Which clauses caution the contractor that costs cannot be incurred beyond the amount allotted and that the Government is not obligated to pay beyond that amount?

Which clauses caution the contractor that costs cannot be incurred beyond the amount allotted and that the Government is not obligated to pay beyond that amount?

• A. Limitation of Funds Clause (FAR 52.232-22) only.
• B. Limitation of Government Obligation clause (DFARS 252.232-7007) only.
• C. Both the Limitation of Funds Clause (FAR 52.232-22) and the Limitation of Government Obligation clause (DFARS 252.232-7007).
• D. Neither clause applies.

Answer: (C)

Both of these clauses serve the same fundamental purpose: they cap the contractor’s costs and the government’s payment obligation to the funds actually obligated. The Limitation of Funds clause (FAR 52.232-22) is the broad, general mechanism used to alert the contractor that the government’s financial obligation is limited to the funds appropriated for the contract. It typically requires the contractor to monitor funding levels and often to stop work or notify the contracting officer when funds are nearing depletion, since payment cannot exceed the funded amount. The Limitation of Government Obligation clause (DFARS 252.232-7007) does the same job within DoD acquisitions, reaffirming that the government’s obligation to pay is limited to the funds that have been obligated. It makes explicit that the government is not liable for costs beyond those funded amounts unless additional funds are provided. Because the question asks which clauses caution the contractor that costs cannot be incurred beyond the allotted amount and that the Government is not obligated to pay beyond that amount, both clauses are applicable and commonly used in DoD contracts. Including both ensures clear protection for both funding control and fiscal liability.

Both of these clauses serve the same fundamental purpose: they cap the contractor’s costs and the government’s payment obligation to the funds actually obligated. The Limitation of Funds clause (FAR 52.232-22) is the broad, general mechanism used to alert the contractor that the government’s financial obligation is limited to the funds appropriated for the contract. It typically requires the contractor to monitor funding levels and often to stop work or notify the contracting officer when funds are nearing depletion, since payment cannot exceed the funded amount.

The Limitation of Government Obligation clause (DFARS 252.232-7007) does the same job within DoD acquisitions, reaffirming that the government’s obligation to pay is limited to the funds that have been obligated. It makes explicit that the government is not liable for costs beyond those funded amounts unless additional funds are provided.

Because the question asks which clauses caution the contractor that costs cannot be incurred beyond the allotted amount and that the Government is not obligated to pay beyond that amount, both clauses are applicable and commonly used in DoD contracts. Including both ensures clear protection for both funding control and fiscal liability.