FAR 32.706—Contract clauses.

Clauses for contracting in advance of funds.

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.

Clauses for limitation of cost or funds.

FAR 32.706-2 tells contracting officers which funding-limitation clause to include when using cost-reimbursement contracts. It covers two related but distinct situations: fully funded cost-reimbursement contracts, which require the Limitation of Cost clause at 52.232-20, and incrementally funded cost-reimbursement contracts, which require the Limitation of Funds clause at 52.232-22. The section applies both to solicitations and to contracts, so the clause must be planned for up front and carried into the award document. Its purpose is to protect the Government and the contractor by clearly stating how much funding is available, when the contractor must stop work or notify the Government, and how overruns are handled. In practice, this section is a clause-selection rule: the funding structure of the cost-reimbursement contract determines which clause must be used, and the contracting officer must make that choice correctly regardless of whether the contract includes a fee.

Clause for unenforceability of unauthorized obligations.

FAR 32.706-3 is a very short but important prescription that tells contracting officers to include the clause at FAR 52.232-39, Unenforceability of Unauthorized Obligations, in all solicitations and contracts. Its purpose is to protect the Government from being bound by obligations that were not properly authorized, while also putting offerors and contractors on notice that certain commitments made outside the contracting process may not be enforceable against the United States. In practice, this section is about clause inclusion, not about negotiating special terms or creating a separate substantive payment rule. It matters because the clause helps manage risk when contractors use electronic commerce, online terms of service, or other nontraditional arrangements that may purport to bind the Government without proper authority. For contracting officers, the rule is straightforward: the clause is mandatory in every solicitation and contract. For contractors, the practical effect is that unauthorized commitments, click-through terms, or other obligations accepted by personnel without authority may not be enforceable, so they should ensure the Government representative has actual authority before relying on any commitment.