Definition: The bona fide needs rule is a credit law rule. It states that funds in a fiscal year are only required to meet a legitimate – or bona fide – need that arises during (or sometimes before) the fiscal year for which the funds were made available. See B-316860 of 29 April 2009. For example, if an agency were required by law to report to Congress annually on the psychological problems of Vietnam veterans for the next five years, it could do so using Section 3903. Article 3903 would allow this agency to conclude each year a contract for the provision of a report (an inseparable service)[11] for the next five years. [12] Under this contract for inseparable services representing the needs of the current and future fiscal years, the Agency may commit either funds for the duration of the contract or funds for the first fiscal year, plus estimated termination costs. 41 U.S.C. § 3903(b)(1). A strict interpretation of this law – in conjunction with the wording of the Authorisations Act – means that the need may arise at any time during the period during which the Authorisations Act indicates that funds are available (e.g. two years for RTD&E or three years for most procurement accounts). However, it is at the discretion of a department or advocacy authority to further limit the period of availability of the allocation of funds by policy, for example to the first year of availability of those funds.
The most common service restriction for the use of a fund beyond the first year applies to RTD&E funds, in particular to the part of the funds intended for activities (e.g. travel, office supplies, salaries, etc.) and not to actual R&D efforts. While this may be considered more restrictive than Congress had intended, it is within the prerogative of the service or agency to be more restrictive through a policy than the U.S. code allows. Several sections of this chapter, beginning with B.4, examine the application of the good faith requirements rule in various aspects of government procurement where transactions cover more than one fiscal year. We have these sections largely based on a comprehensive and well-researched article by Captain Dale Gallimore entitled Legal Aspects of Funding Department of the Army Procurements, 67 Mil. L. Rev. 85 (1975). Good faith needs questions in many forms. Historically, as the discussion that follows will show, questions of bona fide need have most often arisen in the context of the purchase of goods or services.
An agency may enter into a contract in one fiscal year, but the contractor does not complete the service until the following fiscal year. Which exercise should be invoiced? Or an agency may amend a contract within one year of the fiscal year in which it originally signed the contract. Sometimes an audit may raise the question of whether an already recognized obligation was an appropriate burden for the allocation of funds for that fiscal year. Or an agency may have taken certain actions that it should have recorded as an obligation, but did not; When it comes time for payment, the question is still which fiscal year to calculate. These are all facets of the same fundamental question: is an obligation sufficiently proportionate to the legitimate needs of the period of availability of the funds invoiced or sought? [2] A federally funded research and development centre (FRDDC) responds to a particular long-term research or development need of the Confederation. Federal Acquisitions Ordinance (FAR), 48 C.F.R. § 35.017(a). An FFRDC allows federal agencies to use private sector resources such as universities or industrial companies to perform tasks critical to the sponsoring agency`s mission. Id. We begin with a discussion of the good faith requirement rule and section 3903, a section of the Federal Acquisition Streamlining Act (FASA).
The OIG HHS questions whether the scope of the multi-year contracting authority under Section 3903 extends to inseparable and separable service contracts. Next, we discuss the application of the bona fide needs rule and the multi-year award authority to the National Cancer Institutes` separable services contract. We agree with HHS`s determination. When the IAS committed funds for fiscal year 2008 on September 27, 2008 and September 30, 2008, it did so for divisible services that only began in fiscal year 2009. The two multi-year contracting authorities require, in Articles 3903 and 3902 of the FASA, that the Agency demonstrate a bona fide need at the time of the contract for the services, although some services will be provided in future taxation years.