Balancing Efficiency and Fiscal Responsibility
By Thomas Mack, P.E., M.SAME
The continuing contracts clause offers the U.S. Army Corps of Engineers a way to improve project delivery and enhance fiscal responsibility by aligning funding with project execution.
When spending federal dollars on construction projects, there are several steps before any payment is formally made. First, Congress appropriates funds for a specific amount, purpose, and time constraint. The government agency responsible for the project takes the appropriated funds and commits a portion for a specific project or use. After that, a contracting officer solicits a construction contract. After award of the contract is made, the contracting officer obligates funds and the contractor goes to work. As progress is made toward completion, a contracting officer’s representative then makes payments by expending from the obligated funds.
For most contracting actions, this schedule takes place on an annual basis. However, on large-scale, multiyear ventures, the expenditure may take several years to materialize. Such projects require different financial support structures and some, like the “continuing contracts” clause, have the potential to improve the way vital infrastructure improvements are delivered, especially by the U.S. Army Corps of Engineers (USACE).
Strategic Financing
The “continuing contracts” clause, authorized by the River and Harbor Act of 1922 (33 USC § 621), can offer a powerful instrument for managing the financial complexities of large multiyear projects. This mechanism is built to allow USACE to commit to an entire project scope upfront, even if full funding is not immediately available—an approach that allows for a more strategic allocation of resources and aligns funding with the actual progress of a project.
Any commitment made by USACE under the continuing contracts clause must still be tied to reasonable expectations of future appropriations from Congress. Imagine, for example, the construction of a new lock and dam system on a major inland waterway. Such an investment, spanning multiple years and requiring significant capital expenditures, would benefit immensely from the “continuing contracts” clause. Instead of requiring full funding from the outset, USACE could commit to the entire scope, with future appropriations financing the project throughout the construction process. This offers several advantages.
Optimized Resource Allocation: By eliminating the need for full upfront funding, utilizing a “continuing contracts” approach not only conserves significant capital for other critical infrastructure projects but prevents large balances of unspent appropriations.
Earlier Realization of Project Benefits: The ability to start projects sooner allows for quicker delivery of benefits to communities, as waiting for complete funding is no longer a barrier.
Reduced Project Costs: A comprehensive contract structure can lower overhead and administrative burdens on both government and contractors, which encourages more efficient scheduling and execution of work, and, ultimately, reduces overall project costs.
Suitable Approach
While alternatives to continuing contracts exist, such as fully funded projects, separating projects into smaller contracts, or awarding contracts with base and option components, each carries concerns.
Fully Funded Contracts: While the idea of obligating the entire contract amount may initially appear prudent, in practice this approach can strain funding sources due to the need for that large, upfront payment. This approach also ties up significant amounts of unspent funds for extended periods, like the example of the Inland Waterways Trust Fund where USACE is holding nearly $3 billion in obligated but unexpended contract funds. Long-term financial analyses, such as those employing net present value calculations, reveal potential losses compared to incrementally funded continuing contracts. The net present value loss of capital can be substantial, potentially reaching approximately 6 percent of the trust funds due to the capital cost of money when not using continuing contracts. Funding projects in full upfront has been utilized in the past on some mega-projects, but its utility likely is limited to exceptional instances of broad public interest.
Separating into Smaller Contracts: Separating projects into smaller, “fundable” contracts, while seemingly offering greater flexibility, increases the administrative burden significantly. The need to create, solicit, execute, and coordinate multiple contracts can be resource-intensive and potentially triple project costs while substantially extending completion timelines.
Base Contracts and Options: Employing base contracts with options, where the government awards a base contract and retains the right to exercise options for future work, introduce pricing risks for contractors. The uncertainty surrounding the timing and likelihood of option exercise requires contractors to predict future costs without securing supplies or knowing when the work will be performed, potentially leading to higher bid prices. Moreover, misaligned option award periods can disrupt the optimal construction sequence; this forces installations or tasks to be performed at less efficient times. The consequences include increasing costs and delaying overall project completion.
Historical Precedent
For decades, “continuing contracts” played a crucial role in the efficient execution of USACE’s Civil Works projects. Authorized by Section 10 of the River and Harbor Act of 1922, this approach allowed Congress to authorize entire projects while appropriating funds annually, aligning spend with the work scheduled. Prior to this legislation-driven shift, full upfront funding had been the norm—and it led to significant unspent funds. The move to continuing contracts, which began in 1922, drove down bid prices and improved project delivery. This system was a part of USACE operations from the 1930s through the 1990s.
The landscape began to shift in the 1990s, driven by concerns from the Government Accountability Office and the Office of Management & Budget regarding the misuse of continuing contracts. What was initially intended for large, multi-year endeavors was being applied more broadly, raising questions of appropriateness. For example, USACE was commonly awarding
continuing contracts for projects less than $1 million and under 12 months in duration. Subsequent policy changes in the 2000s, including a requirement for headquarters approval and the prioritization of fully funded contracts, significantly curtailed the use of continuing contracts. The final blow came with regulations in 2009–2010, effectively preventing contractors from working beyond available funding. This removed the crucial element of contractor discretion, forcing project shutdowns and incurring costly demobilization and remobilization expenses. The consequences are that timelines become extended and the very efficiency that continuing contracts were designed to promote is undermined.
The legacy of this once-effective approach, designed to deliver projects swiftly and cost-effectively, is now severely limited. But with the right reset of communication and coordination, it could once again provide a valuable option for contracting officers.
Recommended Actions
To improve the implementation of continuing contracts, USACE must define clear criteria for its use and articulate the agency’s responsibilities and obligations. Recommendations for the list of criteria would significantly reduce the number of projects eligible for continuing contracts, potentially to only one or two per year.
- Minimum size of $1 billion to limit its applicable use to only the largest projects.
- Minimum project duration of five years.
- Restricted to Civil Works investments (rivers and harbors) funded by Construction General or Trust Fund, excluding Operations and Maintenance, to prevent misuse.
USACE budget submissions should transparently outline appropriation needs and funding streams for existing and proposed contracts with the continuing contract clause. This transparent reporting should also be tracked by the Inland Water User Board. The criteria and reporting addresses past tracking deficiencies and provides a clear picture of current and future appropriation needs.
Leveraging Benefits
The continuing contracts clause offers a valuable tool for USACE to fund large, multi-year projects by allowing incremental funding and reducing the burden of idle dollars. However, its effectiveness has been hampered by past misuse and restrictive regulations.
By implementing clearer criteria and improving communication with Congress, USACE can leverage the benefits of continuing contracts without the drawbacks. And by providing efficiencies in how the agency fulfills funding obligations, the system can then ultimately better deliver for the public it is designed to support.
Thomas Mack, P.E., M.SAME, is Technical Lead, Inland Navigation Design Center – USACE Rock Island District; thomas.e.mack@usace.army.mil.
Published in the September-October 2025 issue of The Military Engineer
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