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contractor commences work on the entire quantity, not just the
(lesser) quantity that has been fully funded. So, for example,
the contractor may commit to purchase sufficient quantities of
parts from subcontractors to construct all of the contracted
items, even though the parts may not be utilized until several
years later.
The Government may cancel or terminate a multiyear contract
if funds are not appropriated by Congress or the contracting
department or agency no longer requires the item being procured.
If a multiyear contract is canceled, the contractor may attempt
to recover certain of its incurred costs, plus a reasonable
profit, not to exceed a specified “cancellation ceiling”. The
provisions governing cancellation are unique to multiyear
contracts; no other form of Government contract may be canceled.
The Government may cancel a portion of a multiyear contract only
on the first day of each successive fiscal year encompassed
within the contract. Any cancellation applies to all remaining
years in the canceled contract.
In the second half of 1980, the Air Force assembled a task
force to study the potential benefits of multiyear contracting
for the F-16. Based upon its analysis, it was estimated that the
Air Force could save approximately 10 percent per aircraft by
procuring the F-16 through one or more multiyear contracts as
opposed to using the annual contracting approach.
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Last modified: May 25, 2011