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Bid Options Service Contracts


dkubis

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Has anyone done bid options similar to ones used in construction contracting in a service contract? We're trying to do some demo work, 90% demo, 10% site restoration as a service contract but the PM wants to put bid options on the schedule. We have a problem here in this office which primarily does construction by incorporating construction terms into our services contracts. For instance on past services contracts we've tried to make progress payments or withold retainage. I'd like to hear from someone familiar with both Services and Construction contracting.

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dkubis,

Are you talking about options, as in, FAR part 17? If so, I dont see any problem with using them. See the definition of "option" at FAR 2.101.

?Option? means a unilateral right in a contract by which, for a specified time, the Government may elect to purchase additional supplies or services called for by the contract, or may elect to extend the term of the contract.

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I still don?t see a problem using bid alternates for services. Perhaps you could provide a reference that ties it specifically only to construction. I think many times offices assume certain practices are for one thing only. For example, someone once told me that sealed bidding could only be used for construction.

On another note you mentioned progress payments on contracts for services. Why couldn?t you do them?

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It's because progress payments on the services side are considered contract financing. There isn't a progress payment clause that allows for progress payments on services. We wouldn't want to pay a contractor 30% of a job and then they just quit on us. Let's say it was for landscaping and they only cut 30% of the grass in a big field, what good what that do us? We pay what the bid schedule says, lump sum, job, deliverable, but not percentage complete.

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It's because progress payments on the services side are considered contract financing. There isn't a progress payment clause that allows for progress payments on services. We wouldn't want to pay a contractor 30% of a job and then they just quit on us. Let's say it was for landscaping and they only cut 30% of the grass in a big field, what good what that do us? We pay what the bid schedule says, lump sum, job, deliverable, but not percentage complete.

I have to disagree with you that there isn?t a progress payment clause for services. Take another look at your clause matrix and the prescriptions in the clauses; 52.232-13 through 17 for example.

Your example of the grass cutting could go the same for construction. What good does it do us to build 30% of a building?

An example of a service that I could see progress payments on is building demolition. Imagine a contract to demolish a large structure like a bridge or hospital. Assuming we are paying them not vice versa wouldn?t you think progress payments were appropriate?

Do you have a reference stating bid alternatives are only for construction?

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The payments clause does not allow for progress payments for fixed price service contracts. You have to pay for supplies delivered or for services rendered. You couldn't say you're 30% done with demo so we'll pay you 30%. You can however setup line items and split the demo work up such as demo buildings 1-3 and 4-6 and when they are finished on those line items they can ask for a partial payment on those line items only.

On the example you gave on a construction contractor only finishing 30% of the building we have certain remedies to fix that. Maybe we withheld retainage or maybe we need to go to their performance bond to finish the job. Also, the payment clause for construction allows for progress payments.

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You continue to say that you can?t progress pay service contracts but provide no reference. Please take a look at the clause matrix at FAR 52.301 it clearly identifies that fixed price service contract can have progress payments.

I would venture to say most people are more familiar with options on service and commodities contracts that construction. I am just speaking from personal opinion though.

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Guest carl r culham

It seems that the debate between you two is with regard to a progress payments based on "cost" versus a progress payment based on a "percentage or stage of completion". Rather than referencing the FAR Matrix it seems the full FAR Part 32, or at least FAR 32.1 and 32.5, would be a better read to sort out the view on where it is appropriate to use either type of progress payment.

With regard to the original question raised has any thought been given to wording the proposed solicitation/contract where the construction payments allowed by FAR 52.232-5 apply to the construction line items of the contract and performance based payments apply to the optional service line items of the contract (FAR 32.10 and FAR 52.232-32)?

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Guest Vern Edwards

What a mess this thread is!

dkubis:

1. How are you going to conduct this procurement? Part 13? Part 14? Part 15?

2. You have used two terms: "bid options" and "bid alternatives." What are you talking about? Do you really want to give offerors an opportunity to bid on "alternatives"? Or do you mean additive bid items?

3. What kind of services are you talking about? Are you talking about a single job or severable monthly services? If severable monthly services, why are you talking about progress payments? If you're talking about a single job and you are contracting pursuant to FAR Part 15, then why not performance-based payments under FAR Subpart 32.10?

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What a mess this thread is!

dkubis:

1. How are you going to conduct this procurement? Part 13? Part 14? Part 15?

2. You have used two terms: "bid options" and "bid alternatives." What are you talking about? Do you really want to give offerors an opportunity to bid on "alternatives"? Or do you mean additive bid items?

3. What kind of services are you talking about? Are you talking about a single job or severable monthly services? If severable monthly services, why are you talking about progress payments? If you're talking about a single job and you are contracting pursuant to FAR Part 15, then why not performance-based payments under FAR Subpart 32.10?

Vern,

We're going to go with Far 13, Services for demoliion work and a small part landscaping. We want to solicit for bid options for work that can be done when funding becomes available. We do not want to provide contract financing. We will not pay for percentage complete. A lot of people get confused about this since this has a "construction" feel that we would pay percentage complete on the demolition and landscaping work. Since this project will take months to do we might break up the work into jobs, such as separting the buildings to be demo'd and pay per building as the contract progresses.

I guess the original question was can we use bid options that are in construction contracting for services contracts. It was just because I have never used bid options in service contracts except for extending the period of performance. Far 17.2 Options actually says that subpart does not apply to contracts for "(a) services involving the construction, alteration, or repair (including dredging, excavating, and painting) of buildings, bridges, roads, or other kinds of real property;" But it reads below "However, it does not preclude the use of options in those contracts."

I did not see that part until later so it appears you can use bid options for services that involve construction.

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Guest Vern Edwards

I don't recognize the term "bid options." What I think you meant was "additive bid items," but I'm not sure.

You can include options for additional work in your solicitation and contract. Dismantling, demolition, and removal is not "construction, alteration or repair." It is a service. See FAR Subpart 37.3. So FAR Subpart 17.2 applies. FAR Subpart 17.2 would not apply to additive bid items.

As for payments based on percentage completion, you do not have a choice. A contractor is entitled to progress payments based on percentage completion under contracts for dismantling, demolition, and removal. See FAR 52.237-4, Payment by Government to Contractor, which is used in demolition contracts.

Why you would mix demolition with landscaping is not immediately clear to me, but I suppose that you have your reasons.

It appears to me that you are venturing into a field of contracting, demolition, that you do not know much about. You had better do some studying.

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We correspond the term bid options to the definition of options under 2.101 where we may at a later time elect to purchase additional services unilaterally when funding becomes available. Based on your description, these would not be additive bid items. It would be more correct to just call them options.

I did not know about the progress payments clause for demolition.

The project is demolition with site restoration. The reason why site restoration is called landscaping is because we don't want to make this a construction contract. At least that's the theory behind it. We are asking them to demolish buildings and restore the land instead of just leaving a bunch of dirt or some big holes.

You're right, I have never done demolition contracting so any help would be great.

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Guest Vern Edwards

Allow me to suggest that it would be the act of a dishonest and stupid person to describe work as landscaping in order to avoid laws and regulations if, in fact, the work is construction. You don't come across as dishonest or stupid. So if part of the work is construction, then own up and follow the rules.

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