If the full five-year cost can be obligated in year one under multi-year contracting, what does policy generally require?

If the full five-year cost can be obligated in year one under multi-year contracting, what does policy generally require?

• A. You may pay the entire amount in year one
• B. Funds may be transferred after year one
• C. You must obtain a separate waiver
• D. Must pay by each year

Answer: (D)

When a multi-year contract allows obligating the full five-year cost in the first year, the cash payments are still generally made in the year-to-year sequence of performance. The policy requires outlays by year, meaning you fund and pay for the portion of work as it is delivered in each fiscal year. This aligns spending with annual appropriations and preserves proper budgetary control, rather than paying the entire amount upfront in year one. So even though you may set aside the total cost at award, the actual payments are distributed across the years of contract performance.

When a multi-year contract allows obligating the full five-year cost in the first year, the cash payments are still generally made in the year-to-year sequence of performance. The policy requires outlays by year, meaning you fund and pay for the portion of work as it is delivered in each fiscal year. This aligns spending with annual appropriations and preserves proper budgetary control, rather than paying the entire amount upfront in year one. So even though you may set aside the total cost at award, the actual payments are distributed across the years of contract performance.