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FAR and DFARS › DFARS Part 232: Contract Financing › Subpart 232.7

DFARS 232.704-70 Incrementally funded fixed-price contracts.

The codified text (eCFR, as of 2026-10-02). Under the Revolutionary FAR Overhaul ↗, agencies follow class deviations with new text for many parts while the formal rules go through the Federal Register: check the solicitation and your contract's clauses, which rule.

In plain English

This section tells the contracting officer how to respond when a contractor notifies the Government that the limitation of obligation is reached on an incrementally funded fixed-price contract. The officer must promptly notify the contractor whether additional funds are allotted, the contract is terminated, or additional funds are being considered. If no further funds will be provided, the officer must terminate for convenience, and must ensure sufficient funds are allotted to cover termination costs.

Applies to: Contracting officers administering incrementally funded fixed-price contracts under DFARS.

What it requires

  • Upon receipt of the contractor's notice, promptly provide written notice to the contractor that the Government is allotting additional funds, terminating the contract, or considering whether to allot additional funds.
  • Upon learning that the contract will receive no further funds, promptly give the contractor written notice of the Government's decision and terminate for the convenience of the Government.
  • Ensure that sufficient funds are allotted to the contract to cover the total amount payable to the contractor in the event of termination for the convenience of the Government.

Key terms: incrementally funded fixed-price contracts · limitation of Government's obligation · termination for the convenience of the Government · allotting additional funds

Written by AI from this section's text. A guide, not legal advice: the text below rules.

The text

(a) Upon receipt of the contractor's notice under paragraph (c) of the clause at 252.232-7007, Limitation of Government's Obligation, the contracting officer shall promptly provide written notice to the contractor that the Government is—

(1) Allotting additional funds for continued performance and increasing the Government's limitation of obligation in a specified amount;

(2) Terminating the contract; or

(3) Considering whether to allot additional funds; and

(i) The contractor is entitled by the contract terms to stop work when the Government's limitation of obligation is reached; and

(ii) Any costs expended beyond the Government's limitation of obligation are at the contractor's risk.

(b) Upon learning that the contract will receive no further funds, the contracting officer shall promptly give the contractor written notice of the Government's decision and terminate for the convenience of the Government.

(c) The contracting officer shall ensure that, in accordance with paragraph (b) of the clause at 252.232-7007, Limitation of Government's Obligation, sufficient funds are allotted to the contract to cover the total amount payable to the contractor in the event of termination for the convenience of the Government.

Sections it refers to

← 232.704 Limitation of cost or funds. · 232.706 Contract clauses. →

Rule changes for DFARS Part 232

Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.

DFARS 232.704-70 Incrementally funded fixed-price contracts · SpendQuery