Incrementally funded cost reimbursable and time & material contracts will normally contain some version of FAR 52.232-22, which requires the contractor to notify the contracting officer when costs incurred are expected to exceed either 75% or 85% of the funded value of the contract (or task order). Often overlooked is the requirement for the contractor to provide that notice 30, 60 or 90 days IN ADVANCE of reaching that level. The notification should state what date the current funds are expected to be fully expended and how much additional funding is required to complete the work or period of performance. The clause that appears in the contract will specify either 75% or 85% and the number of days. The default is 75% and 60 days.
While the importance of this information to the government in planning its funding requirements seems obvious, it is surprising how little attention is paid to it. In my experience, Limitation of Funds notifications are not routinely submitted. Even more shocking, no contracting officer or COR ever asked a question about one that was submitted or noticed that they were not being provided. Nor has the failure to provide the notifications been mentioned in a past performance review or CPAR. One has to wonder if anyone ever looks at them.
For both government and contractor, perhaps the need for this information is satisfied by financial reporting required as part of monthly progress or technical reports. In some cases, the specific information required by the clause is not useful or practical. For example, on a short-term task where funding is provided quarterly or more often, expenditures could be over the threshold at the time the increment is provided. Sometimes, too, the order or modification itself may contain a statement that funding is incremental and additional funds will be forthcoming by a specified date. In another circumstance, an IDIQ contract had more than 100 open task orders at any given time, most incrementally funded, which would have required so many Limitation of Funds notices that the contracting officer would have been inundated with them. None of these circumstances technically negates the contractual requirement to provide a Limitation of Funds notification.
Ideally, contractors should comply with the requirement for notifications with the specific information required by the clause. If some other form of reporting provides information in a format that is more valuable to the government in anticipating funding needs, the contractor should address the possible substitution of that for the Limitation of Funds requirement with the contracting officer and obtain concurrence (preferably in writing) to satisfy the need by alternate means. In the case of the IDIQ contract mentioned above, the contractor provided a monthly financial report listing all of the task orders, their cost and funding status and highlighting the ones that should be followed closely. The contracting officer agreed that this report was more useful than individual notifications would be for each task order.
As always it is important to know your customer, understand their expectations and agree on the most efficient manner to meet those needs. The FAR Limitation of Funds notification may not be the best answer.