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Vern Edwards

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About Vern Edwards

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  1. Missed Option but Have a J&A

    That's good news! Congratulations. Glad legal joined the team. Your legal counsel's position is the position that 99 out of 100 contracting practitioners would take. The contract "dies" after the period of performance expires and you cannot raise a contract from the dead. I don't mind them taking that position as long as they ground it in a sound argument supported by something other than a vague sense of unease. However, I think it's demonstrably untrue. Contracts do not necessarily die when the period of performance ends.
  2. Missed Option but Have a J&A

    One problem I have is that I write so much stuff I can't remember when I wrote about something. I wrote about the problem of untimely exercise of options and CICA in The Nash & Cibinic Report in 2013. While the article does not address the problem of extension by supplemental agreement vs. new contract, it might be of interest, so I've copied it below. If I were writing it today I would say some things differently. I would say "period of performance has expired" instead of "contract has expired." But I stand by my main conclusions. Where I use the pronouns "we" and "ours" I am speaking from Prof. Nash and myself. I don't agree with all of the things the GAO said in the quote from their decision. The Nash & Cibinic Report, August 2013 ¶ 40. LATE EXERCISE OF OPTIONS: What Are The CICA Implications? Vernon J. Edwards What, if anything, do the Competition in Contracting Act and Federal Acquisition Regulation Part 6, “Competition Requirements,” require a Contracting Officer to do when he has inadvertently failed to exercise an option within the deadline for doing so? Let’s review the regulations and consider three scenarios. The Regulations Suppose that an agency competitively awarded a firm-fixed-price service contract with a period of performance of one year and a priced one-year extension option. The option clause in the contract, FAR 52.217-9, “Option To Extend the Term of the Contract (MAR 2000),” states, in pertinent part: (a) The Government may extend the term of this contract by written notice to the Contractor at least 30 working days before the contract expiration; provided that the Government gives the Contractor a preliminary written notice of its intent to extend at least 60 days before the contract expires. The preliminary notice does not commit the Government to an extension. FAR 6.001, “Applicability,” states: This part applies to all acquisitions except— *** (c) Contract modifications, including the exercise of priced options that were evaluated as part of the initial competition (see [FAR] 17.207(f)), that are within the scope and under the terms of an existing contract; FAR 17.207, “Exercise of options,” states, in pertinent part: (a) When exercising an option, the contracting officer shall provide written notice to the contractor within the time period specified in the contract. *** (c) The contracting officer may exercise options only after determining that— (1) Funds are available; (2) The requirement covered by the option fulfills an existing Government need; (3) The exercise of the option is the most advantageous method of fulfilling the Government’s need, price and other factors (see paragraphs (d) and (e) of this section) considered; (4) The option was synopsized in accordance with [FAR] Part 5 unless exempted by 5.202(a)(11) or other appropriate exemptions in 5.202; and (5) The contractor is not listed on the Excluded Parties List System (EPLS) (see FAR 9.405-1). *** (f) Before exercising an option, the contracting officer shall make a written determination for the contract file that exercise is in accordance with the terms of the option, the requirements of this section, and [FAR] Part 6. To satisfy requirements of Part 6 regarding full and open competition, the option must have been evaluated as part of the initial competition and be exercisable at an amount specified in or reasonably determinable from the terms of the basic contract, e.g.— (1) A specific dollar amount; (2) An amount to be determined by applying provisions (or a formula) provided in the basic contract, but not including renegotiation of the price for work in a fixed-price type contract; (3) In the case of a cost-type contract, if— (i) The option contains a fixed or maximum fee; or (ii) The fixed or maximum fee amount is determinable by applying a formula contained in the basic contract (but see [FAR] 16.102(c)); (4) A specific price that is subject to an economic price adjustment provision; or (5) A specific price that is subject to change as the result of changes to prevailing labor rates provided by the Secretary of Labor. Three Scenarios Assume that the CO properly made all of the determinations in paragraphs (c) and (f) prior to the issuance of the preliminary notice of intent to exercise the option. Now consider three scenarios: (1) The CO gave timely preliminary notice, but did not give the contractor timely written notice of the exercise of the option. The contract period of performance has not yet expired. (2) The CO gave timely preliminary notice, but did not give the contractor timely written notice of the exercise of the option. The contract period of performance expired two weeks ago, but the contractor continued working. (3) The CO gave timely preliminary notice, but did not give the contractor timely written notice of the exercise of the option. The contract period of performance expired two weeks ago, and the contractor stopped working at its end. In every case, the CO’s failure to exercise the option was due to administrative oversight, and the contractor is willing to waive the CO’s failure to meet the deadline. May the CO go ahead and extend the contract by exercising the “option,” or must he conduct a new procurement and either seek full and open competition or justify a sole-source acquisition? Apparently, failure to process option paperwork in a timely fashion is not unheard of, and we recently became aware of two such cases. In each case, agency counsel or contracting staff told the CO that he could not exercise the option. As far as we have been able to determine, this issue has not come before the Government Accountability Office very often, and apparently never before the U.S. Court of Federal Claims. The GAO has treated late option exercises as sole-source contracts. See Washington National Arena Limited Partnership, Comp. Gen. Dec. B-219136, 65 Comp. Gen. 25, 85-2 CPD ¶ 435, 1985 WL 50837, an early CICA decision. In that case, the agency extended a contract four months after its expiration. The GAO sustained the protest on this issue, stating: "We agree with [the protester] that this attempt [to extend the contract] was improper. Upon expiration of [the contractor’s] contract, neither the government nor [the contractor] was obligated by any of the contract terms; [the contractor] no longer was bound to provide visitor reservation services, and the government no longer was bound to pay [the contractor] commissions for such services. The unexercised option provisions were part of the contract and, thus, necessarily expired when the contractual relationship was terminated. Thus, the attempted retroactive extension of [the contractor’s] contract was not an extension at all—there was no contract to extend—but the noncompetitive creation of a new contractual relationship with [the contractor]. Under CICA, agencies are required to “obtain full and open competition through the use of competitive procedures” in procuring property or services. 41 U.S.C. § 253 [now 41 U.S.C. § 3301]. Certain exemptions from the competition requirement are listed, but it does not appear from the record, and [the agency] does not argue, that any of these exemptions would apply to justify a noncompetitive award to [the contractor] under the circumstances here. Consequently, we sustain the protest on the ground that [the agency] should have conducted a competitive procurement for these visitor reservation services." See also Acumenics Research & Technology, Inc.—Contract Extension, Comp. Gen. Dec. B-224702, 87-2 CPD ¶ 128, 1987 WL 102680, and WSI Corp., Comp. Gen. Dec. B-220025, 85-2 CPD ¶ 626, 1985 WL 53711." In none of our scenarios can the option be exercised in accordance with its terms, as appears to be required by FAR 6.001(c) and FAR 17.207(a) and (f) for exercise to be exempt from CICA, since the CO missed the deadline. The deadline is one of the terms of the option. In Washington National, the agency appears to have consciously decided not to extend the contract and then changed its mind, whereas in our scenarios the failure to exercise the option was an oversight. Moreover, four months had passed between the expiration of the contract and the modification to extend it, during which time the then former contractor apparently did not perform. Our scenarios can be distinguished in several ways. In our first scenario, in which the contract has not yet expired, the CO could argue (a) that the parties are still in a contractual relationship and (b) that the matter is thus one of contract administration and the contractor can waive the CO’s failure to provide timely written notice. In our second scenario, in which the contract has expired but the contractor has continued to work, the CO could argue that while he did not formally exercise the option on time he had provided the preliminary written notice and that the contractor’s continued performance shows that he had “constructively” exercised it with the contractor’s assent. Our third scenario is more problematic. The original period of performance expired and the contractor stopped working. However, the CO could argue that he issued a timely preliminary notice, his failure to exercise the option was an administrative oversight, not an intentional decision let the contract come to an end, and the two-week period in which the contractor had stopped work was very brief in comparison with the four months in Washington. That might be enough to distinguish the situation from Washington National. But while the third scenario might not fall squarely within the shadow of Washington National, it certainly falls within its penumbra. We suspect that in the first scenario, in which contract has not yet expired, the CO might get away with late exercise of the option. We are doubtful about the other two scenarios, especially the third. As Ralph and Steve Feldman discuss in 1 GOVERNMENT CONTRACT CHANGES § 11:34 (2013), the boards and courts have, on occasion, treated the improper exercise of an option as a constructive (within scope) change, even though continued performance could have been ordered under the “Changes” clause. See, e.g., Griffin Services, Inc., ASBCA 52280, 02-2 BCA ¶ 31943, 2002 WL 1788533, and General Dynamics Corp., ASBCA 20882,77-1 BCA ¶ 12504, 1977 WL 2191. In one case, Alliant Techsystems, Inc. v. U.S., 178 F.3d 1260 (Fed. Cir. 1999), the contractor asserted that the exercise of an option was improper and ineffective and submitted a claim seeking a declaration that it was not required to perform. The Government terminated the contract for default when the contractor refused to perform as demanded by the CO. The Federal Circuit held that the exercise of the option had not been in accordance with the clause and was thus ineffective. However, the court also held that under the “Disputes” clause the contractor had been required to “proceed diligently” with the CO’s order to perform pending final resolution of the claim, because the claim arose under that clause and was thus a claim “arising under” the contract. We have no idea whether such administrative oversights happen often. We suspect that when they do happen the parties simply complete the paperwork after the fact and go on about their business, which seems a reasonable thing to do in light of the disruption and amount of work that would follow from a decision not to do so. Moreover, it seems unlikely that a prospective protester would become aware of what happened. Of course, such oversights should not happen at all. VJE
  3. Tracking LOE in FFP subcontracts

    I'm not sure it makes a difference. Remember, the contract is cost-reimbursement. The contractor invoices on the basis of allowable cost incurred to deliver the level of effort. not by the hour at a fixed rate. There could be more to the cost of the level of effort than direct labor hours. If the subcontract cost is allowable, then the contractor invoices for it and the government reimburses up to the estimated cost or the total funds allotted.
  4. Invoicing for unworked hours under a FFP TO

    This is a classic example of a question to which the answer depends entirely on a close reading of the actual contract language as a whole. The question cannot be answered reliably on the basis of a secondhand description of what the contract says and the relating of a few facts, especially a muddled relating.
  5. Missed Option but Have a J&A

    What does what most COs would do, and what you have seen COs do, have to do with the points that I have made? Well, if you think that four hours or half a day is a significant savings of time, then I won't argue. Huh? Look up far-fetched and implausible. Really, FrankJon, that's a hoot. This: It is well established that out of scope work can be added to a contract through bilateral modification. FrankJon, I don't understand why you have posted in this thread. I don't know if you are trying to understand one of my points, trying to dispute one of them, or are trying to make a point of your own. But I'll continue with you if you have anything useful to say.
  6. Invoicing for unworked hours under a FFP TO

    @MAY-D-FAR-B-WIT-U It is not possible to answer that question based on the information that you provided.
  7. Missed Option but Have a J&A

    What are you talking about? If a CO fails to exercise an option in a timely manner, a contract extension would be, by definition, out of scope. Extending such a contract on a sole source basis would be a new procurement requiring a J&A and all of the procedures and file documentation of any other new procurement, whether it is done by supplemental agreement mod or a new contract document with a new contract number. The OP, fedcontract, understands that. As I told the fedcontract, the difference would be mainly clerical and not worth arguing about. All the same, it's ridiculous for his legal office to object to a supplemental agreement solely on the ground that the period of performance has expired, and I see no reason to put up with ridiculous objections from a legal office. Especially from a legal office. I expect more from them. Again, doing a bilateral mod instead of a new procurement would not be that much simpler. In fact, after so much time had passed it probably would be easier to write a new contract than a supplemental agreement. In any case, since the mod would require a J&A, do you think the CO would wait three or four years to request approval to extend a service contract on a sole source basis? If he did, do you think he would get it? Do you think the contractor would agree to the same prices as had been stipulated for the three or four year old expired option? Please don't waste my time with half-baked reductio ad absurdum arguments. Huh? In light of what I've said, how would extending the contract by supplemental agreement instead of by preparing a new contract document circumvent CICA? Read the thread again.
  8. Missed Option but Have a J&A

    What do you mean by "expired contract"? When does a contract "expire"? I know when the completion or delivery schedule or the period of performance of a contract expires, but many contractual obligations continue in effect for years after those dates. Liability for latent defects might continue for up to six years after delivery. The contractor's right to submit a claim to the CO continues for six years after the event which commenced the accrual of the claim. Obligations under warranties may remain in effect for many years. Obligations to retain records and cooperate with government auditors remain in effect for years after final payment. So when does a contract "expire"? I know of no statute, regulation, or common law doctrine to the effect that the parties to a government contract cannot extend that contract after the delivery schedule or the period of performance has expired. Go down to your legal office, go to the cubicle of the person who says that you can't modify an "expired contract", and demand that he or she show you the law, regulation, court, or board decision that supports their contention. If you can modify a contract years after the period of performance has expired in order to settle a claim, you can modify it after the period of performance has expired in order to extend that period. If the person in your legal office insists that you can't, demand that they show you where it says so.
  9. Missed Option but Have a J&A

    I don't agree with it, either. But why argue about it? There is no law or regulation about it that I know of. The difference in your case between issuing a mod and writing a new contract is mainly clerical. A new contract might be a little more paperwork, but not enough more to make it worth arguing about. P.S. You intended to exercise the final option, not "issue" it.
  10. Missed Option but Have a J&A

    How old is the old contract? If FAR or your agency supplement prescribes different clauses or newer versions of the old clauses, or if new policies otherwise apply, then the proper thing to do is update the contract terms accordingly. You can do that by bilateral modification of the old contract or by issuing a new contract.
  11. Tracking LOE in FFP subcontracts

    Extra funding? I don't understand what you're talking about. I presume that the contractor included the cost of the subcontract in its estimated cost for the LOE. Or maybe the contractor's upper management will want to assign the employees to other work or cut them loose.
  12. Default Clause to extend Period of Performance

    Emphasis added. Pursuant to FAR 52.236-2(a)(1), that's a Type I differing site condition: But since, according to the "case in point", a redesign will be necessary, the appropriate clause to use would be the Changes clause, FAR 52.243-4. The "case in point" cannot be resolved under the Differing Site Conditions clause, the Suspension of Work clause, or the Default clause, because none of those clauses authorize the CO to make the necessary design changes. Use of the Differing Site Conditions clause is appropriate when a differing site condition will impact the contractor, but not require changes to the design. Since the contractor must perform in accordance with a changed design, and if the change might cause an increase or decrease in the cost of or in the time required for performance, then the contractor might be entitled to an equitable adjustment, including profit---remedies that neither the Suspension of Work clause nor the Default clause provide. See? Plain English. My issue about researching cases is not whether cases might be useful. They can be very useful in the right hands. The issue is time and know-how. Unless a CO is a lawyer, or otherwise very experienced in finding and analyzing cases, it is better for him or her to start with a secondary source---a hornbook or other treatise, such Administration of Government Contracts or Government Contract Changes---than it is to start researching and citing cases in support of arguments. A good secondary source will provide appropriate case citations and explain the cases.
  13. Default Clause to extend Period of Performance

    @Construction CO: I recommend against researching and reading cases. Look, the plain language of the clauses supports your position about time extensions under the Default clause. You don't need any $&*# cases. Tell those people that if they can't understand the simple English of the clauses to read a book on the subject, like Cibinic, Nash and Nagle or Nash and Feldman. Keep in mind, however, that you may not correctly understand the point that they are trying to make. So make sure that you do before you tell them to get lost.
  14. Default Clause to extend Period of Performance

    The following is from FAR 52.243-4(d): We're talking Contracting 101---a matter of plain English. There are professional books that discuss this matter. See e.g., Administration of Government Contracts 4th. If your IG and DBO (whatever that is) told you that the Changes clause does not authorize a time extension under any circumstances, they are simply not qualified for their jobs. I still don't see what there is to discuss, other than the professional ignorance of some of your organization's staff. Of course, there is always that chance that you have misrepresented or incompletely reported their views. We're hearing only your side, and as you've already acknowledged, you previously failed to relate all of the pertinent facts.
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