FAR 17.602—Policy.
Plain-English Summary
FAR 17.602 sets the policy framework for management and operating (M&O) contracts and explains when agencies may authorize them, who must approve them, and how those authorizations must be documented. It covers three main topics: the requirement for written authorization by the head of the agency with statutory authority, the rule that this authority cannot be delegated and must appear on the face of the contract, and the requirement that agencies use M&O contracts only when consistent with the subpart and the situations described in FAR 17.604. It also imposes a one-time agency review obligation to examine existing contractual arrangements, identify and authorize qualifying M&O contracts, and modify or terminate arrangements that do not fit the policy, subject to an exception for contracts with less than four years remaining at the effective date unless they are renewed or substantially renegotiated. In practice, this section is about controlling the use of a special contract type that can involve broad contractor responsibility for operating government facilities or programs, while ensuring that agencies do not use that vehicle without proper legal authority, internal review, and clear documentation. For contracting officers and agencies, the section is a gatekeeping rule: it limits who can approve these contracts, requires a formal paper trail, and forces agencies to reconcile existing contracts with current policy.
Key Rules
Written agency-head authorization
A management and operating contract may be entered into or renewed only when the head of the agency, acting under the required statutory authority, determines in writing that such action is authorized. The authorization must be consistent with the agency’s statutory authority, 41 U.S.C. chapter 33, and the agency’s own regulations governing these contracts.
No delegation of authority
The authority to authorize M&O contracts cannot be delegated. This means the approval must come from the agency head personally, not from a subordinate official acting under delegated authority.
Authorization must appear on contract
Every contract authorized under this policy must show the authorization on its face. The contract document itself must reflect that the required approval was obtained, creating a clear record for audit, review, and enforcement.
Use only when policy and situations fit
Agencies may authorize M&O contracts only in a manner consistent with the guidance in this subpart and only when the contract fits the situations described in FAR 17.604. The policy does not create a general license to use M&O contracts whenever convenient.
Mandatory review of existing contracts
Within two years of the regulation’s effective date, agencies must review their existing contractual arrangements to identify, modify as necessary, and authorize qualifying M&O contracts, and to modify or terminate arrangements that do not qualify.
Exception for near-term contracts
Contracts with less than four years remaining as of the effective date do not have to be terminated, identified, modified, or authorized unless they are renewed or their terms are substantially renegotiated. This avoids disrupting contracts nearing completion.
Responsibilities
Heads of Agencies
Determine in writing whether management and operating contracts may be entered into or renewed, ensure the determination rests on requisite statutory authority, and ensure the authority is exercised personally because it may not be delegated. They must also direct the required review of existing contractual arrangements within the prescribed time frame.
Contracting Officers
Enter into or renew M&O contracts only when proper written authorization exists, ensure the authorization is reflected on the face of the contract, and verify that the contract fits the policy guidance and the situations described in FAR 17.604 before proceeding.
Agencies
Authorize M&O contracts only in a manner consistent with the subpart, review current contractual arrangements within two years of the effective date, identify and authorize qualifying contracts, and modify or terminate contracts that do not qualify, subject to the stated exception for contracts with less than four years remaining.
Legal and Policy Staff
Support the agency head and contracting officers by confirming statutory authority, ensuring agency regulations align with the subpart, and helping determine whether existing and proposed contracts fit the situations described in FAR 17.604.
Practical Implications
This section makes M&O contracts a controlled, high-level approval action rather than a routine contracting decision. Contractors should expect extra scrutiny and a formal authorization trail before award or renewal.
A common pitfall is assuming a subordinate official can approve the contract. FAR 17.602 requires agency-head action and expressly forbids delegation, so an invalid approval can jeopardize the contract’s compliance.
Another risk is failing to document the authorization on the contract itself. If the face of the contract does not show the required authorization, the agency may have a recordkeeping and compliance problem even if internal approval occurred.
Agencies must actively review legacy contracts rather than waiting for renewal time. If an arrangement is not identified and authorized as an M&O contract, the agency may need to modify or terminate it, which can affect continuity of operations.
The four-year remaining-term exception is important for transition planning. Contracting personnel should check remaining performance time and whether a renewal or substantial renegotiation will trigger the need for review and authorization.
Official Regulatory Text
(a) Heads of agencies, with requisite statutory authority, may determine in writing to authorize contracting officers to enter into or renew any management and operating contract in accordance with the agency’s statutory authority, or 41 U.S.C. chapter 33 , and the agency’s regulations governing such contracts. This authority shall not be delegated. Every contract so authorized shall show its authorization upon its face. (b) Agencies may authorize management and operating contracts only in a manner consistent with the guidance of this subpart and only if they are consistent with the situations described in 17.604 . (c) Within 2 years of the effective date of this regulation, agencies shall review their current contractual arrangements in the light of the guidance of this subpart, in order to- (1) Identify, modify as necessary, and authorize management and operating contracts; and (2) Modify as necessary or terminate contracts not so identified and authorized, except that any contract with less than 4 years remaining as of the effective date of this regulation need not be terminated, nor need it be identified, modified, or authorized unless it is renewed or its terms are substantially renegotiated.