FAR 17.106—Procedures.

General.

FAR 17.106-1 explains the basic rules for using multi-year contracting and how contracting officers should structure, price, and administer those acquisitions. It covers the method of contracting, type of contract considerations, cancellation procedures and cancellation ceilings, how to estimate nonrecurring costs, setting cancellation dates, revising ceilings and dates after solicitation, payment of cancellation charges, use of presolicitation or pre-bid conferences, limiting the Government’s payment obligation to available funds, and the effect of a termination for convenience. In practice, this section is about balancing the benefits of multi-year buying—such as better pricing, production stability, and reduced administrative burden—against the Government’s need to protect itself if later-year requirements are canceled or funding is not available. It tells contracting officers how to calculate and document cancellation risk, how to communicate the structure to industry, and how to ensure the contract does not obligate the Government beyond what is legally available. For contractors, it signals that later program years are not guaranteed and that pricing, financing, and risk assumptions must account for possible cancellation and funding limits. The section is especially important in long-lead, production, and other multi-year acquisitions where startup costs, learning curves, and amortization of nonrecurring costs materially affect price.

Solicitations.

FAR 17.106-2 explains what must be included in solicitations for multi-year contracts so offerors can compete on a common, transparent basis and the Government can evaluate whether a multi-year approach is better than buying only the first program year. It requires the solicitation to state the requirements for the first program year and for the full multi-year period, including the requirements for each program year, and to provide the criteria for comparing the lowest evaluated submission for the first-year requirements against the lowest evaluated submission for the multi-year requirements. It also requires a provision that limits evaluation to the first program year if the Government decides before award that only that year is needed, a separate cancellation ceiling for each program year subject to cancellation, and a statement that award will not be made for less than the first program year requirements. The section further addresses when the Government’s administrative costs of annual contracting may be used as an evaluation factor and makes clear that the cancellation ceiling itself may not be used as an evaluation factor. In practice, this section is about solicitation design, price evaluation transparency, and protecting the Government’s ability to compare alternatives without distorting competition or improperly weighting cancellation risk.

Special procedures applicable to DoD, NASA, and the Coast Guard.

FAR 17.106-3 sets special procedures for multi-year contracting used by DoD, NASA, and the Coast Guard. It addresses how these agencies should use multi-year contracts to broaden the defense industrial base by encouraging subcontractor, supplier, and vendor participation and by ensuring payments and benefits flow to those participants as quickly as practicable. It also protects the Government’s ability to terminate deficient prime contracts, requires cancellation or termination if funding is not available, and limits the types of contract pricing arrangements that may be used. In addition, it covers when recurring costs may be included in cancellation ceilings, when agencies may solicit only multi-year prices instead of both annual and multi-year offers, and when level unit pricing is required or variable unit pricing may be approved. In practice, this section is about balancing long-term procurement efficiencies against fiscal control, competition, pricing fairness, and the Government’s ability to stop poor performance or walk away if funding disappears.