38 U.S.C. § 114 — Multiyear procurement

(a) The Secretary may sign a multiyear contract to buy supplies or services, but only after confirming all of these things: (1) there is enough appropriated money available for what the contract requires this fiscal year, plus the estimated cost if the contract gets canceled later; (2) a multiyear contract truly serves the United States better than a one-year contract would, by cutting costs, making contract management more efficient, improving contractor performance, or encouraging real competition; (3) during the contract period, (A) the need for these supplies or services will keep coming up, (B) that need probably will not change much in total amount or delivery pace, and (C) the specifications should stay fairly stable; (4) the contractor is not too risky to likely perform as promised; (5) using a multiyear contract will not shut small businesses out of competing for it; and (6) for a drug whose patent expired less than four years before bids are requested, there is no strong chance that more generic competition would show up during the contract term. (b) Required contract terms, and what happens if funding runs short. (1) Every multiyear contract must include: (A) a clause saying the government's obligation in any later fiscal year depends on Congress actually appropriating enough money, if funds for the whole contract were not already available when it was signed; and (B) a clause for paying the contractor reasonable cancellation charges, covering one-time costs the contractor cannot recover, if the contract gets canceled under that funding clause. (2)(A) If, in a later fiscal year, the Secretary decides available funds are not enough for the contract — considering the Department's other funding needs — the Secretary must cancel the contract under the required clause. (B) Cancellation charges are normally paid from the funds originally set aside for that contract or its cancellation costs. If those funds fall short, money set aside for buying the same kind of supplies or services elsewhere must be used to cover the rest. (c) This section does not limit the Secretary's separate right to cancel any contract "for convenience" under other laws that allow multiyear contracting. (d) The Secretary must write regulations to carry out this section. (e) Definitions for this section: (1) "Appropriations" has the meaning given in section 1511 of title 31. (2) A "multiyear contract" is one that, by its terms, runs past the fiscal year it started in, but no later than the end of the fourth fiscal year after that. It does not include a construction contract or a lease of real property. (3) "Nonrecurring, unrecovered costs" are one-time costs the contractor reasonably incurred while performing the contract, as determined under the Secretary's regulations.