As September 30 approaches, government contractors enter one of the busiest periods of the federal procurement calendar. The end of the government’s fiscal year often brings a surge in contracting activity, including new awards, extensions, funding actions, modifications, and efforts to complete performance before appropriated funds expire or become subject to additional limitations.
For contractors, however, fiscal year-end is more than a period of increased procurement activity. It is also a useful time to review contract funding, invoicing, performance, compliance, bid protest considerations, and closeout issues. Contractors that take a proactive approach can reduce the risk of missed deadlines, funding disruptions, billing problems, and disputes.
Contractors also should account for the funding environment immediately following fiscal year-end. For FY 2027, the federal government will begin the new fiscal year operating under a continuing resolution through December 11, 2026.
Review Contract Funding
Contractors should begin by reviewing the funding status of their active contracts and task or delivery orders, particularly those that are incrementally funded or supported by annual appropriations. The amount currently obligated may not be sufficient to cover anticipated performance through the end of the period of performance.
The Federal Acquisition Regulation (FAR) contains several provisions governing the funding of federal contracts, including incrementally funded contracts and contracts subject to limitations on cost or funds. Contractors should review the funding provisions and clauses applicable to each contract and determine whether additional funding or a contract modification is necessary.
Contractors also should be cautious about performing work beyond currently authorized funding based solely on informal assurances from program personnel that additional funding is forthcoming. A program office’s desire for continued performance does not necessarily constitute contractual authorization to incur additional costs. Depending on the applicable funding clause, a contractor also may not be obligated to continue performance beyond the amount funded. For example, FAR 52.232-22, Limitation of Funds, generally provides that the contractor is not obligated to continue performance or incur costs beyond the amount allotted to the contract, subject to the terms of the clause. Before proceeding, contractors should confirm the applicable contractual authority and, where appropriate, obtain direction from the contracting officer.
Carefully Review Year-End Modifications
The final weeks of the fiscal year can generate a high volume of contract modifications. Agencies may issue modifications addressing funding, options, quantities, labor rates, periods of performance, or other contract terms.
Contractors should resist the temptation to treat these modifications as routine administrative matters. Before signing or accepting a proposed bilateral modification, the contractor should carefully review the effective date, funding amount, period of performance, changes to contract ceilings or obligations, and any new contractual requirements.
Particular attention should be paid to release or waiver language. A modification that appears to address only funding or another administrative matter may contain language affecting pending requests for equitable adjustment, claims, or other potential contractor rights. Contractors should understand the consequences of any release before accepting it.
Reconcile Invoices, Costs, and Funding
Fiscal year-end is also an appropriate time to review outstanding invoices and reconcile contract costs with amounts billed and funds obligated. Contractors should confirm that work performed and accepted by the government has been properly invoiced and that supporting documentation is complete.
For cost-reimbursement contracts, contractors should pay particular attention to the treatment of direct and indirect costs and to the requirements governing final indirect cost rate proposals. FAR 52.216-7 generally requires a contractor to submit its final indirect cost rate proposal within six months after the end of each contractor fiscal year, subject to the clause’s provisions concerning extensions. Thus, September 30 is not necessarily the relevant deadline for a contractor’s own indirect rate submission; the applicable date generally depends on the contractor’s fiscal year.
Maintaining accurate contract-level cost information can also help contractors identify potential funding shortfalls and billing issues before they become more difficult to resolve.
Pay Attention to Bid Protest Deadlines and Risks
The federal government will award a significant volume of contracts as the September 30 fiscal year-end approaches, making this period particularly important for contractors participating in federal competitions. The concentration of procurement activity at the end of the fiscal year can mean that contractors are receiving award decisions, debriefings, and other procurement-related information in a compressed period. As a result, contractors should be particularly attentive to potential bid protest issues and the short deadlines that govern challenges to federal procurements. The increased volume of year-end awards can translate into increased bid protest activity simply because there are more procurement decisions for disappointed offerors to evaluate.
Identify Contracts Ready for Closeout
The end of the government’s fiscal year provides a useful opportunity to review contracts and task orders that have reached the end of their performance periods. Contracts sometimes remain open long after performance has been completed because of unresolved invoices, government property, subcontract matters, audits, indirect cost issues, or other administrative requirements.
FAR 4.804-5 identifies matters that must be addressed as part of administrative contract closeout, including final invoices, property clearance, settlement of costs, subcontract settlement, indirect cost rates, audits, and excess funds. Contractors should therefore identify completed contracts that may be ready for closeout and work with the contracting officer to resolve outstanding matters.
For certain physically completed contracts, the FAR also provides for quick closeout procedures. FAR 42.708 permits quick closeout when specified conditions are satisfied, including circumstances in which unsettled direct and indirect costs are relatively insignificant. Contractors with a substantial number of completed contracts may benefit from reviewing whether this procedure is available and discussing it with their contracting officers.
Review Claims and Equitable Adjustments
Fiscal year-end is a good time to take stock of unresolved contract issues. Contractors should review pending requests for equitable adjustment, claims, disputes, delays, differing site conditions, constructive changes, stop-work impacts, and other matters that could affect contract value or performance.
The objective should not simply be to submit claims before September 30. Instead, contractors should ensure that potential claims have been identified, documented, and preserved in accordance with the applicable contract provisions and statutory requirements.
This review is particularly important when the government proposes a year-end modification. Contractors should determine whether the proposed modification affects an existing claim or could be construed as resolving or releasing a potential entitlement.
Watch for New Requirements
The transition to a new fiscal year can also coincide with changes in statutes, regulations, appropriations provisions, agency policies, and contractual requirements. Contractors should review new and modified requirements that may apply to their contracts, including requirements involving cybersecurity, supply chains, domestic sourcing, reporting, labor, small-business subcontracting, organizational conflicts of interest, export controls, and ethics and compliance.
Not every new statutory or regulatory requirement automatically applies to every existing contract. Contractors should determine applicability based on the specific contract, applicable effective dates, and the language of the relevant statute or regulation.
Preserve the Record
Finally, contractors should remember that communications and documents generated during the fiscal year-end period may become important evidence in an audit, claim, bid protest, or other dispute. Contractors should maintain contemporaneous records concerning work performed, government direction, available funding, costs incurred, deliverables, and communications regarding potential schedule or cost impacts.
This is particularly important when a contractor is asked to continue performance while a funding action or contract modification is still being processed, or when a contractor is considering challenging an award. Clear documentation of what the government requested, what the contractor understood it to authorize, and what costs or impacts resulted can become critical if the parties later disagree.
Conclusion
The federal government’s fiscal year-end can create both opportunities and risks for government contractors. While September may bring increased procurement activity and new funding, it is also an appropriate time to review existing contracts, reconcile funding and billing, evaluate potential bid protests, preserve claims, and address contracts that are ready for closeout.
A disciplined fiscal year-end review, coordinated among contracting, finance, accounting, program, and legal personnel, can help contractors identify potential problems before they become disputes and enter the new fiscal year with a clearer understanding of their contractual rights, obligations, funding status, and outstanding issues.
If you have any questions about the foregoing or require assistance, please do not hesitate to contact Aron Beezley or Steven Herrera.