FAR 32.706-1—Clauses for contracting in advance of funds.
Plain-English Summary
FAR 32.706-1 tells contracting officers when to include advance-funding clauses in solicitations and contracts. It covers two specific clauses: FAR 52.232-18, Availability of Funds, for actions initiated before new fiscal year funds are available but expected to be charged to those funds; and FAR 52.232-19, Availability of Funds for the Next Fiscal Year, for one-year indefinite-quantity or requirements contracts for services funded by annual appropriations that will extend beyond the initial fiscal year. The section exists to protect the Government from creating an obligation before appropriations are legally available and to make clear to contractors that award or continued performance may depend on future funding. In practice, it is a funding-control and risk-allocation rule: it alerts offerors to the possibility of delayed or limited funding, and it gives the Government a contractual mechanism to proceed before funds are fully available without violating fiscal law. Contracting officers must match the clause to the funding situation and contract type, especially where performance crosses fiscal years or depends on next-year appropriations. Contractors should read these clauses carefully because they affect when work may start, whether the Government is bound, and what happens if funds do not become available.
Key Rules
Use Availability of Funds clause
Insert FAR 52.232-18 when the contract will be charged to new fiscal year funds but the action is started before those funds are available. This clause is used to allow the Government to initiate the action while making clear that the Government’s obligation is contingent on the availability of the future funds.
Use next fiscal year clause
Insert FAR 52.232-19 when a one-year indefinite-quantity or requirements contract for services is contemplated, the contract is funded by annual appropriations, and performance will extend beyond the initial fiscal year. This clause specifically addresses contracts that must bridge fiscal years under annual funding.
Applies only to specified contract types
The second clause is limited to one-year indefinite-quantity or requirements contracts for services. It is not a general cross-fiscal-year funding clause for all contracts, so the contracting officer must confirm the contract structure before using it.
Annual appropriations trigger special treatment
FAR 52.232-19 is required only when the contract is funded by annual appropriations. The clause is intended to manage the risk that future-year funding may not yet be available or may be different from current-year funding.
Clause placement is mandatory when conditions exist
The rule uses mandatory language for the contracting officer: if the stated conditions are present, the clause must be inserted in both solicitations and contracts. This is not discretionary when the funding and contract facts match the rule.
Responsibilities
Contracting Officer
Determine whether the action will be initiated before funds are available or whether the contract is a one-year indefinite-quantity or requirements contract for services funded by annual appropriations that will extend beyond the initial fiscal year. Insert FAR 52.232-18 or FAR 52.232-19, as applicable, in the solicitation and contract.
Agency
Ensure the procurement is structured and funded in a way that complies with fiscal law and appropriations limits. Provide the contracting officer with accurate funding information so the correct clause is used.
Contractor
Review the applicable clause to understand that performance or continued performance may depend on future funding availability. Plan for the possibility that the Government may not be able to obligate funds immediately or for the full period expected.
Practical Implications
These clauses are a warning sign that funding is not yet fully available or not yet obligated, so contractors should not assume immediate or guaranteed performance authority without checking the contract language.
A common pitfall is using the wrong clause, especially confusing a general availability-of-funds situation with the narrower next-fiscal-year clause for one-year IDIQ or requirements service contracts.
Contracting officers should verify both the funding source and the contract type before award; an incorrect clause choice can create fiscal-law risk and contract administration problems.
Contractors should pay close attention to start dates, notice-to-proceed language, and any conditions tied to funding availability, because work begun too early may not be reimbursable if the contract is not properly funded.
For multi-year planning, this section matters because it signals whether the Government is committing only conditionally and whether performance may be interrupted or limited if future appropriations are delayed or reduced.
Official Regulatory Text
(a) Insert the clause at 52.232-18 , Availability of Funds, in solicitations and contracts if the contract will be chargeable to funds of the new fiscal year and the contract action will be initiated before the funds are available. (b) The contracting officer shall insert the clause at 52.232-19 , Availability of Funds for the Next Fiscal Year, in solicitations and contracts if a one-year indefinite-quantity or requirements contract for services is contemplated and the contract- (1) Is funded by annual appropriations; and (2) Is to extend beyond the initial fiscal year (see 32.703-2 (b)).