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IDIQ base contract option signed date is late, are the task orders bad?

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I have a contract that was awarded on August 11, 2010 for a base year and 4 one-year options. The first Option had an effective date of 7 August 2011 but a signed date of 13 August 2011. The second option had an effective date of 11 August 2012 but was signed on 12 August 2012. I am now being told that when the first option year was signed two days late in 2011 then it made the contract invalid and now every task order issued after 11 August 2011 has to be terminated. It seems that I could instead do a ratification for the 2 days late in 2011 and 1 day late in 2012. Any opinions or ideas on other solutions? Terminating two years back just doesn't seem like the best course of action.

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I assume that what you mean is that the option was exercised after the deadline for exercising the option.

An option is a legal right. In order for the right to be enforceable, the option must be exercised in strict compliance with its terms. If what you mean is that the option was exercised after the deadline, then the government's right to performance is not enforceable, and the contractor can refuse to perform. In your words, the contract is "invalid." But the option will be enforceable if the contractor waived the deadline, either in writing or by performing during the option period without protest.

See Formation of Government Contracts, 4th ed., by Cibinic, Nash, and Yukins, pp. 1422 - 1434.

This is not a matter for ratification. The CO did not make an unauthorized commitment by exercising the option after the deadline. He or she breached the contract. Even if the CO did make an unauthorized commitment, a ratification would not cure the breach and make the option enforceable.

Get the facts. Is the problem that the option was exercised late? If so, did the contractor waive the deadline in writing or by performing without protest? If so, then the contract should be enforceable, i.e., it should be "valid."

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Yes the problem is that the option was exercised late and yes the contractor has been performing on task orders issued against the base where the options were exercised late for the past two years. If I understand your response, I should not have to terminate all task orders and should be able to continue to use the contract because it is still an enforceable contract. Did I interpret that correctly?

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I wasn't the Contracting Officer at the time or it would not have happened. The problem I am facing now is explaining to those that believe that I now have to terminate over 100 task orders issued since 2011 and that I can't award any new task orders. Thanks so much for a different outlook!

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The only reason that I can think of for requiring the government to terminate the orders would be that the orders were entered into in violation of law or regulation. I don't think that late exercise of a contract option fits into that category. Someone might argue that late exercise violated something in FAR 17.207(a), but I think that you are okay if the CO complied with everything in 17.207© and (d) and if the option itself met the requirements of 17.207(f)(1) through (5).

If issuance of the orders constituted a material breach of contract and the contractor has rejected them, then there is nothing to terminate.

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I found a few cases that support what you said but they were all prior to CICA and they are saying that it is a CICA violation which has to be corrected. The method on the table right now is terminating the orders. I'm trying to find a more sensible solution than issuing sole source contracts to continue performance on ones terminated for violating CICA. Doesn't seem to meet the intent of CICA.

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If you want to terminate all the orders, you can -- it sounds like you want to.

But you don't have to. The contractor could have rejected the orders, but it didn't. You can look at your lateness as a minor informality or irregularity which the contractor waived in accepting the orders (I tend to think that's what the GAO would say in a protest). But you haven't offended the original competition or gone beyond the scope of that competition, it seems to me, based on what little I have read here.

Or you can terminate the orders by concluding that you have offended the original competition and gone beyond the scope of that competition.

You make the decision. Someone else might have a differing opinion.

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Here's another thought -- if the option exercises were late and the task orders "illegally" issued, then you can't terminate them -- you can't terminate something that doesn't exist.

Your orders exist -- they are binding and enforceable. If the contractor tried to abandon its obligations now, after accepting and performing work in the orders, the Government would unanimously fight to deny the contractor's ability to walk away.

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Ji20874 - Thank you. No trust me I don't want to terminate them. I don't believe that CICA applies here because FASA was issued to supplement CICA for multiple award contracts (which this is). In addition, based on my research CICA does not apply to option exercise if it was priced as a part of the original competition (which this was). My challenge is getting others to see the logic in what I am stating and that I in fact have a valid contract and that there is no violation of CICA since it doesn't apply.

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Sometimes I think working in this career field has given me a clear appreciation for why, oftentimes, government simply doesn't work. Person A made an easily preventable mistake, by not exercising an option on time. He then compounded the mistake (from what I can understand) by exercising that option unilaterally, even though it was too late, instead of pursuing the easy fix of getting the contractor's bilateral signature. Since then, 100 task orders were issued without anyone questioning the underlying problem. Now Person B, who likely doesn't really know what he is talking about, is advising a solution that's worse than the underlying problem. Terminating (presumably for convenience?) 100 task orders? Does he even know what that means, or what it will cost? What does he then propose to do? Reissue the contract? Reissue all the orders? Place a bunch of noncompetitive purchase orders? And all this after paying termination settlement costs? Lunacy.

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You want to talk about lunacy? The following is from a New York Times article about the IRS "scandal" that was published on Sunday, May 18:

While there are still many gaps in the story of how the I.R.S. scandal happened, interviews with current and former employees and with lawyers who dealt with them, along with a review of I.R.S. documents, paint a more muddled picture of an understaffed Cincinnati outpost that was alienated from the broader I.R.S. culture and given little direction.

Overseen by a revolving cast of midlevel managers, stalled by miscommunication with I.R.S. lawyers and executives in Washington and confused about the rules they were enforcing, the Cincinnati specialists flagged virtually every application with Tea Party in its name. But their review went beyond conservative groups: more than 400 organizations came under scrutiny, including at least two dozen liberal-leaning ones and some that were seemingly apolitical.

Over three years, as the office struggled with a growing caseload of advocacy groups seeking tax exemptions, responsibility for the cases moved from one group of specialists to another, and the Determinations Unit, which handles all nonprofit applications, was reorganized. One batch of cases sat ignored for months. Few if any of the employees were experts on tax law, contributing to waves of questionnaires about groups’ political activity and donors that top officials acknowledge were improper.

“The I.R.S. is pretty dysfunctional to begin with, and this case brought all those dysfunctions to their worst,” said Paul Streckfus, a former I.R.S. employee who runs a newsletter devoted to tax-exempt organizations. “People were coming and going, asking for advice and not getting it, and sometimes forgetting the cases existed.”

“I think that what happened here was that foolish mistakes were made by people trying to be more efficient in their workload selection,” Mr. Miller testified before a House committee Friday. While “intolerable,” he said, it “was not an act of partisanship.”

Sound familiar to any of you? Sounds like a lot of procurement offices to me. The IRS-Tea Party story is being hyped as a political conspiracy. But the truth is that it is likely a bureaucratic screwup. If you think the FAR is bad, go take a look at the IRS regulations, all 20 volumes.

Now imagine yourself hauled up before an angry congressional panel and on national television. The panel is supposed to be investigating, gathering facts, trying to find out what happened. But that's not they're doing. What they are really doing is accusing, berating, castigating, and condemning.

With better training, staffing, and supervision, maybe you wouldn't have overlooked so many tasks and made so many mistakes. But do you think they want to hear that?

Ain't government service rewarding and wonderful? Now, go enjoy your furlough.

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Sometimes I think working in this career field has given me a clear appreciation for why, oftentimes, government simply doesn't work. Person A made an easily preventable mistake, by not exercising an option on time. He then compounded the mistake (from what I can understand) by exercising that option unilaterally, even though it was too late, instead of pursuing the easy fix of getting the contractor's bilateral signature. Since then, 100 task orders were issued without anyone questioning the underlying problem. Now Person B, who likely doesn't really know what he is talking about, is advising a solution that's worse than the underlying problem. Terminating (presumably for convenience?) 100 task orders? Does he even know what that means, or what it will cost? What does he then propose to do? Reissue the contract? Reissue all the orders? Place a bunch of noncompetitive purchase orders? And all this after paying termination settlement costs? Lunacy.

I think this is well said. For a variety of reasons, options sometimes get exercised late. The fix for that is not to try to unwind 100+ task orders, it is to, in the future, make sure the option paperwork gets done on time.

I think this is a situation where contracting professionals should use a little business judgement...

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OP FWIW your agency most likely committed a CICA violation and a protest challenging the exercised option may be sustained. "Where a contract for visitor reservation services has expired, the contractual relationship which existed is terminated and the issuance of an amendment 4 months after the expiration date to retroactively extend and modify the contract as if it had not expired amounts to a contract award without competition, contrary to the requirements of the Competition in Contracting Act. A protest challenging the amendment is sustained, therefore, and GAO recommends that a competitive procurement for the requirement be conducted" (65 Comp. Gen. 25 (Comp.Gen.), 25, 1985 WL 50837, 1).

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OP FWIW your agency most likely committed a CICA violation and a protest challenging the exercised option may be sustained. "Where a contract for visitor reservation services has expired, the contractual relationship which existed is terminated and the issuance of an amendment 4 months after the expiration date to retroactively extend and modify the contract as if it had not expired amounts to a contract award without competition, contrary to the requirements of the Competition in Contracting Act. A protest challenging the amendment is sustained, therefore, and GAO recommends that a competitive procurement for the requirement be conducted" (65 Comp. Gen. 25 (Comp.Gen.), 25, 1985 WL 50837, 1).

In your comment you mention "expiration date". The assumption here is that the date for exercising the option in a timely manner in accordance with 52.217-9 has passed, not the period of performance end date "expiration date" for the current contract period. It is possible to exercise an option after the time stated in the clause and enforce the contract, provided the contractor does not dispute it, but not after then performance end date of the contract.

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