(a) Under 38 U.S.C. 114, VA contracting officers may enter into multi-year contracts for supplies and services not to exceed 5 years (unless otherwise authorized by statue), provided the Secretary or designee makes the following determinations:
(1) Appropriations are available for obligation to pay for the total payments for the fiscal year in which the contract is awarded plus the estimated amount of any cancellation charges.
(2) The contract serves the best interest of the Government by:
(i) Reducing cost;
(ii) Achieving contract administration and other efficiencies;
(iii) Increasing quality contract performance; and
(iv) Encouraging effective competition.
(3) That, during the contract period:
(i) Demand for the supplies or services will continue;
(ii) Substantial changes in demand for supplies and services in terms of quantity or rate of delivery are unlikely; and
(iii) Specifications for the supplies or services will remain reasonably stable.
(4) The risk of the contractor’s inability to perform under the terms and conditions of the contract is low.
(5) A multi-year contract will not inhibit competition from small businesses.
(6) For a pharmaceutical item for which a patent has expired less than 4 years before the solicitation issue date, that there is no substantial likelihood that increased competition among potential contractors would occur during the term of the contract as the result of the availability of generic equivalents increasing during the term of the contract.
(b) The Secretary has delegated authority to make the determinations specified in 817.105-1(a) as follows:
(1) HCAs may make the above determinations and approve contracts that do not require legal/technical reviews under 801.602-70 and that do not contain a first year cancellation ceiling exceeding 20 percent of the contract value over the full multi-year term.
(2) Authority to make the above determinations and to approve all other proposed multi-year contracts is delegated to the SPE and is further delegated to the DSPE. For approval purposes, the HCA will justify and document the use of a multi-year contract against each of the criteria specified in paragraphs (a)(1) through (a)(6) of this section and forward to the DSPE for approval. The justification must explain the cancellation ceiling and the method used to calculate that ceiling. The justification also must explain the advantages of multi-year contracts over other alternative methods, e.g., option year contracts.
(c) The contracting officer must develop the cancellation ceilings in accordance with FAR 17.106-1. (38 U.S.C. 114)
