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Effective period of a requirements contract


longhornjoe

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My interest is in a commercial item procurement that utilized SF 1449 and also incorporated FAR 52.216-21 Requirements (Oct. 1995), 52.216-8 Ordering (Oct. 1995) and 52.217-9 Option to Extend (Mar 2000). The statement of work, however, provides that the contractor perform certain actions over a five-year period.

I am interested in defining or establishing the "effective period" of this contract, for purposes of the Requirements clause. The effective period of a contract incorporating the Requirements clause is important because this period should fix the period of time during which the Government must obtain its requirements from the contractor.

Assuming the contract on its face is a one-year base with four option years contract, but the scope requires that the contractor perform work in years two through five, could the effective period of the contract be five years? Under my example, the Government may issue delivery orders for up to five years. And if if the contract is a true option contract, the Government may exercise its option each year.

I've read Vern's June 22 and 26, 2009 blogs on the "effective period" of IDIQ contracts and "Task And Delivery Order Contract Period: It's Over When It's Over," 13 No. 7 NASHCIBINIC ¶ 37 (July 1999).

I agree with Vern's conclusion that the end of the effective period in the IDIQ contract example he examined is not defined in the Schedule (Sections A-H), but could be either the last date of ordering or the last date of required performance.

In my example, it appears to me that the only way to determine the end of the "effective period" is to go through a contract interpretation exercise of the contract documents to discern the parties' intent. A requirements contract provides for delivery orders as does an IDIQ contract, but there appears to me to be a different twist regarding the requirements obligation and how it plays into the "effective period." If the statement of work requires contractor performance in years three, four and five, is the last date of required performance the end of the fifth year?

This is also interesting because there are some cases that stand for the proposition that the terms of the contract may limit the Government's right to decline to exercise an option. If the Government had a five-year requirements obligation, perhaps such an obligation would require the Government to exercise options, subject to availability of funds.

Would appreciate any thoughts on this.

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Guest Vern Edwards

You're needlessly making this more complicated than it is.

The Requirements clause states that the effective period is stated in the Schedule. (That would be in Section F of the Uniform Contract Format.) It seems obvious to me that the effective period should be contemporaneous with the ordering period stated in the Ordering clause.

What you must extend when you exercise an option to extend the "term" of a Requirements contract are (a) the effective period, (B) the ordering period and ( c) the date in paragraph (f) of the Requirements clause. So write the option clause to change those dates. Note from the introduction to the option clause at 52.217-9 that you can modify it to accommodate those changes.

As for setting the date in paragraph (f) of the Requirements clause, logic dictates that it should be later than the last date of the ordering period. How much later? It depends on what you're buying.

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Thank you Vern. If I am making this more complicated, it is because I am not clear on a few things.

Doesn't the last comma that appears in the first sentence of 52.216-21(a) eliminate the Schedule as the sole source to define the effective period? I thought you reached this conclusion in your June 26 blog analyzing similar language from 52.216-22. If so, this begs the question, where is the effective period stated? But is this even relevant based on your comment that the effective period should be contemporaneous with the ordering period stated in the Ordering clause?

If I understand you correctly, for a contract with a base year and four option years, the dates intially fixed in the Requirements and Ordering clauses should be one year after award (or slightly later as you mentioned) and not for five years initially. Based on the Option clause, one could then extend these dates if and when an option is exercised.

But if the dates intially fixed in the Requirements and Ordering clauses provide for five years initially, would you consider the contract's effective period as five years, even before the options had been exercised? It appears to me that in this scenario the ordering period is five years.

Also, I do not understand the distinction between the "term" of a Requirements contract and its "effective period?"

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Guest Vern Edwards

Thank you Vern. If I am making this more complicated, it is because I am not clear on a few things.

Doesn't the last comma that appears in the first sentence of 52.216-21(a) eliminate the Schedule as the sole source to define the effective period?

Huh? No. Here's the sentence: "This is a requirements contract for the supplies or services specified, and effective for the period stated, in the Schedule." I read that to say that the effective period is stated in the Schedule. If we assume that "Schedule" means what it means with reference to the Uniform Contract Format, then the Schedule includes Sections A through H. Now see FAR 15.204-3, "Part I - The Schedule," paragraph (f) "Section F, Deliveries or performance," which states: "Specify the requirements for time, place, and method of delivery or performance... ."

I have always put times like effective period in Section F. If you want to put it somewhere else, be my guest. Putting it somewhere else will have no effect on the answer I gave you in the earlier post. The key is to make sure that the effective period makes sense in light of the ordering period and the last date on which the contractor is obligated to perform. That's important for Requirements contracts generally, but especially for Requirements contracts priced on a cost-reimbursement or time-and-materials basis.

I thought you reached this conclusion in your June 26 blog analyzing similar language from 52.216-22.

I don't know what conclusion you're talking about and I have no intention of going back to read my blog post. In any case, any conclusion I may have reached with respect to 52.216-22 would be about 52.216-22, not 52.216-21.

If so, this begs the question, where is the effective period stated? But is this even relevant based on your comment that the effective period should be contemporaneous with the ordering period stated in the Ordering clause?

What are you talking about?

If I understand you correctly, for a contract with a base year and four option years, the dates intially fixed in the Requirements and Ordering clauses should be one year after award (or slightly later as you mentioned) and not for five years initially.

You do not understand me correctly. I said nothing that should lead you to any such conclusion. You could make the effective period and the ordering period five years long if you wanted to do so. I don't know why you would, but that's your business.

Based on the Option clause, one could then extend these dates if and when an option is exercised.

The "term" of a Requirements contract is defined by three sets of dates: the effective period, the ordering period, and the first date of the ordering period and date in paragraph (f) of 52.216-21. If you are asking about an option to extend the term of the contract, then those are the dates that you must extend.

But if the dates intially fixed in the Requirements and Ordering clauses provide for five years initially, would you consider the contract's effective period as five years, even before the options had been exercised? It appears to me that in this scenario the ordering period is five years.

I would consider the effective period to be whatever effective period is stated in the Schedule. If you do not state an effective period in the schedule, then the meaning of effective period would be open to interpretation. No competent CO would leave it open to interpretation. If I were the CO, and if the ordering period were five years in length, then I would make the effective period five years in length.

Also, I do not understand the distinction between the "term" of a Requirements contract and its "effective period?"

The Requirements clause, the Ordering clause, and the Option to Extend the Term of the Contract clause at 52.217-9 do not use the same words. The Requirements clause uses "effective... period," the Ordering clause does not use the phrase "ordering period," but that is what it is defining. The option clause says "term of this contract." There are no official definitions of those phrases.

The FAR is not a perfect system. The clauses were written by different persons at different times and the writers did not always reconcile their language with other FAR language. You have to use your head, think, and resolve inconsistencies when writing your solicitations and contract documents. The idea is to ensure clarity and definiteness and to avoid ambiguity so as to avoid conflicting interpretations. That's why agencies hire contract specialists, who are supposed to take care of those kinds of problems.

Read the three clauses together. Think. Do what makes sense. All the indefinite delivery contracts have these kinds of problems with respect to dates.

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