FAR 32.703-2—Contracts conditioned upon availability of funds.
Plain-English Summary
FAR 32.703-2 explains when the Government may move forward with contract actions before funds are actually available, and what safeguards must be built into those contracts. It covers three related topics: fiscal year contracts that are chargeable to the next fiscal year, one-year indefinite-quantity or requirements contracts funded by annual appropriations that may extend beyond the fiscal year, and the rule that the Government may not accept supplies or services until the contracting officer confirms that funds are available. The section exists to let agencies plan and award certain recurring or continuing needs without violating fiscal law, while still protecting against unauthorized commitments and premature acceptance. In practice, it tells contracting officers when they may proceed with a contract action in advance of funding, what clauses must be included, what kinds of requirements qualify, and when performance may be accepted. For contractors, it signals that award or performance may be contingent on future funding and that payment/acceptance risk is controlled by specific contract language and notice requirements.
Key Rules
Next-year fiscal year contracts
A contracting officer may start a contract action before new fiscal year funds are available if the contract includes FAR 52.232-18, Availability of Funds. This authority is limited to obligations properly chargeable to the new fiscal year.
Limited to recurring operating needs
The advance-funding authority applies only to operation and maintenance and continuing services such as rentals, utilities, and supply items not financed by stock funds. The requirement must be necessary for normal operations and must be the type for which Congress has historically appropriated funds, unless another statute specifically allows broader use.
One-year IDIQ or requirements contracts
A one-year indefinite-quantity or requirements contract for services funded by annual appropriations may extend beyond the fiscal year in which it begins, but only if the minimum quantity is certain to be ordered in the initial fiscal year and the contract includes FAR 52.232-19, Availability of Funds for the Next Fiscal Year.
Minimum quantity must be certain
For qualifying IDIQ or requirements contracts, any stated minimum quantity must be definite enough to be ordered during the initial fiscal year. This prevents the Government from promising a minimum without having a valid fiscal-year basis for that commitment.
No acceptance before funding notice
The Government may not accept supplies or services under a contract conditioned on availability of funds until the contracting officer notifies the contractor that funds are available, and that notice must be confirmed in writing. Acceptance before that notice is prohibited.
Responsibilities
Contracting Officer
Determine whether the action qualifies for advance processing under this section, ensure the correct availability-of-funds clause is included, verify that the requirement fits the limited categories allowed, confirm that any minimum quantity is certain for the initial fiscal year, and withhold acceptance until funds availability has been communicated to the contractor in writing.
Contractor
Understand that performance, award, or acceptance may be contingent on future funding, review the contract for the required availability-of-funds clause, and avoid relying on acceptance or payment until the contracting officer has issued the required written notice that funds are available.
Agency
Use this authority only for qualifying recurring or continuing needs, maintain fiscal discipline by limiting advance actions to the categories allowed, and ensure internal planning and funding processes support timely confirmation of funds before acceptance.
Practical Implications
This section is a planning tool, not a blanket permission to obligate money before it exists; the contract must fit the narrow categories described and include the right clause.
A common pitfall is using availability-of-funds language for requirements that are not truly recurring operating needs or that lack a history of congressional appropriations for that purpose.
For IDIQ and requirements contracts, the minimum quantity issue is critical: if the minimum is not certain in the initial fiscal year, the contract may not qualify under this rule.
Contractors should not assume that performance can be accepted, invoiced, or paid simply because work has started; acceptance is barred until written funding notice is given.
Contracting officers should document the funding status and the notice to the contractor carefully, because premature acceptance can create fiscal and contractual problems.
Official Regulatory Text
(a) Fiscal year contracts. The contracting officer may initiate a contract action properly chargeable to funds of the new fiscal year before these funds are available, provided that the contract includes the clause at 52.232-18 , Availability of Funds (see 32.706-1 (a)). This authority may be used only for operation and maintenance and continuing services ( e.g., rentals, utilities, and supply items not financed by stock funds)- (1) Necessary for normal operations; and (2) For which Congress previously had consistently appropriated funds, unless specific statutory authority exists permitting applicability to other requirements. (b) Indefinite-quantity or requirements contracts. A one-year indefinite-quantity or requirements contract for services that is funded by annual appropriations may extend beyond the fiscal year in which it begins; provided, that- (1) Any specified minimum quantities are certain to be ordered in the initial fiscal year (see 37.106 ) and (2) The contract includes the clause at 52.232-19 , Availability of Funds for the Next Fiscal Year (see 32.706-1 (b)). (c) Acceptance of supplies or services. The Government shall not accept supplies or services under a contract conditioned upon the availability of funds until the contracting officer has given the contractor notice, to be confirmed in writing, that funds are available.