Failure by the contractor to provide written notice along with a revised estimate of costs could prevent the contractor from collecting on any costs incurred in excess of estimated costs. The contractor is not obligated to perform on contract or incur any costs in excess of estimated costs until the CO notifies the contractor, in writing, that the estimated costs have been increased.
The Limitation of Funds clause is similar to the Limitation of Costs clause; however, written notice to the CO is required when the contractor has reason to believe that inception to date costs are expected to be greater than a certain threshold (between 75% and 85%) of funds allotted to contract within the next 30 – 90 days. In addition, sixty days prior to the end of the contract schedule, the contractor is required to provide written estimate of any additional funds required and when the funds would be required. If, after written notice, additional funds are not allotted to contract by CO, the contractor is not obligated to perform or incur additional costs and CO will terminate contract.