Jump to content
The Wifcon Forums and Blogs

rios0311

FAR 17.204(d) - Exercising an Option After POP Has Expired

Recommended Posts

Does FAR 17.204(d) provide authority to exercise an option after the contract's period of performance has expired in cases where funds are not available at the expiration of the POP, but will become available in the following fiscal year? When I read it that's what it seems to suggest.

I'm basing my question on a contract clause included in the contract that's the subject of Arko Executive Services, Inc. v. U.S., 78 Fed. Cl. 420 (2007). The document references Section F.4.3 of the government's contract:

"F.4.3 The Government may exercise the option set forth at Subsection I.1.1, “FAR 52.217-8, Option to Extend Services”, within the currently ongoing period of performance or within 30 days after funds for the option become available, whichever is later."

The part that stands out to me is the last part of this section (...or within 30 days after funds for the option become available, whichever is later). I interpret this to mean that if funds do not become available until after the period of performance has ended, the government could essentially "revive" the contract by exercising the option within 30 days (in Arko's case) of the funds having become available. Is this correct? Is this allowable?

The document references FAR 17.204. I notice that paragraphs ( B), ( c) and (d) all reference "the period". If "the period" referred to in ( c) and (d) refer to the same period referred to in ( B); i.e., the period within which the option may be exercised, then (d) answers my question since it states that "The period [within which the option may be exercised] may extend beyond the contract completion date for service contracts" and it continues to explain why this is permissible.

But this creates another question for me. ( c) states that "The period shall be set so as to provide the contractor adequate lead time to ensure continuous production". Note the use of the word "shall". Providing the contractor with adequate lead time is compulsory. Based on this, it would seem that section F.4.3 of the governments contract with Arko was too broad when stating the period within which the option may be exercised, or the clause isn't specific enough. "Within the currently ongoing period of performance", as stated in the contract, could include the last day of the period of performance. How can exercising the option at FAR 52.217-8 on the last day of the period of performance without any requirement of a preliminary notification (such as that required by FAR 52.217-9) provide the contractor adequate lead time?

In fact, if it is permissible for the government to exercise the option up to 30 days (in Arko's case) after the contract's period of performance has elapsed because funding doesn't become available prior to the period of performance ending, how would the contractor know that the government intends to exercise the option without some sort of preliminary notification? How does this provide any sort of lead time to the contractor? What does the contractor do in the interim (between the date the contract ends and the date that the option is exercised, assuming funds became available) if he is operating in a remote area?

To recap, my question is the following: is it permissible to fill in the blanks on either 52.217-8 or 52.217-9 to allow for exercising an option within "X" amount of time after the contract completion date on service contracts if funds are not available at the time the current period of performance ends? And if doing this with 52.217-8, although not required by the FAR, should we provide a similar notice to the contractor as the one required by 52.217-9?

Could it be that the ability to do this (exercise an option after the end of the POP) was intended to be reserved only for 52.217-9 since it is the only clause that requires a preliminary notice to the contractor? And one other thing; could Arko's case have been helped had it based its suit on not having been provided adequate lead time? One could argue that 27 days notice does not provide sufficient notice to a contractor operating in a remote area.

Share this post


Link to post
Share on other sites
To recap, my question is the following: is it permissible to fill in the blanks on either 52.217-8 or 52.217-9 to allow for exercising an option within "X" amount of time after the contract completion date on service contracts if funds are not available at the time the current period of performance ends? And if doing this with 52.217-8, although not required by the FAR, should we provide a similar notice to the contractor as the one required by 52.217-9?

You answer your own question. While the main point of Arko was contending the difference of the use between 52.217-8 and 52.237-3, you are contending a certain provision of when the option may be exercised. FAR 17.204(d) states very plainly that "The period may extend beyond the contract completion date for service contracts." So why would that not allow you to enter a time after completion of an option period to allow for funds to become available?

However, your question is not pertinent to 52.217-8, as that is not the point of the clause. The answer is pertinent to 52.217-9, which is allowing for the extension of the term of the contract, which you would use when exercising an option. As the Arko decision makes very clear, the point of 52.217-8 is to allow the contracting officer flexibility to extend the term of service contracts for up to six months in order to prevent frequent short term extensions while the effort is re-competed. So, your question would be better directed only at 52.217-9 as opposed to 52.217-8, which is to be used when the contract is ending, not when you are giving notice to exercise an option period that exists on the schedule already.

*52.217-8, as asserted in Arko, is to be used in circumstances that are out of the Contracting Offices control, such as delays resulting from bid protests or alleged mistakes in bids. It is clear that the point of 52.217-8 is to allow for the contracting office to extend the current contract at the current rate and limits being performed in order to allow for a negotiation to end and [potentially] new contractor to start work.

Could it be that the ability to do this (exercise an option after the end of the POP) was intended to be reserved only for 52.217-9 since it is the only clause that requires a preliminary notice to the contractor?

See my answer above, yes, it appears that 17.204(d) is not directed towards 52.217-8. You are giving the contractor preliminary notice that you are going to exercise an option period on the contract, and therefore giving them notice that you will be exercising it for an additional year.

And one other thing; could Arko's case have been helped had it based its suit on not having been provided adequate lead time? One could argue that 27 days notice does not provide sufficient notice to a contractor operating in a remote area.

Where does the FAR require that seperate notice be required to a contractor operating in a remote area? If Arko had taken the time to understand the clauses they were agreeing to in the contract, they would have negotiated a sufficient lead time in the first place, not a lead time that was "within the currently ongoing period of performance or within 30 days after funds for the option become available, whichever is later."

Arkos cause appears to have been flawed from the getgo because there basis hinged on calling the extension of services "phase in, phase out" services instead, when they were clearly an extension of currently provided services and not services to provide a new contractor training in order for continuity of services to be provided. They also did not understand what "current rate and limits of the contract" meant.

Share this post


Link to post
Share on other sites

Thank you for your answer. If I understand you correctly, an option can be exercised after the period of performance has ended in order to allow funds to become available:

FAR 17.204(d) states very plainly that "The period may extend beyond the contract completion date for service contracts." So why would that not allow you to enter a time after completion of an option period to allow for funds to become available?

Assuming that the clause was correctly completed, it seems that this can essentially "revive" an otherwise dead contract. If so, this is news - and very interesting - to me and to several of us at our agency, including the attorney I discussed it with.

My uncertainty with this interpretation - before receiving your answer - derived from the definition of "the period", as used in FAR 17.204(d). I have seen where the term "the period" in the very same section is given a different interpretation (relating to the period of performance of an option) as in:

"4. If a task order includes options, then that task order “shall state the period with within which the option may be exercised. The period may extend beyond the contract completion date for service contracts.” FAR 17.204(B),(d). Nothing in FAR SubPart 17.2 requires that an IDIQ contract be still in effect as a condition for exercising a task order’s option. If fact, it is the order’s option that controls the order’s performance. Why else would FAR SubPart 17.2 permit an order option to extend beyond the contract’s completion date unless that order option could then be exercised? An option that cannot be exercised is certainly useless." That paragraph was sourced from http://interact.gsa....schedule-orders

I favor your use of the term "the period" because it seems to have been defined in 17.204(B) "The contract shall state the period within which the option may be exercised." As for my other question regarding adequate lead time, I assumed (apparently incorrectly) that FAR 17.204 applied to 52.218-8 equally.

Share this post


Link to post
Share on other sites
Assuming that the clause was correctly completed, it seems that this can essentially "revive" an otherwise dead contract. If so, this is news - and very interesting - to me and to several of us at our agency, including the attorney I discussed it with.

How does your lawyer interpret it? A) I'm curious to see how someone who studies/practices law interprets this and B) I would err on the side of caution and go with what your lawyer interprets this as. I am not a lawyer, so my interpretation would mean nothing if this was somehow protested.

Share this post


Link to post
Share on other sites

A contract is not "dead" as long as rights and duties continue in effect and the contract has not otherwise been discharged. Exercising a valid option after the ordering period or performance period has expired does not "revive" a "dead" contract.

Share this post


Link to post
Share on other sites

Vern, your last response brought me back to where I started. Since you contend that exercising a valid option after the ordering period of performance period has expired does not "revive" a "dead" contract, please interpret two things for me:

- The term "the period" as used in FAR 17.204(B),(c ) and (d),

And

- The meaning of FAR 17.204(d) - The period may extend beyond the contract completion date for service contracts. This is necessary for situations when exercise of the option would result in the obligation of funds that are not available in the fiscal year in which the contract would otherwise be completed.

I must be interpreting this incorrectly, but if I define "the period" in (d) with the same meaning it is given in (B) of the same clause (period within which the option may be exercised), then I must interpret this section as providing authority to exercise an option after the contract completion date.

I played with the idea that the term "the period" in (c ) and (d) might mean the period of performance, but I notice that (a) of the same clause uses "duration of the term of the contract" to signify "period of performance". Why would a different meaning be given to a term used more than once in a clause when doing this could lead to a different interpretation?

Share this post


Link to post
Share on other sites

I'm not sure why you are having such a problem with FAR 17.204. Yes, it allow you to exercise an option to extend a service contract after the period of performance has ended. It clearly says that. So what?

The "period" referred to in FAR 17.204(B), ( c), and (d) is the period within which the option may be exercised. FAR 17.204(d) allows you to provide for a period that continues beyond the contract "completion date." The problem you seem to be having is not with the term "period," bit with the term "completion date." What does it mean?

FAR does not define "completion date," but in connection with 17.204(d) it apparently means the end of the period of performance. You wrote: "t seems that this can essentially "revive" an otherwise dead contract." "Dead is not a professional term. A contract continues in effect as long as there are rights and duties to be fulfilled. Duties remain after the period of performance has ended. The contract does not "end" with the period of performance.

Share this post


Link to post
Share on other sites

Thank you for clarifying that for me. I appreciate it! I will remember not to use the term "dead" when referring to contracts for which the period of performance has ended or which have reached their completion date.

Share this post


Link to post
Share on other sites
Guest
This topic is now closed to further replies.

×