Limitations on Funds - Federal Contracts

For Federal cost-type contracts:

  • The contracting officer shall insert a Limitation of Cost clause (see 52.232-20,) in solicitations and contracts if a fully funded cost-reimbursement contract is contemplated and a Limitation of Funds clause (see 52.232-22,) if an incrementally funded cost-reimbursement contract is contemplated.
  • PIs must  assure compliance with the Limitation of Funds and/or Limitation of Cost clauses, which require that:
    • the Contractor notifies the sponsoring agency in writing at any time that there is reason to believe the total cost to the government for the performance of the project will be greater or substantially less than the estimated cost;
    • the Contractor notifies the sponsoring agency if, at any time, there is reason to believe that the costs which are expected to be incurred in the next succeeding 60 days, when added to all costs previously incurred, will exceed 75 percent of the obligated amount;
    • if this is a cost-sharing contract, the Contractor notifies the sponsoring agency of the amount obligated to the contract by the Government plus the Contractor’s corresponding share;
    • the notice shall state the estimated amount of additional funds required to continue performance for the period specified.