Jump to content
The Wifcon Forums and Blogs

CO1559

Extending Period of Performance of a Completion Contract

Recommended Posts

My organization intends to extend the period of performance of a cost type completion contract beyond the original awarded performance period in order to allow more time to complete the contract scope. The contract is for completion of a project. The contract has no option periods and the period of performance exceeds five years. I am preparing an extension request for senior level review and am struggling to locate regulatory or statutory authority to support extending my completion contract beyond the stated term.

Comparing FAR 16.306(d)(1) and (2), it is implied that I can extend the completion contract without it being a new acquisition.

I researched WIFCON and found a post which started on April 1, 2003 titled “Changing Period of Performance after Award.” In that post, Vern Edwards stated the following to “CO4AF”: “… This (restructuring a period of performance beyond the scope of existing contract) must be distinguished from a situation in which the period of performance is extended to give the contractor more time to complete a project, which is not a new procurement and does not change the scope of the contract.”

Can someone point me towards authority to support extending this contract without competition or a Part 6 justification?

Share this post


Link to post
Share on other sites

The authority depends on the reason for the completion delay.

Under a cost-reimbursement contract, the contractor is required to complete nonseverable work not later than the stipulated completion date as long as the Government provides funds. If the contractor did not complete the work on time, then the question is why not? Did it run out of money and did the government take too long to provide additional funds? Did the government interfere with its performance in some other way? Did it perform poorly? Was there an act of God?

If there was an "excusable delay," then the authority to extend the period of performance would be the excusable delay clause, FAR 52.249-14. If there was no excusable delay, then the contracting officer can terminate for default or give the contractor additional time to complete the work in return for some consideration. See FAR 49.402-4.

Competition is not an issue in a case when the Government extends the period of performance to allow completion of nonseverable work (e.g., a project). A schedule extension to allow the contractor to complete the specified work is not a new procurement and requires no new competition. When services are severable, any extension requires new competition or a J&A for other than full and open competition.

Share this post


Link to post
Share on other sites

Thank you for the analysis.

The Government has issued numerous change orders that have extended the time needed to complete the project, and several differing site conditions have also extended the schedule. However, we have dealt with these changes without impacting the contract end date. Recently the Government made a decision to reduce promised funding for the fiscal year, and this funding reduction is the driver to the schedule slipping beyond the current contract performance period. That appears to be an excusable delay under 52.249-14.a.2. The contractor is performing well.

I’m not sure if the services are severable. I found a definition of severable on a dau website that quotes the Red Book (Vol 1, chapter 5), and also offers that “a service is non-severable if the service produces a single or unified outcome, product, or report that cannot be subdivided for separate performance in different fiscal years.”

(https://dap.dau.mil/...estionID=106277)

My agency treats this as a project with a defined completion in terms of scope, i.e. “a single or unified outcome.” However, under the definition above, the services appear severable because the project is made up of numerous completion goals that lead up to a final completion outcome, but that could be subdivided. For example, some of our changes have removed significant pieces of scope.

Share this post


Link to post
Share on other sites

No, no, no. Intermediate progress/phase/stage goals do not make the service severable.

Severable services are ongoing or recurring in nature. See Financial Crimes Enforcement Network-Obligations under a Cost-Reimbursement, Nonseverable Services Contract, GAO B-317139, June 1, 2009:

A severable service is a recurring service or one that is measured in terms of hours or level of effort rather than work objectives.

See also the GAO's letter to Representative Jerry Lewis (no joke), GAO B-287619, July 5, 2001:

Nonseverable services involve services that represent a single undertaking, or, in other words, provide value when the entire project is complete. Severable services generally involve continuing or recurring services often reflecting the day to day operational needs of an agency.

See also Funding for Air Force Cost Plus Fixed Fee Level of Effort Contract, GAO B-277165, January 10, 2000:

[W]here the service provided constitutes a specific, entire job with a defined end-product that cannot feasibly be subdivided for separate performance in each fiscal year, the task should be financed entirely out of the appropriation current at the time of award, notwithstanding that performance may extend into future years. B-240264, February7, 1994. Thus a nonseverable contract is essentially a single undertaking that cannot feasibly be subdivided.

A change in the project funding profile would indeed by an excusable delay.

Share this post


Link to post
Share on other sites

Just remember that a service is severable when it is in the nature of an ongoing, recurring activity, and it can be broken down into discrete units of time, each of which is independent of the others. When an undertaking has a beginning and an end and produces a unitary outcome that was specified at the outset, then it is nonseverable (or "entire"), even if can be broken down into stages or phases.

When a service is severable, then extending the period of performance is like buying more, which would be out of scope. On the other hand, extending the period of performance of a nonseverable project allows the contractor more time to complete the specified undertaking, but does not buy more of anything -- there is no new procurement to be synopsized and competed and no need for a J&A.

Share this post


Link to post
Share on other sites

Your advice has been a great help to me, thank you! I'll next be researching cardinal changes, because there may be a desire to change the type of contract going forward. For example, from a CPAF to a CPFF, etc. In other words, the contract will still be cost type, but certain parties want the fee determinatin scheme to change. The current idea includes making a final determination for fee earned up to the end of the current performance period, and then the modified fee determination scheme would kick in for the extension. Except for periodic change orders that may occur during the extension, all work going into the extension was included in the original solicitation.

Share this post


Link to post
Share on other sites

Vern,

Could I ask you for some clarification. I'm not a contract specialist but I'm policy and I have a question about whether it is a requirement to extend the work completion date if the contractor has delivered the non-severable item ordered and is working on clearing his discrepancy list. Apparently when transporting systems, it is not unusual to have little things go wrong. I think we're talking things like replacing a light that isn't working and an electrical component that is "iffy". The item has been technically accepted by the project manager but has not reached the standard needed to declare it fully operational.

What is the requirement in that kind of situation?

Share this post


Link to post
Share on other sites

summerlady51:

This is a matter of contract law, not regulation.

I'm not sure, but it sounds to me that the work might be "substantially complete," or that there has been "substantial performance," but not perfect performance. If that is the case, then you must extend the contract in the sense that you cannot declare the contractor be in default or assess liquidated damages, and you must pay the contractor in full once the remaining work is done. If the work is substantially complete, then you don't need consideration in order to waive the stated delivery date.

If the contract is fixed-price, then you don't have to formally modify the contract -- whether you do or not is largely a matter of local practice. However, if the contract is cost-reimbursement you might have to do so in order to avoid cost allowably issues with respect to work done after the expired performance period.

Three key questions:

1. What kind of work?

2. What type of contract?

3. Do you believe that the work is substantially complete or that there has been substantial performance?

Share this post


Link to post
Share on other sites

Summerlady, I am confused by your post. Are you saying that the government accepted the items at source, had them shipped to a government destination and discovered that there were defects in them when they arrived at destination? If this is not what you meant, can you clarify the situation in regard to acceptance, i.e., when and where it occurred and whether the defects were discovered before or after acceptance?

Share this post


Link to post
Share on other sites

We purchased a simulator for over $20M and had it built to our specifications. The vendor delivered the simulator to our site and we went over the functions for the initial tests to make sure that it was up to specs. It is entirely normal when a simulator is transported to have some things shake loose. The government and vendor make a discrepancy list which the vendor has to address before he is paid in full. If the simulator is substantially complete but we can't perform final tests on it until these items are fixed so we process a conditional acceptance but the final payment is withheld until the discrepancies are corrected. I have someone pulling the contract for me now. I know that being a non-contracts person means I'm not using your terminology and I really appreciate the help.

This vendor was given extensions for which the government received concessions. I was approached about another extension to correct the deficiency items. From my perspective, we can't declare him in default but can you explain what the purpose is in officially giving him time to correct the problems especially if they are small? I'm looking at the impact on workload to process the documents vice the law as it relates to contracts. Isn't the vendor going to eventually receive payment in full when he jumps through this last hoop? We will have to go back to the funds grantor to get an extension on their funding document before we can give our contracting department a request for the amendment. By the time all the hoops have been jumped through, the vendor will be done. That's why I'm asking. When do you have to do an amendment?

Share this post


Link to post
Share on other sites

Summerlady is referring to conditional acceptance. Per FAR 46.407©:

©(1) In situations not covered by paragraph (b ) of this section, the contracting officer ordinarily must reject supplies or services when the nonconformance is critical or major or the supplies or services are otherwise incomplete. However, there may be circumstances (e.g., reasons of economy or urgency) when the contracting officer determines acceptance or conditional acceptance of supplies or services is in the best interest of the Government. The contracting officer must make this determination based upon—

(i) Advice of the technical activity that the item is safe to use and will perform its intended purpose;

(ii) Information regarding the nature and extent of the nonconformance or otherwise incomplete supplies or services;

(iii) A request from the contractor for acceptance of the nonconforming or otherwise incomplete supplies or services (if feasible);

(iv) A recommendation for acceptance, conditional acceptance, or rejection, with supporting rationale; and

(v) The contract adjustment considered appropriate, including any adjustment offered by the contractor.


With conditional acceptance, a contract modification is generally only required if the deficiencies involved critical or major nonconformances. See FAR 46.407(f):

"When supplies or services are accepted with critical or major nonconformances as authorized in paragraph © of this section, the contracting officer must modify the contract to provide for an equitable price reduction or other consideration. In the case of conditional acceptance, amounts withheld from payments generally should be at least sufficient to cover the estimated cost and related profit to correct deficiencies and complete unfinished work. The contracting officer must document in the contract file the basis for the amounts withheld. For services, the contracting officer can consider identifying the value of the individual work requirements or tasks (subdivisions) that may be subject to price or fee reduction. This value may be used to determine an equitable adjustment for nonconforming services. However, when supplies or services involving minor nonconformances are accepted, the contract need not be modified unless it appears that the savings to the contractor in fabricating the nonconforming supplies or performing the nonconforming services will exceed the cost to the Government of processing the modification."

Share this post


Link to post
Share on other sites

Summerlady, I wanted to add one more thing. Vern stated the following:

summerlady51:

This is a matter of contract law, not regulation.

I'm not sure, but it sounds to me that the work might be "substantially complete," or that there has been "substantial performance," but not perfect performance. If that is the case, then you must extend the contract in the sense that you cannot declare the contractor be in default or assess liquidated damages, and you must pay the contractor in full once the remaining work is done. If the work is substantially complete, then you don't need consideration in order to waive the stated delivery date.

Then you asked: "but can you explain what the purpose is in officially giving him time to correct the problems especially if they are small?"

I believe that Radiation Technology, Inc. v. United States (366 F.2d 1008 (1966)) addresses the issue of nonconforming items that substantially comply (or do not comply) with the contract specifications. In the cited case, the Court of Claims defined the term "delivery" as the equivalent of a shipment which is in substantial compliance with contract specifications. Under the view that the court espoused, a contractor is entitled to a reasonable period in which to cure a nonconformity provided that the supplies (or system) shipped are in substantial conformity with contract specifications. The reasonable period consists of an automatic 10-day extension after a written notice of nonconformity (cure notice). I think 10 days is the minimum number of days the government is required to provide.

The court case provides that "In order to meet this requirement, it is incumbent at the outset that the contractor demonstrate that he had reasonable grounds to believe that his delivery would conform to contract requirements. Shipment alone is not an adequate badge of proof. Further, the right to cure assumes that the defects complained of are minor in nature and extent and are susceptible to correction within a reasonable time. Where extensive repair or readjustment is necessary in order to produce a fully operable product, substantial performance cannot be found and summary termination would be warranted."

If you do not give the contractor at least 10 days to cure the nonconformities and you terminated the contract, then the contractor is likely to prevail in court in a wrongful termination suit. The answer to your question depends on what you meant by "...officially giving him time to correct the problems..." I think that the purpose of giving him additional time to correct the nonconformity is to deal fairly and in good faith with the contractor. I believe that the purpose of officially giving him time to correct the nonconformance, even if small, is to document the extension so the contractor can't prevail in court under a wrongful termination suit.

Share this post


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

×