2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1
*October 2008
1-28
lead-times are greater than the life of the appropriation (3-5 years). In some circumstances,
Advance Procurement is also warranted when items have significantly longer lead-times than other
components, parts, and material of the same end item or when efforts must be funded in an advance
procurement timeframe in order to maintain a planned production schedule. For new development
programs, the planned production schedule should be based on a full funding basis without the use
of long lead material. Planning the program content this way provides additional flexibility should
development delays arise. When advance procurement is part of the program, however, the cost
of components, material, parts, and effort budgeted for advance procurement shall be relatively
low compared to the remaining portion of the cost of the end item. Each budget request for
advance procurement shall represent, at a minimum, the termination liability associated with the
total cost of the long lead-time components, material, parts, and effort for which the advance
procurement request is being made. The termination liability should not cover the cost of the end
item budgeted in the following fiscal year(s). The full cost of components, material, parts, and
effort included in the advance procurement request should be budgeted in the FYDP consistent
with full funding procedures. The budget requests will properly debit and credit advance
procurement budget requests as defined in Exhibits P-1, P-5, P-10 and P-40 instructions.
2.2.3.4. Economic Order Quantity (EOQ) Procurement. EOQ may be used only in
connection with multiyear procurement. It is the general policy of the Department of Defense not
to create unfunded contract liabilities for EOQ procurements. Rather, funding for EOQ
procurements shall be included in advance procurement budget requests unless an exception to the
general policy is granted by the USD(Comptroller). The EOQ procurement may satisfy
procurement requirements for no more than the number of program years covered by the multiyear
procurement contract. Unless it would be more effective to fully fund the EOQ, or the
USD(Comptroller) has granted an exception to the general policy to allow inclusion of EOQ costs
in a cancellation clause, the advance procurement funding for an EOQ procurement shall cover, at
a minimum, the estimated termination liability of the EOQ procurement.
2.2.3.5. Relationship of Budgeting and Contracting. An end item is fully funded
only when funds are budgeted, programmed and available to cover the total estimated cost of the
item at the time the procurement action is begun. Contracting, on the other hand, is a part of the
execution phase or acquisition process within the framework of a program. The number of
contracts required to procure a defense system, the type of contract awarded, and the timing of the
award have no bearing upon whether or not an item is fully funded. In executing a program, no
procurement of material or equipment, or work or services, therefore, shall be directed or
implemented unless the full program amount is available, except for authorized economical order
quantity (EOQ) and advance procurement. Similarly, the value of existing contracts for the
procurement of material or equipment shall not be increased (through contract modifications)
unless the funds are available to fully fund the new contract price. Limitations of funds clauses
shall not be used as a mean of avoiding the requirement to fully fund procurement programs.
(Note that this guidance does not affect the proper use of limitations of funds clauses in
incrementally funded development contracts.) For multiyear contracts, the test of full funding
does not include the cancellation ceiling associated with items in the FYDP to be procured in fiscal
years not yet funded (that is, beyond the budget year). Multiyear contracts may not be awarded
unless the contract and the multiyear program are fully funded within the approved FYDP funding.