FAR and DFARS › FAR Part 32: Contract Financing › Subpart 32.7
FAR 32.706-2 Clauses for limitation of cost or funds.
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 contracting officers which clauses to include in cost-reimbursement contracts. For fully funded contracts, they must use the Limitation of Cost clause; for incrementally funded contracts, they must use the Limitation of Funds clause. This matters because it determines how and when the contractor can be paid and what happens if costs exceed the funded amount.
Applies to: Contracting officers issuing solicitations and contracts for cost-reimbursement contracts
What it requires
- Insert the clause at 52.232-20, Limitation of Cost, in solicitations and contracts if a fully funded cost-reimbursement contract is contemplated, whether or not the contract provides for payment of a fee.
- Insert the clause at 52.232-22, Limitation of Funds, in solicitations and contracts if an incrementally funded cost-reimbursement contract is contemplated.
Key terms: Limitation of Cost · Limitation of Funds · fully funded cost-reimbursement contract · incrementally funded cost-reimbursement contract
Written by AI from this section's text. A guide, not legal advice: the text below rules.
The text
(a) The contracting officer shall insert the clause at 52.232-20, Limitation of Cost, in solicitations and contracts if a fully funded cost-reimbursement contract is contemplated, whether or not the contract provides for payment of a fee.
(b) The contracting officer shall insert the clause at 52.232-22, Limitation of Funds, in solicitations and contracts if an incrementally funded cost-reimbursement contract is contemplated.
← 32.706-1 Clauses for contracting in advance of funds. · 32.706-3 Clause for unenforceability of unauthorized obligations. →
Rule changes for FAR Part 32
- Federal Acquisition Regulation: Inflation Adjustment of Acquisition-Related Thresholds ↗ · final rule 2025-08-27 · effective 2025-10-01
- Federal Acquisition Regulation; Technical Amendments ↗ · final rule 2025-08-07 · effective 2025-08-07
- Federal Acquisition Regulation: Inflation Adjustment of Acquisition-Related Thresholds ↗ · proposed 2024-11-29 · comments due 2025-01-28
Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.