XL EagleObligation (Obligation of Funds)
Obligation stands for Obligation of Funds. An obligation is a binding legal commitment of government money to a contract or order. Contracts generally cannot be signed, and work cannot be paid, without funds obligated to cover it.
De-obligation is the reverse. When work comes in under budget, is canceled, or the contract closes, the leftover obligated money is taken back off the contract.
Why it matters to a small contractor
Before you start work, make sure the order shows enough obligated funds. Work done beyond obligated money is at your own risk.
Example
A $300,000 contract has only $100,000 obligated for the first quarter. The contractor plans work to stay within that amount until the next funding mod.
Obligation: common questions
What is de-obligation?
It is removing unused obligated money from a contract, often at closeout or after a scope cut.
Why does obligation matter to me?
Because federal law generally does not let agencies pay beyond what was obligated.
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