# IG5304.7103 Establishing Contract Line Items

Informational Guidance

IG5304.7103
Establishing Contract Line Items

October 2009

1. The Department of Defense Federal Acquisition Regulation Supplement (DFARS) states in 204.7101, Definitions: “Nonseverable deliverable, as used in this subpart, means a deliverable item that is a single end product or undertaking, entire in nature, that cannot be feasibly subdivided into discrete elements or phases without losing its identity.” For a contracting officer, the severable or non-severable nature of a requirement influences the contract line item numbering (CLIN) structure and must be considered in determining the appropriate use of accounting classifications and their assigned accounting classification reference numbers (ACRNs).

2. Generally, installation services are severable; the government receives the full benefit of the service each time it is performed. Non-severable deliverables typically have a delivery date for products or a completion date for tasks. Severable services are typically recurring during a specified period. Many Research, Development, & Testing requirements are non-severable; they cannot be feasibly subdivided. Thus the government will receive a benefit only upon delivery or completion of the entire requirement. It is important that financial managers and contracting officers evaluate severability case-by-case for each contract action. Contracting officers should seek legal advice when the severable or non-severable nature of a requirement or CLIN is difficult to discern.

3. The financial management official, in consultation with the contracting officer and requirements official, must decide to use an annual or a multiple year appropriation only after considering the severable or non-severable nature of each CLIN and the performance start and end dates. This decision will ensure compliance with the funding rules concerning period of availability, bona fide need, and purpose. Complying with these rules will avoid any violations of the Antideficiency Act. When funding decisions are not straight forward, such as using multiple year appropriations or when annual funding is used to cross fiscal years in accordance with FAR 37.106, contracting officers must document the basis for funding decisions in the contract file.

4. Obligating annual funding for severable CLINs at the end of fiscal year requires extra care to show that decisions made were executed as planned. The contracting officer must document the contract file with evidence that performance or a duty to perform occurred in the fiscal year funds were available and obligated in order to establish a bona fide need. The requirements official or financial management official must provide the evidence. For example, if FY08 annual funds are obligated on 25 September 2008 for a twelve month period of performance, the file must show there was a duty to perform or that performance started before 30 September 2008. If the requirements official cannot provide this evidence for the file, then using the FY 08 funds to pay for this service is not proper and the customer will have to provide FY09 funds to pay for the service.