(iii) Step Three: Fund The Nonrecurring Cost Portion. (if you decided to in Step One E)

(A) Step Three A: Fund the First Year Cancellation Ceiling.

For the cancellation ceiling that applies to a cancellation occurring at the end of year one of a multi-year contract, you should:

(1) Consult with your funding experts to determine whether to fund this with advance procurement or regular procurement dollars.

(i) If you decide to fund it with advance procurement dollars, include this amount in the Advanced Funding on Exhibit MYP-4, Present Value Analysis, for year one of the multi-year contract, and include this amount in the Advance Procurement funds requested for year one in your budget submission.

(ii) If you decide to fund it with regular procurement dollars, include this amount in the "Multi-year Proposal Gross" row in the first column of Exhibit MYP-4, Present Value Analysis, and include this amount in the regular Procurement funds requested for year one in your budget submission.

(2) Commit the funds for their intended purpose, once they are appropriated and have flowed down to the product division.

(B) Step Three B: Fund the Second Year Cancellation Ceiling.

For a cancellation ceiling that applies to a cancellation occurring at the end of the second year of the multi-year contract, you should:

(1) Use the same type of funds used in the previous year to fund this portion of the cancellation ceiling (i.e., either advance procurement or regular procurement dollars).

(2) If you are using advance procurement dollars, you may fund this amount with the advance procurement dollars reserved to fund the nonrecurring cost portion of the previous year's cancellation ceiling. The process applied in Step Two B applies here as well.

If you are using regular procurement dollars, you should include the nonrecurring cost portion of the cancellation ceiling in the "Multi-year Proposal Gross" row of the second column of Exhibit MYP-4, Present Value Analysis; and include this amount in the procurement funds requested for year two in your budget submission.

Note: The regular procurement dollars reserved to fund the nonrecurring cost portion of the previous year's cancellation ceiling may fund subsequent year's ceilings as long as the bona fide need relates to the year of the appropriation. Once the reserved funds are no longer needed to fund potential cancellation charges they may be used for other purposes consistent with the law under which they were appropriated. If previous year's appropriation(s) are no longer available to fund cancellation ceilings, and a potential cancellation charge continues to exist, additional funds must be budgeted in a current appropriation so they may be reserved to cover the contingent liability.

(C) Step Three C: Fund Subsequent Year Cancellation Ceilings.

For a cancellation ceiling that applies to a cancellation occurring at the end of the third or a subsequent year of the multi-year contract, follow the guidance in Step Three B.