For federal cost-type contracts:
- If a fully funded cost-reimbursement contract is contemplated, the contracting officer shall insert a Limitation of Cost clause - 52.232-20 in solicitations and contracts.
- If an incrementally funded cost-reimbursement contract is contemplated, the contracting officer shall insert a Limitation of Funds clause 52.232-22 in solicitations and contracts.
Compliance with Limitation of Funds or Limitation of Cost Clauses
PIs must ensure compliance with the Limitation of Funds and/or Limitation of Cost clauses. These clauses require the contractor to notify the sponsoring agency in writing 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 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
Notices to the sponsoring agency should include:
- The estimated amount of additional funds required to continue performance for the period specified
- (If a cost-sharing contract) the amount obligated to the contract by the government plus the contractor’s corresponding share