Changing an option CLIN exercise expiration date

[tnt2k1]

Question: Can I modify the contract to change the exercise expiration dates for each Option CLIN? Is it allowed? Is it protestable?

Situation: Contract was awarded near the end of FY11 with several option CLINs because the customer wanted to fund them with FY12 money. Customer cannot get funding to exercise those option CLINs before the expiration date. Customer requests to move the option exercise expiration date to the right to buy itself more time to get money to fund those CLINs.

I searched everywhere and I saw topics regarding negotiation option CLIN prices, exercising option CLINs that already expired, but nothing on this topic. The reason why I'm asking the question and researching it because my contracting dept head believes the losing contractor could protest this if we change the option CLIN exercise date.

Thanks guys.

[Guest Vern Edwards]

I cannot think of anything wrong with extending the deadline for exercising an option.

[tnt2k1]

Thank you for the prompt response. Let me expand a bit further now:

It's been about two months since contract award and the exercise date is coming up in two weeks. So the loss is still very fresh to the losing contractor. The contractor could argue that by changing the exercise due date of the option CLIN, it can change the terms of the option CLIN. The potential protestor could also argue that by pushing the exercise option date to the right, it can alter a proposal because it can mitigate some risk and reduce acceleration costs to mobilize their resources in anticipation for that fast coming option CLIN.

Could the protestor have a case? Thanks!

[Guest Vern Edwards]

You are worried that if you try to change the deadline for exercising the option the contractor will want to change the option price. What you want to know is whether you could get away with changing the price if the loser protests. I don't think so. You will need to justify the lack of competition if you renegotiate the option price.

I don't see how pushing the option date "to the right," which I take to mean to a date later in the current period, will mitigate risk and "reduce acceleration costs," whatever that means. Pushing the date to later in the current period will increase the contractor's risk, not mitigate it. Or is that what you were trying to say -- that the contractor will want to increase the option price in order to mitigate the risk of a last minute extension?

Is this going to be one of those dreaded threads in which the initial poster keeps coming back with variations on the original theme?

[tnt2k1]

Sorry for making this sound confusing and no, this is not going to be one of those dreaded threads.

The problem lies with the losing contractor. By shifting the option CLIN exercise expiration date to a later date, could the losing contractor protest on the basis that a later CLIN exercise date could have improved their proposal?

[Don Mansfield]

I cannot think of anything wrong with extending the deadline for exercising an option.

Vern,

What if the deadline for the option exercise had passed? Do you think the parties could modify the contract such that the deadline would occur at a future date?

If your answer is no, then why do you think it would be ok for the parties to modify the option exercise date prior to its occurrence?

[Guest Vern Edwards]

Off the top of my head, I cannot recall any bid protest decision that precludes the exercise of an option after the deadline for exercise has passed as long as the underlying contract has not itself expired. Do you? If the contractor does not object, then I don't see a problem. That is no different than accepting an offer after it has expired. The GAO said, in Medical Development International, Inc., B-402198.2, 2011 CPD ? 185:

As a general matter, and as noted by the agency, it is not improper for an agency to accept an expired offer without reopening negotiations where acceptance is not prejudicial to the competitive system.

I cannot think how exercising an option after the deadline but while the contract is still in effect would be prejudicial to the competitive system.

I know of nothing in FAR that prohibits modification of a contract in order to extend the period within which an option may be exercised. I know of no protest decision that precludes the extension of the period within which an option may be exercised as the long as the contract itself is still in effect. Do you?

I think it is okay to bilaterally modify a contract to extend the period within which an option may be exercised as long as (1) the contract is still in effect at the time the modification is entered into and (2) the terms of the option itself -- e.g., price, quantity, performance period, etc., -- are not changed.

[Don Mansfield]

Vern,

No, I don't know of any such cases off the top of my head.

Why does it matter that the underlying contract still be in effect in order to exercise an expired option? Let's say an agency has a contract with sequential options and the CO fails to exercise one of the options on time. Why couldn't the CO exercise the option late (assuming the contractor is ok with it) and argue that she is just accepting an offer after it has expired?

[Guest Vern Edwards]

I think the GAO's position is that once a contract has expired any attempt to resurrect it is a new procurement and the CO must comply with FAR Part 6.