Example

Cancellation

You have a multi-year contract to buy 20 flying saucers a year for five years. At the time of contract award, you obligated funds sufficient to fully fund the FY 1 requirement of 20 flying saucers. To permit the contractor to begin production of the 20 FY 2 flying saucers, all you need is an adequate appropriation from Congress. Then you will execute a contract modification to fully fund the FY 2 requirement.

If Congress does not appropriate funds for FY 2, you must cancel the FY 2 through FY 5 requirements because funds are not available to satisfy those requirements. The contractor's work on the FY 1 requirements is unaffected. It is expected that the contractor will complete and the Government will take delivery of the FY 1 end items.