable property or services for needs of up to five years` duration. [7] Services must begin in the current fiscal year and extend to subsequent fiscal years. To answer the first question from the HHS Office of the Inspector General, it is important to understand Section 3903 in the broader context of service contracts. In the absence of any other legal authority, a temporary allowance is only available to cover a real or bona fide need arising during the period for which it was made available. 31 U.S.C. § 1502(a); B-308010, 20 April 2007. Therefore, an agency cannot commit current appropriations according to the legitimate needs of future years. This basis of the right of authorization is commonly referred to as the good faith requirement rule. When commissioning services, an agency must first determine whether the services are inseparable or separable in order to comply with the rule of good need. B-277165 71 Comp.

Gen. 428, 429 (1992). If an agency wanted to enter into a multi-year contract for monthly garden and window cleaning services (separable services)[13], it could also use section 3903. This agency could conclude a multi-year contract for needs of up to five years. [14] Under this divisible service contract reflecting both the needs of the current and future fiscal years, the Agency could use section 3903 to commit either funds for the duration of the contract or mandatory funds for the first fiscal year, plus estimated termination costs. Id. Does the above quote from the Treasury Auditor mean that an organization`s commitment to allocate funds annually on the last day of the fiscal year can never be a gullible necessity of that fiscal year? While this should certainly raise a question, the answer is, “It depends.” An agency may very well have valid reasons to spend at the end of the year. For example, some programs have predictable increases in Q4 due to cyclical or seasonal requirements.

When using time-limited funding, an organization must divide its day-to-day operations into separate units of time to determine whether a particular transaction can be initiated or charged against a particular credit. The bona fide request rule provides an analytical framework for analyzing an organization`s financial transactions to determine the period to which a transaction relates. The National Institutes of Health (NIH), an operational division of HHS, conducts and funds medical research. Application letter 1, to 2; NIH, About NIH, available on www.nih.gov/about/ (last visited August 7, 2013). HHS OIG has conducted a series of audits of NIH contracts that exceed one year of performance. Request letter 1, to 1. To inform its findings, the HHS Office of the Inspector General asked us for a legal interpretation of the scope of 41 U.S.C. § 3903. Section 3903 was enacted into the Federal Acquisition Streamlining Act, which was intended to give agencies the flexibility to structure contracts based on the needs of current and future fiscal years. B-277165, 10 January 2000. In particular, the HHS Office of the Inspector General asked whether Section 3903 empowers executive agencies to enter into a multi-year contract for the purchase of inseparable and detachable services.

Letter of request 1, to 1. The HHS OIG considers that Section 3903 only allows for flexible funding of separable service contracts, but notes that the HHS Directive states that Section 3903 also approves flexible funding for non-separable service contracts.