When the funds notice is due, and why the answer lives in your hours
The short answer. FAR 52.232-22 requires written notice to the contracting officer when costs incurred plus those expected in the next 60 days will exceed 75 percent of the funds allotted, unless the contract sets other figures within its allowed range of 75 to 85 percent and 30 to 90 days. The allotment is stated exclusive of fee, and the test looks forward, so a burn estimate built from hours actually worked finds the date sooner than one built from invoices, which run weeks behind the work. On a time-and-materials or labor-hour order, FAR 52.232-7(d) calls for notice when payments accruing in the next 30 days, added to everything before, will exceed 85 percent of the ceiling price.
If you hold a cost-type or time-and-materials task order that is funded in increments, one deadline matters more than most: the written notice to the contracting officer that the money is running out. The government is not obliged to pay for work past the allotted amount until the contracting officer raises it in writing, so the notice is what starts that conversation while there is still time to have it.
This article covers what the two notice clauses ask for, a worked example by contract line (CLIN), and the ways a burn spreadsheet gets the date wrong. It is general information, not legal advice; how your own contract reads is a question for your counsel.
Last reviewed: November 11, 2026
The two clauses in plain words
Limitation of Funds, FAR 52.232-22. On an incrementally funded cost-type contract, you must notify the contracting officer in writing when you believe that the costs you have incurred, plus the costs you expect in the next 60 days, will pass 75 percent of the funds allotted. The notice states the estimated additional funds needed to keep performing through the period the schedule sets. The allotment is stated exclusive of fee, so fee stays out of the arithmetic. Your contract may set the figures anywhere from 75 to 85 percent and from 30 to 90 days, so check the clause as your contract writes it. The same clause also asks for a written notice at least 60 days before the end of the funded period if more money will be needed, and it says you are not obliged to keep performing past the allotment until the contracting officer tells you in writing that it has been increased.
Time-and-materials ceiling, FAR 52.232-7(d). On a time-and-materials or labor-hour order, notice is due when you have reason to believe that payments accruing in the next 30 days, added to everything before, will pass 85 percent of the ceiling price. The notice gives a revised estimate of the total price, with supporting reasons and documentation.
Both are forward-looking. The test is not what you have spent; it is what you will have spent a set number of days from now.
A worked example by contract line
Take an illustrative cost-type task order with three CLINs, the standard 75 percent and 60 days, and figures made up for the example. Costs to date come from hours actually worked, priced at the contract's own loaded rates. The next 60 days are the current weekly rate times 60 over 7.
| CLIN | Allotted (no fee) | Costs to date | Weekly rate | Next 60 days | Share of allotment |
|---|---|---|---|---|---|
| 0001 Program management | $180,000 | $96,000 | $3,500 | $30,000 | 70.0% |
| 0002 Engineering support | $400,000 | $185,000 | $14,000 | $120,000 | 76.3% |
| 0003 Travel | $40,000 | $12,000 | $500 | $4,300 | 40.8% |
| Order total | $620,000 | $293,000 | $18,000 | $154,300 | 72.1% |
Three things show up.
First, CLIN 0002 crossed this week. Last week its costs to date were $171,000, which with $120,000 ahead came to 72.8 percent. One more week of engineering hours put it over.
Second, the order as a whole is still under 75 percent. A sheet that watches only the total says all is well. Schedules commonly allot funds by line, and money usually cannot move between lines without a modification, so the line that runs dry is the one that stops the work. Whether your notice is owed by line or by total depends on how your contract allots its funds; read the schedule, and ask counsel if it is unclear.
Third, a time-and-materials order works the same way on a shorter horizon. Say its ceiling is $900,000, payments to date are $690,000, and the next 30 days will add $80,000. That is $770,000, or 85.6 percent, past the $765,000 line. The notice is due now, with a revised total price and the reasons for it.
How a burn spreadsheet gets the date wrong
- It burns from invoices, not hours. Billing runs weeks behind the work. If the last month of CLIN 0002 is not invoiced yet, a sheet built on invoices shows perhaps $140,000 spent, puts the line at 65 percent, and finds the notice a month late.
- It watches the total. As the example shows, the total can sit comfortably under the line while one CLIN is past it.
- It uses the standard figures. A contract written at 85 percent and 90 days, beside one at 75 and 60, needs two different tests. A single formula copied across both is wrong for one of them.
- It lets fee in. Adding fee to the costs, or to the allotment, moves the percentage.
- Hours land on the wrong line. A timesheet row charged to a closed or wrong CLIN makes one line look slow and another fast.
You can do better even in a spreadsheet. Import the week's hours, not the invoices. Price them at stored loaded rates per labor category, which your accountant supplies. Keep one row per CLIN with that contract's own percentage and days beside it, and compute the due date, not just the percentage. List every timesheet row that could not be placed on a CLIN before you trust the totals. And have someone other than the author check the formulas once a quarter.
The 50 percent limit, briefly
If the order is a small business set-aside for services, 13 CFR 125.6 adds a second running total: you may not pay more than 50 percent of what the government pays you to subcontractors that are not similarly situated. Work a similarly situated sub performs with its own employees does not count; work it passes on does. Compliance is generally measured over the base period and then each option period, and the penalty is the greater of $500,000 or the excess. The useful question is not where you stand today but where a proposed subcontract would put the next period, before anyone signs it.
How a system does it
The live demo shows this working for Ardenmoor Mission Services, a fictional federal services contractor with three task orders. Each carries its own clause: the Army order at the standard 75 percent and 60 days, the Air Force order written at 85 percent and 90 days, and the NASA time-and-materials order under the ceiling-price notice.
The week's export from the timesheet tool is checked before it is imported: every row placed on a contract line and a labor category, the rows it cannot place listed, indirect hours left to the accounting system. Hours become dollars at each contract's own rates. Each line then shows its funds, spending, weekly rate, a runway chart, the date its notice is due under its own contract's rule, and when its funds run out. When last week's hours are imported, one Army line crosses, and the system drafts the Limitation of Funds notice with the figures the clause asks for. The contracts manager edits it, sends it from her own email, and records what she sent and when. The system never emails anyone.
The subcontractor ledger counts payments against the 50 percent limit for the period, and "what if" shows that one sub's proposed expansion would take the next option year past it. The AI helper reads incoming modifications into proposed changes, and a person accepts or rejects each line; it does not decide anything about funding or notices.
The system holds dates, amounts, statuses and links only. It sits beside QuickBooks and your timesheet tool, which stay the record of the books and the hours, and it makes no DCAA, CMMC or compliance claim.
See it for yourself
The federal services page sets out what we build for contractors of 5 to 100 people. The live demo signs you in with one click, needs no account, and resets every night. A typical build is $8,000 to $25,000 at a fixed price, then hosting and support from $350 a month, with no per-user fee.
Questions
Is the Limitation of Funds notice owed per CLIN or for the whole contract?
FAR 52.232-22 speaks of the amount allotted to the contract, but schedules commonly allot funds by line, and money usually cannot move between lines without a modification. Whether a notice is owed by line or by total depends on how the contract allots its funds, so read the schedule and ask counsel if it is unclear.
Does fee count toward the 75 percent threshold?
No. Under FAR 52.232-22 the allotment is stated exclusive of fee, so fee stays out of both the costs and the allotment; adding it to either moves the percentage.
When is the time-and-materials ceiling notice due?
Under FAR 52.232-7(d), notice is due when the contractor has reason to believe that payments accruing in the next 30 days, added to all earlier payments, will exceed 85 percent of the ceiling price. The notice gives a revised estimate of the total price, with supporting reasons and documentation.