Navigating DoD Contract Obligations in Advance of Fiscal Year 2026 Funding
The Department of Defense (DoD) has issued a class deviation, referenced as USA002140-25-DPCAP, to guide contracting officers on awarding contracts and modifications in advance of Fiscal Year 2026 appropriations. This policy is crucial for maintaining operational continuity during lapses in federal funding and outlines the conditions under which contracts, modifications, task orders and delivery orders may proceed in advance of appropriations.
Background and Purpose
The memorandum, originating from the Office of the Under Secretary of Defense for Acquisition and Sustainment, addresses the need for certain DoD activities to continue even when appropriated funds for the new fiscal year are not yet available.
The deviation clause (252.232-7998) enables the DoD to obligate the government for contracts, modifications, task orders and delivery orders necessary to support excepted activities before Fiscal Year 2026 funds are appropriated.
Key Provisions of the FY2026 DoD Class Deviation
- Scope and Applicability: The deviation applies to contract actions that require obligations in advance of appropriations, except those using prior year funds that are still available for obligation and liquidation.
- Required Guidance:
- Contracting officers must comply with:
- The Deputy Secretary of War’s memorandum on continuation of operations during a lapse of appropriations (September 30, 2025).
- The Department of War’s contingency plan for operations without available appropriations (September 2025).
- Any applicable military department or DoD component guidance.
- Authorization and Documentation:
- Actions using the deviation clause must be authorized at a level not lower than the head of the contracting activity.
- Authorization must be documented in the contract file.
- Bilateral Agreement: Any contract action using the deviation clause must be bilateral, reflecting mutual agreement between the parties.
- Duration: The class deviation remains in effect until rescinded.
Understanding DFARS 252.232-7998 (Obligations in Advance of Appropriations)
The clause explicitly states that the DoD has authority to obligate the government in advance of appropriations, but payments cannot be made until funds become available. Once appropriated funds are available, payments will be made in accordance with the contract terms, including interest under the Prompt Payment Act if applicable. This clause supersedes any conflicting payment or financing terms in the contract until funds are available.
Implications for DoD Contracting Officers
- Operational Continuity: The deviation ensures that critical DoD activities are not interrupted due to funding gaps at the start of a fiscal year.
- Risk Management: Contracting officers must carefully document and authorize actions, ensuring compliance with departmental guidance.
- Stakeholder Communication: Both parties must mutually agree to the terms, and contractors should be aware that payments will be delayed until appropriations are made.
Takeaways
The class deviation outlined in USA002140-25-DPCAP provides a structured approach for DoD contracting officers to manage obligations in advance of Fiscal Year 2026 funding. By following the prescribed guidance and ensuring proper authorization, the DoD can maintain mission-critical operations during periods of fiscal uncertainty.