FAR 50.102-3—Limitations on exercise of authority.
Plain-English Summary
FAR 50.102-3 sets the limits on using the extraordinary authority available under Public Law 85-804 and related indemnification authority. It explains what this authority cannot be used for, including cost-plus-a-percentage-of-cost contracting, violating statutory profit or fee limits, avoiding full and open competition, or waiving legally required bonds. It also establishes threshold conditions for approving contracts, amendments, modifications, and informal commitments, such as a finding that the action will facilitate national defense, a determination that no other adequate legal authority exists, and compliance with appropriations, contract authorization, and congressional notification requirements for obligations over $150 million. The section further restricts post-award changes by requiring timely contractor requests, limits price increases tied to mistakes or negotiated procurements, and imposes special limits on officials below the secretarial level. Finally, it adds a separate safeguard for indemnification authority under Executive Order 10789 when the supply or service may be a qualified anti-terrorism technology, requiring additional review involving DHS, DoD, and OMB. In practice, this section is a guardrail: it preserves the government’s ability to act in exceptional circumstances while preventing misuse of extraordinary authority to bypass normal procurement rules, competition, fiscal controls, and statutory protections.
Key Rules
No prohibited contract forms
Pub. L. 85-804 cannot be used to create a cost-plus-a-percentage-of-cost contract, override laws limiting profit or fees, avoid full and open competition, or waive bonds required by law. These are categorical prohibitions, not discretionary choices.
National defense and no other authority
Any contract, amendment, or modification under this authority must be approved only if it will facilitate the national defense and if other legal authority in the agency is lacking or inadequate. The authority is meant to be exceptional, not a substitute for ordinary contracting tools.
Fiscal and congressional limits
Actions must stay within available appropriations and statutory contract authorization, except for certain indemnification agreements authorized by an agency head under 50.104-3. Any obligation over $150 million requires advance written notice to the Armed Services Committees and a 60-day continuous session waiting period, unless the action is an indemnification agreement under 50.104-3.
Post-performance requests required
A contract may not be amended or modified unless the contractor requested the action before all obligations, including final payment, were discharged. This prevents after-the-fact relief once the contract has been fully closed out.
Price increase ceiling on corrections
A modification cannot raise the contract price above the lowest rejected bid of any responsible bidder when the contract was negotiated under 14.404-1(f). For mistake corrections, the price also cannot exceed the next lowest responsive offer of a responsible offeror.
Informal commitments have strict timing
An informal commitment may be formalized only if the contractor submits a written payment request within 6 months after furnishing or arranging to furnish the supplies or services, and the approving authority finds that normal contracting procedures were impracticable when the commitment was made.
Extra limits for lower-level officials
Officials below the secretarial level cannot use this authority to release a contractor from obligations over $90,000, increase government cost over $90,000, handle matters already submitted to GAO, or dispose of surplus property. They also face tighter limits on mistake corrections and price increases.
Mistake corrections are tightly capped
Mistakes may not be corrected by obligating the Government for more than $1,000 unless the contracting officer received notice of the mistake before final payment. This prevents large retroactive corrections after performance is complete.
Special anti-terrorism technology rule
Indemnification authority under E.O. 10789 cannot be used for supplies or services that are, or could be, designated as qualified anti-terrorism technology unless the required DHS, DoD, and OMB conditions are met. This creates an added review layer for SAFETY Act-related items.
Responsibilities
Approving Authority
Must determine that the proposed action will facilitate the national defense and that no other adequate legal authority exists. Must also ensure the action stays within appropriations and statutory authorization, and provide congressional notice when required.
Contracting Officer
Must ensure requests for amendments or modifications are timely, verify that the contractor submitted a written request before final discharge of obligations, and apply the price and mistake-correction limits. Must also avoid using this authority for prohibited purposes or beyond delegated limits.
Agency Head / Secretarial-Level Official
Must oversee use of extraordinary authority and ensure actions comply with statutory and regulatory limits. For indemnification under 50.104-3, may authorize agreements not limited by appropriations or contract authorization, subject to the rule’s specific exceptions.
Officials Below Secretarial Level
May exercise the authority only within the additional dollar, subject-matter, and procedural limits in paragraph (e). They must not act on matters over the stated thresholds or on issues submitted to GAO.
Contractor
Must submit a written request for payment within 6 months for informal commitments and must request contract amendments or modifications before all obligations are discharged. The contractor also bears the practical burden of showing the circumstances that justify relief.
Department of Defense
For E.O. 10789 indemnification involving qualified anti-terrorism technology, the Secretary of Defense must determine that use of the executive-order authority is necessary for timely and effective military or intelligence activities after considering SAFETY Act authority.
Secretary of Homeland Security
Must advise whether use of SAFETY Act authority would be appropriate for other departments and agencies considering E.O. 10789 indemnification involving qualified anti-terrorism technology.
Director of the Office of Management and Budget
Must approve the exercise of E.O. 10789 authority for other departments and agencies when the technology may be a qualified anti-terrorism technology.
Congressional Armed Services Committees
Must receive written notice before the Government can obligate more than $150 million under this authority, followed by a 60-day continuous session waiting period.
Practical Implications
This section is a hard stop on using extraordinary authority to bypass normal procurement rules. If the action looks like a workaround for competition, bonding, or statutory profit limits, it is likely impermissible.
Timing matters. Contractors must request relief before final payment and, for informal commitments, within 6 months; once the contract is fully discharged, the government’s ability to formalize relief narrows sharply.
Dollar thresholds are critical. Different caps apply depending on who is acting and what is being corrected, so contracting officers must confirm delegation level and total government exposure before proceeding.
Price relief is not open-ended. Even when a mistake or exceptional circumstance exists, the resulting price cannot exceed specified benchmark offers or bids, which protects the government from paying more than market-tested alternatives.
Indemnification for anti-terrorism technology has a separate approval path. Agencies should screen early for SAFETY Act implications because DHS, DoD, and OMB involvement may be required before authority can be exercised.
Official Regulatory Text
(a) Pub. L. 85-804 is not authority for- (1) Using a cost-plus-a-percentage-of-cost system of contracting; (2) Making any contract that violates existing law limiting profit or fees; (3) Providing for other than full and open competition for award of contracts for supplies or services; or (4) Waiving any bid bond, payment bond, performance bond, or other bond required by law. (b) No contract, amendment, or modification shall be made under Pub. L. 85-804’s authority- (1) Unless the approving authority finds that the action will facilitate the national defense; (2) Unless other legal authority within the agency concerned is deemed to be lacking or inadequate; (3) Except within the limits of the amounts appropriated and the statutory contract authorization (however, indemnification agreements authorized by an agency head ( 50.104-3 ) are not limited to amounts appropriated or to contract authorization); and (4) That will obligate the Government for any amount over $150 million unless the Senate and House Committees on Armed Services are notified in writing of the proposed obligation and 60 days of continuous session of Congress have passed since the transmittal of such notification. However, this paragraph (b)(4) does not apply to indemnification agreements authorized under 50.104-3 . (c) No contract shall be amended or modified unless the contractor submits a request before all obligations (including final payment) under the contract have been discharged. No amendment or modification shall increase the contract price to an amount higher than the lowest rejected bid of any responsible bidder, if the contract was negotiated under 14.404-1 (f). (d) No informal commitment shall be formalized unless- (1) The contractor submits a written request for payment within 6 months after furnishing, or arranging to furnish, supplies or services in reliance upon the commitment; and (2) The approving authority finds that, at the time the commitment was made, it was impracticable to use normal contracting procedures. (e) The exercise of authority by officials below the secretarial level is subject to the following additional limitations: (1) The action shall not- (i) Release a contractor from performance of an obligation over $90,000; (ii) Result in an increase in cost to the Government over $90,000; (iii) Deal with, or directly affect, any matter that has been submitted to the Government Accountability Office; or (iv) Involve disposal of Government surplus property. (2) Mistakes shall not be corrected by an action obligating the Government for over $1,000, unless the contracting officer receives notice of the mistake before final payment. (3) The correction of a contract because of a mistake in its making shall not increase the original contract price to an amount higher than the next lowest responsive offer of a responsible offeror. (f) No executive department or agency shall exercise the indemnification authority granted under paragraph 1 A of E.O. 10789 with respect to any supply or service that has been, or could be, designated by the Secretary of Homeland Security as a qualified anti-terrorism technology unless- (1) For the Department of Defense, the Secretary of Defense has determined that the exercise of authority under E.O. 10789 is necessary for the timely and effective conduct of the United States military or intelligence activities, after consideration of the authority provided under the SAFETY Act (Subtitle G of title VIII of the Homeland Security Act of 2002, 6 U.S.C. 44 1-444); or (2) For other departments and agencies that have authority under E.O. 10789- (i) The Secretary of Homeland Security has advised whether the use of the authority under the SAFETY Act would be appropriate; and (ii) The Director of the Office of Management and Budget has approved the exercise of authority under the Executive order.