FAR 36.609-1—Design within funding limitations.
Plain-English Summary
FAR 36.609-1 addresses how architect-engineer (A-E) contracts handle design work when the Government wants the project designed to fit within a specified construction cost limit. It explains when the contractor must redesign at no additional cost if the proposed construction price exceeds the funding limitation, and when that obligation does not apply because cost growth was caused by events beyond the firm’s reasonable control. The section also covers how the construction funding limitation is established during negotiations, what cost information the contracting officer should share with the A-E firm, and what must be documented in the contract file if the Government decides not to require redesign despite a cost overrun. Finally, it tells contracting officers when to include the clause at 52.236-22 and lists the exceptions for certain fixed-price A-E contracts. In practice, this section is meant to align design effort with realistic funding, reduce the risk of designs that cannot be built within budget, and create a clear allocation of responsibility when estimated construction costs exceed the agreed limit.
Key Rules
Design to the funding limit
The Government may require the A-E contractor to design the project so construction costs do not exceed a contractually specified dollar limit. This makes the funding limitation a binding design requirement, not just an estimate.
Redesign at no extra cost
If the construction price proposed in response to a Government solicitation exceeds the funding limitation, the A-E firm is generally responsible for redesigning the project within that limit at no increase in the contract price. The redesign work is treated as part of the original obligation.
Exception for uncontrollable events
The firm is not required to redesign at no cost if the higher construction cost resulted from events beyond its reasonable control, such as unforeseeable material price increases or undue Government delay in issuing the construction solicitation. This protects the contractor from bearing risk for circumstances it could not reasonably manage.
Document refusal to require redesign
If the design fails to meet the construction cost limitation and the Government decides the firm should not redesign, the contracting file must include a written statement explaining that decision. This creates an audit trail and supports accountability.
Set the limitation during negotiations
The construction funding limitation inserted into the clause must be negotiated between the contractor and the Government. It should reflect statutory or other limits and exclude Government supervision/overhead and contingency reserves.
Share cost basis information
During negotiations, the contracting officer should provide the contractor the information used for the Government’s initial construction estimate, plus any later information that could affect construction cost. This helps the contractor price and design against a realistic target.
Insert the clause in covered contracts
The contracting officer must include the clause at 52.236-22, Design Within Funding Limitations, in fixed-price A-E contracts unless one of the stated exceptions applies.
Recognized exceptions
The clause is not required when a written determination says cost limits are secondary to performance and more funding can be expected if needed, when the design is for a standard structure not tied to a specific location, or when little or no design effort is involved.
Responsibilities
Contracting Officer
Negotiate the construction funding limitation with the A-E contractor; provide the contractor the Government’s estimate basis and later cost-impacting information; insert clause 52.236-22 in applicable fixed-price A-E contracts; and ensure any decision not to require redesign is documented in the contract file with written reasons.
Architect-Engineer Contractor
Design the project to meet the agreed construction funding limitation; if the proposed construction price exceeds that limit, redesign the project within the limitation at no additional contract price unless the overrun was caused by events beyond the firm’s reasonable control.
Head of the Contracting Activity or Designee
Make a written determination, when appropriate, that cost limitations are secondary to performance considerations and that additional project funding can be expected, which allows the contracting officer to omit the clause in that circumstance.
Government Program/Technical Personnel
Provide or update information that may affect construction cost so the contracting officer can negotiate a realistic funding limitation and so the contractor can design with current cost assumptions.
Practical Implications
This section is a risk-allocation tool: it pushes A-E firms to design within budget, but it also limits their exposure when cost growth is caused by unforeseeable events or Government delay.
A common pitfall is setting the funding limitation too low or without sharing the Government’s estimate basis, which can lead to unrealistic designs, repeated redesigns, or disputes over who bears the cost.
Another frequent issue is failing to document why redesign was not required; if the Government waives redesign, the file must clearly explain the decision to avoid later audit or protest problems.
Contracting officers should be careful to distinguish between normal design shortfalls, which may require free redesign, and external cost changes beyond the firm’s control, which may relieve the firm of that obligation.
For contractors, the practical takeaway is to treat the funding limitation as a hard design constraint and to raise cost-risk concerns early during negotiation rather than after solicitation responses show the project is over budget.
Official Regulatory Text
(a) The Government may require the architect-engineer contractor to design the project so that construction costs will not exceed a contractually specified dollar limit (funding limitation). If the price of construction proposed in response to a Government solicitation exceeds the construction funding limitation in the architect-engineer contract, the firm shall be solely responsible for redesigning the project within the funding limitation. These additional services shall be performed at no increase in the price of this contract. However, if the cost of proposed construction is affected by events beyond the firm’s reasonable control ( e.g., if there is an increase in material costs which could not have been anticipated, or an undue delay by the Government in issuing a construction solicitation), the firm shall not be obligated to redesign at no cost to the Government. If a firm’s design fails to meet the contractual limitation on construction cost and the Government determines that the firm should not redesign the project, a written statement of the reasons for that determination shall be placed in the contract file. (b) The amount of the construction funding limitation (to be inserted in paragraph (c) of the clause at 52.236-22 ) is to be established during negotiations between the contractor and the Government. This estimated construction contract price shall take into account any statutory or other limitations and exclude any allowances for Government supervision and overhead and any amounts set aside by the Government for contingencies. In negotiating the amount, the contracting officer should make available to the contractor the information upon which the Government has based its initial construction estimate and any subsequently acquired information that may affect the construction costs. (c) The contracting officer shall insert the clause at 52.236-22 , Design Within Funding Limitations, in fixed-price architect-engineer contracts except when- (1) The head of the contracting activity or a designee determines in writing that cost limitations are secondary to performance considerations and additional project funding can be expected, if necessary; (2) The design is for a standard structure and is not intended for a specific location; or (3) There is little or no design effort involved.