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Use of 52.217-8 extend services with option years still on contract

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Question: Can a CO exercise 52.217-8 at the expiration of an option year when there are available future option years left on a contract but not enough funding to exercise future option years?

Scenario: Contract for services had 1 base year and 4 option years. The base year was performed and the CO exercised the first option year. At the end of the first option year, the CO was informed by the program office that sufficient funding was not available for a 2nd option year. The contract was going to expire and the CO did not have a replacement contract in place. The CO did not have adequate time to award a replacement contract.

The CO began the procurement process for a new contract. During that time, the CO exercised the clause 52.217-8 a total of 5 times, first for 2 months, then 4 more exercises of 1 month each, totaling 6 months. The clause was unmodified from the version provided for in the FAR.

Discussion:

The CO contends that this is a valid exercise. FAR 17.207 states, among other things, that the CO "may exercise options only after determining that -- (1) Funds are available." Funds were not available for the 2nd option year, so the CO could not have exercised the 2nd option year. If a future option year cannot be exercised, the contract will expire at the conclusion of the current period of performance (in this case, the POP was defined in the option year 1 CLIN).

FAR 37.111, Extension of services, permits the CO to include an option clause described in 17.208(f) "which will enable the Government to require continued performance of any services within the limits and at the rates specified in the contract" noting that "award of contracts for recurring and continuing services are often delayed due to circumstances beyond the control of contracting offices". FAR 17.208(f) states to insert a clause substantially the same as 52.217-8, Option to extend services, "in contracts for services when the inclusion of an option is appopriate" While FAR 37.111 provides examples (bid protests, alleged mistakes in bids), those examples are not exhaustive. Rather, the requirement seems to be whether an 'award for a contract for recurring and continuing services was delayed due to circumstances beyond the CO's control'.

Vern Edwards published two articles in the Nash & Cibinic Report in June 2007 "When the Government can choose among options: let the contractor beware" and November 2007 "Postscript: When the Government can choose among options" (21 N&C 6 and 21 N&C 11, respectively).

In the first article, Vern describes a contract very similar to what I mention above. In that case, the "Government exercised the first three options, but during the third option term (fourth contract year), the Contracting Officer notified the contractor that instead of exercising the fourth extension option the Government would exercise its option under the clause at FAR 52.217-8 ... and conduct a new procurement." Later in the article, Vern states "it appears that the clause is intended to be used as a stop-gap measure when circumstances beyond the control of the contracting office delay the award of a new contract. But in this case, the matter was entirely within the control of the contracting office, which chose not to exercise the FAR 52.217-9 option." In the second article, Vern wrote that "the FAR 52.217-8 option clause is for use at the end of a contract when the award of a new contract is 'delayed due to circumstances beyond the control of contracting offices.'"

Taking the FAR provisions, articles, and decsisions together, I think it's plausible to distinguish my hypothetical with the one in the article. In the present fact pattern, the CO did not have the authority to exercise 52.217-9 and doing so was not within the CO's control or discretion. The contract was nearing its end of the POP, even though there were future option years. Under those circumstances, is it reasonable and permissible for the CO to use 52.217-8 as a stop-gap to get a new solution in place, even though the contract had future option years?

Thank you in advance. I can answer questions or provide more details if necessary.

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Also, another way to ask the question: Does an agency have to exhaust all available options under a contract before exercising a 217-8 extension?

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Question: Can a CO exercise 52.217-8 at the expiration of an option year when there are available future option years left on a contract but not enough funding to exercise future option years.

The answer is yes. See Arco Executive Services, Inc. v. U.S., 78 Fed. Cl. 420 (2007). In that decision the court relied entirely on the language in the option clauses and ignored FAR 37.111. See also Griffin Services, Inc., ASBCA 52280, 02-2 BCA para. 31943. The plain language of the -8 clause does not limit its use to any particular purpose.

In the two articles that you mentioned I disagreed with the court and the board. But I'm not a judge, so who cares what I think?

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Vern, thanks for answering so promptly. As a frequent lurker here and reader of the source selection answer book, I care what you think ;D

I read primarily Arko Executive Services, Inc. v. U.S., 553 F.3d 1375 (C.A.Fed. 2009) which is the appeal from the final order in 78 Fed. Cl. 420.

I will incorporate In re Griffin Services in the analysis.

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The Government may require continued performance of any services within the limits and at the rates specified in the contract. These rates may be adjusted only as a result of revisions to prevailing labor rates provided by the Secretary of Labor. The option provision may be exercised more than once, but the total extension of performance hereunder shall not exceed 6 months. The Contracting Officer may exercise the option by written notice to the Contractor within _____insert the period of time within which the Contracting Officer may exercise the option

The usage of 52.217-8 allows for the extension of services at the rates specified in the contract (i.e. the current year of performance). The rates can only adjusted if the labor categories being used are controlled by rates provided by the Secretary of Labor. This is making a complete assumption, but it could be that the Program Office had money for the effort to be performed, but not enough to pay for the option year while also believing that re-competing the effort would give them a lower price. So they extended using 52.217-8 and re-competed the effort in hopes of a lower price.

That would be quite an assumption of them to make if true, and I would hope was backed up by some thorough market research indicating so.

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Not to sound argumentative, but the SCA is not applied if they are "exempt" employees on professional, executive or administrator positions... which we cannot answer based on the information provided.

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Yes, the scope of the next contract was reduced to reflect funding limits imposed by the program office's funding source and guidance on the appropriate level of services. The contract, as in Arko, was for guard services.

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I may have, but I don't remember. I'm so ashamed.

I'll check when I get a moment. But in any case, the common law of contracts requires that in order to be binding on the contractor an option must be exercised in strict accordance with its terms. It cannot be partially exercised, unless the option itself provides for that.

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I may have, but I don't remember. I'm so ashamed.

I'll check when I get a moment. But in any case, the common law of contracts requires that in order to be binding on the contractor an option must be exercised in strict accordance with its terms. It cannot be partially exercised, unless the option itself provides for that.

Vern, I believe that this is your Blog post:

http://www.wifcon.com/discussion/index.php?/blog/2/entry-3039-exercising-options-there-is-more-to-it-than-just-the-far/

Your blog entry clearly answers Wolverine70's 4 November post #11 question.

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