JUN 10, 2008 GSA Acquisition Letter V-08-04

MEMORANDUM FOR ALL GSA CONTRACTING ACTIVITIES

FROM: DAVID A. DRABKIN

ACTING CHIEF ACQUISITION OFFICER (V)

SUBJECT: INTERAGENCY AGREEMENTS---ACCEPTANCE AND OBLIGATION OF FUNDS

**1. [Purpose:]{.underline}** This Acquisition Letter establishes GSA
policy for accepting funds under an Interagency Agreement (IA). For the
purposes of this Acquisition Letter, the term \"Interagency Agreement\"
includes Memorandum of Understanding (MOU), Memorandum of Agreement
(MOA), Reimbursable Work Authorization (RWA), or any other interagency
assisted acquisition service agreement (including stand-alone Military
Interdepartmental Purchase Request (MIPR)).

**2. [Background:]{.underline}** It is GSA's mission to help Federal
agencies better accomplish their missions by providing premier
acquisition services to obtain goods, services and real property at best
value. GSA must properly manage customer expectations with regard to the
timely contractual obligation of funds and adherence to applicable laws,
regulations, and fiscal policies. Customer agencies are required to
obligate their funds during the funds\' period of availability \-- in
the typical case of annual appropriations, by the end of the given
fiscal year. Customer agencies can obligate funds via an IA with GSA for
bona fide needs. GSA, in accepting the IA under its statutory
authorities, must then act reasonably and expeditiously to contract for
the customer agency's needs in a timely manner.

This is particularly important in certain DoD requirements because,
should GSA accept an IA late in the fiscal year but fail to award a
contract before the end of the funds' original availability, GSA may be
required to return the unused funds to the customer agency, which likely
will not be able to apply them to new obligations. For additional
details, please see the Administrator's memorandum of November 21, 2006,
entitled \"Implementation of the DoD Policy -- Non-Economy Act Orders,
Dated October 16, 2006\" (see section 9 for links to this document and
other guidance/memoranda referenced in this Acquisition Letter)*.*

[Appendix A]{.underline} provides the policies for determining what is a
"reasonable time" in specific cases.

-2-

[Appendix B]{.underline} provides the required steps for accepting
Interagency Agreements.

[Appendix C]{.underline} provides a brief discussion of key fiscal law
principles and terminology such as \"bona fide needs,\" \"obligation,\"
\"contractual obligation,\" \"severable services,\" \"non-severable
services,\" \"multiple year funds,\" and \"no-year funds.\"

[Appendix D]{.underline} provides the required timeframes for
contractual obligation of customer funds from DoD and other civilian
agencies.

**3. [Cancellation]{.underline}:** This Acquisition Letter supersedes
Acquisition Letter V- 0704.

**4. [Effective Date:]{.underline}** Immediately

**5.** **[Termination Date:]{.underline}** This Acquisition Letter
remains in effect until revoked or terminated.

**6. [Applicability:]{.underline}** This Acquisition Letter applies to
all IAs entered into between GSA and Federal agencies/departments or
non-Federal entities as authorized by law for the procurement of goods
and services.

This Acquisition Letter does not apply to\--

> a\) GSA's provision of space and services for which GSA charges and
> collects rent pursuant to 40 U.S.C. 586;
>
> b\) Orders issued through the FED/MILSTRIP process; or
>
> c\) GSA's internal purchasing requirements.

**7. [Policy:]{.underline}** It is GSA's policy to enter into an IA and
accept funds solely for the "bona fide needs" (31 U.S.C. 1502(a)) of the
customer agency. GSA should not, at any time during the fiscal year,
accept an IA that lacks information or specificity to such a degree that
it is not feasible to award or modify a contract or task/delivery order
(i.e., \"contractually obligate\") within a \"reasonable time\" (see
Appendix A). In addition to complying with all laws and regulations, GSA
is committed to follow any policy restrictions of customer agencies (see
for example, the restrictions on agreements with DoD set out in
[Appendix D]{.underline}.). This policy is particularly important during
the last months of the fiscal year, when the need to obligate funds
prior to their expiration date is greatest.

Further implementing guidance will be issued by each Service.

-3-

**8. [Fiscal Year Cut-Off Dates:]{.underline}** The decision to accept
funds near the fiscal year end must be a case-by-case determination
taking into consideration the minimum time required for GSA to properly
contractually obligate the funds. Each GSA Service, based on the
guidance provided in [Appendix D]{.underline}, shall devise cut-off
dates that are appropriate for the organization. Consideration should be
given that IAs accepted after the cut-off dates may not allow sufficient
time for proper execution under normal circumstances and require special
management attention.

Under no circumstances may an IA citing "expired" funds be accepted from
a customer agency (e.g., after September 30 if the funding authority is
from the previous year\'s annual appropriations). The accepting office
must also bear in mind that multiple-year funding may have reached its
year of expiration depending on the term of such funding and the year it
was first appropriated.

The cut-off dates do not apply when accepting no-year funds or multiple
year funds that are not expiring in the same fiscal year. However, at no
time should an IA that fails to set out a bona fide need be accepted.
Further, GSA must expeditiously and diligently begin work on all IAs it
accepts.

**9.** **[Reference Documents]{.underline}:** *Available at the
**InSite** [OCAO Acquisition Policy Library]{.underline}\--*

under GSA InSite \> Reference & Resources \> OCAO Acquisition Policy
Library; or

[http://insite.gsa.gov/acquisitionlibrary]{.underline}

PBS Commissioner Memorandum dated 2/13/2007, Subject: PBS Guidance on
Implementing DoD Policy \-- Non-Economy Act Order.

FAS Commissioner Memorandum dated 1/18/2007, Subject: Federal
Acquisition Service Guidance for the Implementation of DOD Policy
Regarding Non-Economy Act Orders and GSA Administrator Memorandum of
November 21, 2006.

GSA Administrator Memorandum dated 11/21/2006, Subject: Implementation
of the DOD Policy - Non-Economy Act Orders.

DoD Comptroller Memorandum dated 10/16/2006, Subject: Non-Economy Act
Orders. http://www.acq.osd.mil/dpap/specificpolicy/

General Counsel and Chief Financial Officer's Memorandum dated
9/13/2005, Subject: GSA Authority for Interagency Transactions.

FSS Commissioner's Memorandum dated 6/3/2005, Subject: Special Order
Program -- Policy.

PBS\' Reimbursable Work Authorization National Policy Document dated
5/4/2005.

-4-

GSA Acquisition Letter V-05-06 dated 4/27/2005, Subject: Purchases on
Behalf of Other Agencies.

FTS Commissioner and Chief Financial Officer's Memorandum dated
6/7/2004, Subject: Guidance and Information Concerning Interagency
Transactions and Proper Management of Reimbursable Agreements in
Revolving Funds.

GSA Order OGP 2800.1 dated 1/1/2004, Subject: Acquisition Planning.

OMB Memorandum M-07-03 dated 11/13/2006, Subject: Business Rules for
Intergovernmental Transactions,.

TFM Bulletin No. 2007-03, Subject: Intergovernmental Business Rules.

**[Appendix A:]{.underline}**

**GSA POLICIES FOR DETERMINING "REASONABLE TIME"**

a\) [Reasonable time]{.underline}. \"Reasonable time\" refers to the
acquisition lead time required for GSA to contractually obligate the
accepted funds (except for a reasonable amount/balance to cover
contingencies, GSA labor charges, fees, close-out costs (e.g., paying
DCAA to perform audit), and other miscellaneous potential
costs/liabilities) in accordance with applicable laws, regulations, and
the customer agency\'s requirements. \"Reasonable time\" depends on\--

-   The type and complexity of requirements (e.g., supplies/services,
    simple/complex, commercial/non-commercial, routine/unique);

-   The method of procurements (e.g., orders under Federal Supply
    Schedules (FSS), Government-Wide Acquisition Contracts (GWACs),
    Multi-Agency Contracts (MACs), or agency Indefinite
    Delivery/Indefinite Quantity contracts (IDIQs); open market
    purchases under FAR Parts 13, 14, or 15; or sole-source/competed);

-   Other workload, and

-   Availability of staffing resources.

For the purposes of this Acquisition Letter, GSA has defined
\"reasonable time\" to mean the amount of acquisition lead time, based
on the complexities of the requirement, mutually agreed upon and
documented between the customer agency and GSA at the time of funds\'
acceptance, or a longer period that has been justified by executing a
written justification. If no separate agreement has been made, a
\"reasonable time\" of 90 calendar days shall be presumed (all days in
this Acquisition Letter are calendar days unless stated otherwise). The
date of acceptance is the date GSA acknowledges acceptance of the
funding document (e.g., in the case of a DoD customer, signing DD Form
448-2, \"Acceptance of MIPR\"; for RWAs, date specified on GSA Form
2957, box 30B). Except for the funds that come with customer-specific
fiscal policy restrictions as described in section App A(b), GSA has
reasonable time to contractually obligate the accepted funds even if
award occurs in a subsequent fiscal year (see [Appendix D]{.underline}
for details).

b\) [DoD restrictions on reasonable time]{.underline}. This \"reasonable
time\" may be [further restricted]{.underline} by customer-specific
fiscal policy attached to the funds. DoD\'s policy on Non-Economy Act
Orders, dated 10/16/2006 (see section 9 for the link to this memo),
prohibits GSA from taking any contractual action with fiscal year funds
after the fiscal year end. For example, regardless of when GSA accepts
DoD\'s FY 2008 funds (or multiple year funds if FY 2008 is the last year
of funding availability), GSA must contractually obligate the funds by
the last day of FY 2008. This means that, for DoD funds received on or
after 7/2/2008 (90 days from FY 2008 fiscal year end), GSA will
[NOT]{.underline} have the full \"reasonable time\" period.

-2-

This may not be a problem if the requirement is simple and a contract or
task/delivery order can be awarded/modified (i.e., \"contractually
obligated") quickly before the fiscal year end (but see [Appendix
D]{.underline} for delivery of goods). But for complex requirements, an
acquisition lead time of less than 90 days is often impractical and may
seriously impair the contracting officer\'s ability to properly
structure the acquisition and provide the best value.

For that reason, it is crucial that, prior to accepting
[any]{.underline} funds at [any]{.underline} time, the receiving
official (i.e., GSA official who accepts funds or is responsible for
accepting if done electronically) determine whether contractual
obligation of the funds can be made within the time period required by
the fiscal law and the customer agency\'s restrictions governing the
funds in accordance with the procedures in [Appendix B]{.underline}.

**[Appendix B:]{.underline}**

**REQUIRED STEPS FOR ACCEPTING FUNDS**

Incorporate the following steps when accepting funds under Interagency
Agreements (IAs)\--

> **\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_**
>
> **[Step A]{.underline}**. Ensure that each IA clearly identifies or
> accompanies (i.e., either by reference to the previously executed IA
> or the requirements package)\--
>
> 1\) The type of funds to be used (i.e., annual/multiple-year/no-year),
> amount, and the funds\' expiration date;
>
> 2\) The authority for the IA (e.g., 40 U.S.C. §§ 501-506, 592(b)(2)
> (formerly the Property Act) or 40 U.S.C. §§ 11101-11704 (the
> Information Technology Management Reform Act of 1996 (ITMRA), also
> known as the Clinger-Cohen Act)) (The Economy Act should not be used
> except in rare circumstances);
>
> 3\) The type of requirements (i.e., supplies, severable services,
> non-severable services; if the IA covers several requirements,
> indicate as such);
>
> 4\) Specific, definite, and concise description of requirements
> sufficient to demonstrate the bona fide needs at the time of GSA\'s IA
> acceptance; and,
>
> 5\) Any special customer agency restrictions attached to the funds.
>
> **[Step B]{.underline}**. Use [Appendix D]{.underline} and the
> customer agency request to determine the time by which contractual
> obligation of the funds must be made.
>
> **[Step C]{.underline}**. Determine, in consultation with contracting
> personnel in the office that will be handling the requirements, if GSA
> can meet that time requirement. Consider other workload and
> availability of staffing resources.
>
> **[Step D]{.underline}**. Reject the IA if the required timeframe is
> unattainable.
>
> **[Step E]{.underline}**. If the decision is to accept the funds,
> clearly indicate the acceptance date and ensure that everyone involved
> is aware that the funding authority may have to be returned to the
> customer if a contract/modification is not awarded within the time
> required in [Appendix D]{.underline}.
>
> **\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_**

**[Appendix C:]{.underline}**

**FISCAL LAW TERMINOLOGY IN INTERAGENCY CONTRACTING**

*\*Quoted parts below are from the GAO\'s [Principles of Federal
Appropriations Law]{.underline}, often referred to as the \"Red Book.\"
Emphases have been added.*

\"\[A\]n "**[obligation]{.underline}**" is some action that creates a
legal liability or definite commitment on the part of the government, or
creates a legal duty that could mature into a legal liability by virtue
of an action that is beyond the control of the government.\" (Red Book,
p. 7-3). It is a binding commitment against an appropriation that will
require expenditure at some later time. In interagency contracting,
funds accepted under a valid Interagency Agreement (IA) constitute an
obligation on the part of the customer agency. (See 31 U.S.C. 1301, and
GAO\'s legal opinion in Library of Congress case, B-302760 (5/17/2004)).
GSA then awards or modifies contracts or task/delivery orders using the
accepted funds. Obviously, this is also an obligation. However, to
distinguish the two, this Acquisition Letter uses the term
\"**[contractual obligation]{.underline}**\" for the latter.

\"If an agency fails to obligate its annual funds by the end of the
fiscal year for which they were appropriated, they cease to be available
for incurring and recording new obligations and are said to have
"**[expired]{.underline}**."\" (Red Book, p. 5-6). Once GSA accepts
funds, an obligation has occurred on the part of the customer agency and
the funds remain available to liquidate the obligation following GSA\'s
execution (i.e., contractual obligation). However, GSA\'s ability to
contractually obligate the funds will still be subject to time
restrictions set out in [Appendices A and B]{.underline} or a
customer\'s specific requirements such as DoD\'s fiscal policy (see
[Appendix D]{.underline} for details). When the accepted funds are no
longer usable because of GSA\'s failure to timely contractually
obligate, the funds will have to be returned to the customer agency to
be deobligated. To provide clarity, this Acquisition Letter proposes
calling this \"**[funds subject to deobligation]{.underline}**\" rather
than \"**[expired funds]{.underline}**,\" as they are commonly referred
to.

\"The **[bona fide needs]{.underline}** rule is one of the fundamental
principles of appropriations law: A fiscal-year appropriation may be
obligated only to meet a legitimate, or *bona fide*, need arising in, or
in some cases arising prior to but continuing to exist in, the fiscal
year for which the appropriation was made.\" (Red Book, p. 5-11). The
bona fide needs rule is statutory, 31 U.S.C. 1502. Because obligation
occurs when GSA accepts a customer\'s funds, there has to be a
documented bona fide need assessment at time of IA acceptance. In
practice, this means there must be, at a minimum, a \"**[specific,
definite, and concise]{.underline}**\" description of the requirements
associated with the funds at the time of IA acceptance (see
\"Non-Economy Act Acquisition Package Checklist\" attached to DoD
Comptroller 10/16/2006 Memorandum). It is important to note that, while
further development of the Statement of Work (or PWS/SOO) may occur
later, a sufficiently detailed requirements description must be
documented in the IA to satisfy the bona fide needs rule to accept the
IA and for the customer to record an obligation.

-2-

Even after the acceptance of funds, the bona fide needs established at
the time of initial obligation may be questioned if GSA takes too much
time executing the funds. Excessive and unreasonable delay or inaction
by GSA may be viewed as an indication that there may not be a true bona
fide need or that the obligation was an attempt to \"park\" the funds.
To avoid this, once funds are accepted, GSA and the customer agency must
proceed reasonably and diligently to complete the contract action.

**[Severable services]{.underline}** are services that are continuing
and ongoing in nature -- such as help-desk support, maintenance, or
janitorial services -- for which benefit is received each time the
service is rendered. **[Non-severable services]{.underline}** involve
work that results in a final product or end-item and for which benefit
is received only when the entire project is complete, such as systems
design, building construction, or environmental study.

\"\[T\]here 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]{.underline}*** 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 \[widget\]. If the repairs are not
completed, certainly some work has been done but you still don't have an
operational \[widget\]. The latter two examples are nonseverable.\" (Red
Book, p. 5-28).

\"**[Annual appropriations]{.underline}** (also called fiscal-year or
one-year appropriations) are made for a specified fiscal year and are
available for obligation only during the fiscal year for which made. . .
. All appropriations are presumed to be annual appropriations unless the
appropriation act expressly provides otherwise.\" (Red Book, p. 5-4).
Thus, **[annual funds]{.underline}**.

\"**[Multiple year appropriations]{.underline}** are available for
obligation for a definite period in excess of one fiscal year. (Red
Book, p. 5-7). Thus, **[multiple year funds]{.underline}**.

\"A **[no-year appropriation]{.underline}** is available for obligation
without fiscal year limitation. . . . The standard language used to make
a no-year appropriation is "to remain available until expended."\" (Red
Book, p. 5-7). Thus, **[no-year funds]{.underline}**.

**[Appendix D:]{.underline}**

**Restrictions Applicable to Funds Accepted Under Interagency Agreements
(IAs)**

I. DoD Annual Funds[^1] (or Multiple Year Funds That Are in the Last
Year of Availability) Received on or after 10/16/2006.

  ------------------- -------------------------- --------------------------------
  **TYPE OF           **TIME RESTRICTIONS**      
  REQUIREMENTS**                                 

  GOODS               Contracts/orders must be   The delivery of goods may
                      awarded[^2] within a       [not]{.underline} be specified
                      reasonable time[^3] but no to occur in the subsequent
                      later than fiscal year end fiscal year (see footnote below
                      (for example, for funds    for complete instructions).[^4]
                      received after 7/1/2008,   
                      reasonable time is         
                      *[further                  
                      restricted]{.underline}*   
                      by 9/30/2008).             

  SEVERABLE SERVICES                             Contract or task order period of
                                                 performance must begin no later
                                                 than the last day of the fiscal
                                                 year and may be up to 1 year.

  NON-SEVERABLE                                  Contract or task order period of
  SERVICES                                       performance may extend across
                                                 fiscal years until complete. No
                                                 incremental funding of
                                                 contracts/orders is
                                                 permitted.[^5]
  ------------------- -------------------------- --------------------------------

II\. Non-DoD Fiscal Year Funds

+------------------+---------------------------------------------------+
| **TYPE OF        | **TIME RESTRICTIONS**                             |
| REQUIREMENTS**   |                                                   |
+------------------+---------------------------------------------------+
| GOODS or         | Contracts/orders must be awarded within a         |
|                  | reasonable time (even if awards occur in a        |
| NON-SEVERABLE    | subsequent fiscal year).                          |
| SERVICES         |                                                   |
+------------------+---------------------------------------------------+
| SEVERABLE        | Contracts/orders must be awarded within a         |
| SERVICES         | reasonable time (even if awards occur in a        |
|                  | subsequent fiscal year). Period of performance    |
|                  | may be up to 1 year.                              |
+------------------+---------------------------------------------------+

[^1]: e.g., Operation & Maintenance (O&M) funds.

[^2]: Refers to \"contractual obligation\" by GSA.
    \"Contractual-obligation\" means awards or modifications of a
    contract or task/delivery order (see [Appendix A]{.underline} for
    explanation).

[^3]: Defined in Appendix A.

[^4]: DoD requires that the funds be returned \"*unless the request for
    goods was made during the period of availability of the funds
    **and** the item(s) could not be delivered within the funds period
    of availability solely because of delivery, production or
    manufacturing lead time, or unforeseen delays that are out of the
    control and not previously contemplated by the contracting parties
    at the time of contracting. Thus, where materials cannot be obtained
    in the same fiscal year in which they are needed and contracted for,
    provisions for delivery in the subsequent fiscal year do not violate
    the bona fide need rule as long as the time intervening between
    contracting and delivery is not excessive and the procurement is not
    for standard commercial off the shelf (COTS) items readily available
    from other sources. The delivery of goods may not be specified to
    occur in the year subsequent to funds availability.*\" (see p. 4,
    DoD Comptroller Memorandum, 10/16/2006; available at the [OCAO
    Acquisition Policy Library]{.underline}).

[^5]: Period or quantity options are permitted.