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FAR Clause 52.217-8 and -9

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Greetings,

I was hoping to get some insight on the interpretation regarding the following statement, which was posted in one of the Army Contracting Directorate regarding FAR Clause 52.217-8 and -9:

In accordance with FAR Clause 52.217-8, Option to Extend Services, the contract may be extended, at the Government’s sole discretion, for a period of up to six (6) months, exercisable in increments of not less than one (1) month. If the contract contains an unexercised option period, the Government may elect to exercise the option pursuant to FAR Clause 52.217-9, Option to Extend the Term of the Contract, during any short-term extension. The short-term extension(s) shall be subtracted from the total duration of the immediately succeeding option period that may follow as a result of the exercise of the option pursuant to FAR Clause 52.217-9 so that the combination of the short-term extension(s) and the option will not exceed 12 months duration. If the Government exercises one or more short term extensions in accordance with FAR Clause 52.217-8 and this instruction or an option period pursuant to FAR Clause 52.217-9, or any combination thereof, the contract as extended shall be deemed to include this extension instruction and FAR Clause 52.217-8; thus, the authority to extend services pursuant to FAR Clause 52.217-8 and this instruction may be exercised at the end of the base period and at the end of each option period.

Question: Can this be done? Excercising -9 and then cut it short and use -8? Just want to know if this practice is similar to other DoD agencies, when these options are excercised.

Note: That the -8 price/cost was evaluated prior to award.

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As written, the -9 clause does not permit the Army's interpretation. However, you could modify the -9 clause to allow the intermixing of the -8 and -9 clauses.

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Napolik – I am wondering about your response. I do not understand why the -9 clause does not allow the Army’s interpretation?

By example both clauses are in the contract exactly as worded in the FAR. -9 states 12 months in paragraph c. . So at end of base year KO exercises a 1 month extension per 217-8. During this one month period the KO then decides to exercise the option under -9. Per the Army instruction the option extended under -9 when combined with -8 cannot exceed 12 months. The -9 clause using the exact language of the FAR states “shall not exceed”. Since the extension + the option is not more than 12 months has not all the rules (lack of a better term on my part) been adhered to? Clause -8 allowed the one month, Clause -9 allowed the option that did not exceed 12 months as it was only 11 months and the Army instruction was adhered to as the overall length of the contract is 12 months longer (extension plus option).

I am actually confused by ipod24’s question as it is implied by ipod’s post that -9 would be exercised first and the option period cut short and then use -8 but that is not what the instruction says by my read. It says that during the short term extension of -8 and the “succeeding option” of -9 it says nothing about cutting -9 short and then using -8.

So what am I missing?

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Absent additional language in the – 9 clause, I do not see how one can unilaterally modify the length of the – 9 option so as to achieve a maximum of a 12 month extension via the exercises of the -8 and -9 options.

The – 8 clause allows multiple exercises up to a total of 6 months. An option period covered by the -9 clause is fixed – 1 month, 6 months, or, more commonly, 12 months – and can be exercised only once for the specific option period.

If one exercises the – 8 option for 2 months, how does one exercise an option pursuant to -9 that leads to a cumulative -8 and -9 total of no more than 12 months, unless the – 9 option period is defined as a period of 10 months or less?

What does one do if the - 9 option period is 12 months?

Paragraph (c ) of the -9 clause refers to the total contract length inclusive of all -9 option exercises, not to the length of a specific option.

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Napolik – I understand your position better but still wondering. Aren’t you are mixing the pricing schedule with the clause?

Again by example -8 and -9 are in the contract exactly as worded in the FAR. Nothing in the -9 clause limits the how long a option can be for except that the contract cannot exceed a certain amount of months. What is limiting on the option is the pricing as pricing would limited to the pricing applicable to a specific period, as you note, usually 12 months. In a counter view with the clause -9 worded as is I could exercise a single option to take all of the XX months the day after the base contract is awarded but the prices applicable to the different periods is what applies, unilaterally, along with unilaterally right to exercise up to XX months.

The most important part of your second post is the noting of “contract language”. I would suggest that ipod’s question cannot be answered without knowing these things….

Are both -8 and -9 in the contract?

What is the wording of both -8 and -9?

And is there any language in the contract other than -9 that limits the length of a option period, not it’s pricing but it’s period, and if so what is that period.

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I was hoping to get some insight on the interpretation regarding the following statement, which was posted in one of the Army Contracting Directorate regarding FAR Clause 52.217-8 and -9:

In accordance with FAR Clause 52.217-8, Option to Extend Services, the contract may be extended, at the Government’s sole discretion, for a period of up to six (6) months, exercisable in increments of not less than one (1) month. If the contract contains an unexercised option period, the Government may elect to exercise the option pursuant to FAR Clause 52.217-9, Option to Extend the Term of the Contract, during any short-term extension. The short-term extension(s) shall be subtracted from the total duration of the immediately succeeding option period that may follow as a result of the exercise of the option pursuant to FAR Clause 52.217-9 so that the combination of the short-term extension(s) and the option will not exceed 12 months duration. If the Government exercises one or more short term extensions in accordance with FAR Clause 52.217-8 and this instruction or an option period pursuant to FAR Clause 52.217-9, or any combination thereof, the contract as extended shall be deemed to include this extension instruction and FAR Clause 52.217-8; thus, the authority to extend services pursuant to FAR Clause 52.217-8 and this instruction may be exercised at the end of the base period and at the end of each option period.

Question: Can this be done? Excercising -9 and then cut it short and use -8? Just want to know if this practice is similar to other DoD agencies, when these options are excercised.

You have phrased this as exercising -9 and cutting it short. I do not think this is within the policy you mention, which says that -9 can be exercised during any short-term extension.

I do not think you can exercise -8 for two months and -9 for 10 months. Typically, the -9 option is pursuant to a specific pricing schedule for 12 months, and is exercised for 12 months. If you try to exercise the -9 option for ten months, you are not exercising the option in accordance with the terms of the contract (reading the option CLIN and the -9 clause together), so the option exercise is not enforceable.

Actually, I think there is a disconnect between -9 and the option CLINs because the -9 is so unspecific. In reality, the option exercise is more in line with the -7 clause for additional quantities under separately priced CLINs, in that you have a separately priced option CLIN for an additional year of services, but there is no reference in the -9 clause for what is actually being exercised (just some undefined "option").

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First of I apologize for the confusion. Re stating question: Exercising -8 (for two-months) and then follow-up with a -9 (ensuring not to exceed 12-months).

C Culham - to clarify your inquiry, the situation is the result of the customer anticipation of not needing the services due to budget issues among other reasons. Anyways, we are at the point when we need to exercise the 2nd option period. Contracting office proposed we exercise -8 for 2-months and once customer confirms they need the service, -9 would be excercised following its respected period (PoP on option is idnetifed in Section F - 12-month periods).

Stated the following in the contract for -9:

"The Government may extend the term of this contract by written notice to the Contractor within 30 days prior to contract expiration, i.e., end period; provided that the Government gives the Contractor a preliminary written notice of its intent to extend at least 60 days before the contract expires. The preliminary notice does not commit the Government to an extension."

I have seen some put PoP, but for this particular contract that is what was stated.

52.217-8 in contract states:

"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 30 days prior to contract expiration, i.e., end period."

Regarding your last inquiry:

"And is there any language in the contract other than -9 that limits the length of an option period, not it’s pricing but its period, and if so what is that period."

No there is not -- any other language in the contract regarding the limits on option period.

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ipod - It would seem the additional facts you have provided would support doing a -8 extension and -9 exercise afterwards but I would suggest consulting legal counsel. This case might be on an assist in determining the proper course of action.

http://www.asbca.mil/Decisions/2013/58111%20Glasgow%20Investigative%20Solutions%20Inc.%204.9.13%20PUBLISH.pdf

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I'm in a DOD office and we just went through this during an inspection. The auditors stated that we were abusing the -8 clause doing what ipod is proposing. According to our inspectors, the -8 clause can only be used in circumstances outlined in FAR 37.111, to prevent short term POs due to issues outside of the contracting office's control. Exercising an option timely is entirely within the contracting office's control, therefore using the -8 and then -9 clause to keep a contract alive longer than the normal terms of the option are unallowable.

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I would say yes. Exercising the -8 clause to extend the POP for up to 6 months and then exercising the -9 clause seems to me to be an abuse of the -8 clause. To me the cases where the -8 clause should be used are rare, however I see more and more the -8 clause being used to string along a contract because either or both the contracting office or the program office fail to properly plan for a recompete, and then rather than face the consequeneces of failing to plan, the KO must string the contract along using any means necessary.

However I have learned many things from this forum, especially from you (Don), so I ask you the same question, do you think the inspectors and my interpretation of the regulations are correct?

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The inspectors are wrong. In Griffin Services, Inc., ASBCA 52280, 02-2 BCA P 31943, the Board ruled that a contracting officer's discretion to exercise an option under FAR 52.217-8 is not limited to the circumstances described at FAR 37.111. Here's an excerpt:

The plain, objective, language of the Option to Extend Services clause is not limited as to the reasons for its use. The “intention of a party entering into a contract is determined by an objective reading of the language of the contract, not by that party’s statements in subsequent litigation.” Varilease Technology Group, Inc. v. United States, 289 F.3d 795, 799 (Fed. Cir. 2002). The appellant’s argument that the contractor “never agreed to or bargained for an option clause that was so open-ended” is just that, mere argument. There is no evidence, by affidavit, contemporaneous writing, or otherwise, that anyone, for either the contractor or the Government, had such a limiting intention. This first contention fails for lack of proof.

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ipod24 - I don't see how one can reduce the duration of 52.217-9 based on the fact that 52.217-8 was exercised. In competing the requirement, Option XYZ was priced by the contractor for a duration of 12 months (you state section F identifies the option as a 12 month duration). You cannot then unilaterally change the terms (duration) of Option XYZ just because you exercised 52.217-8. I don't see that authority given anywhere in the contract or the clauses.

A separate yet relevant question, Did you evaluate FAR 52.217-8 price as part of your initial competition? see ramifications GAO decision of B401472 Major Contracting Services
http://www.gao.gov/decisions/bidpro/401472.htm

In order to exercise 52.217-8 the option must have been evaluated as part of the initial competition and be exercisable at an amount specified in or reasonably determinable from the terms of the basic contract. if it was NOT evaluated, then the exercise of the option amounts to a contract extension beyond the scope of the contract and effectively constitutes a new procurement.

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ipod24 - I don't see how one can reduce the duration of 52.217-9 based on the fact that 52.217-8 was exercised. In competing the requirement, Option XYZ was priced by the contractor for a duration of 12 months (you state section F identifies the option as a 12 month duration). You cannot then unilaterally change the terms (duration) of Option XYZ just because you exercised 52.217-8. I don't see that authority given anywhere in the contract or the clauses.

A separate yet relevant question, Did you evaluate FAR 52.217-8 price as part of your initial competition? see ramifications GAO decision of B401472 Major Contracting Services

http://www.gao.gov/decisions/bidpro/401472.htm

In order to exercise 52.217-8 the option must have been evaluated as part of the initial competition and be exercisable at an amount specified in or reasonably determinable from the terms of the basic contract. if it was NOT evaluated, then the exercise of the option amounts to a contract extension beyond the scope of the contract and effectively constitutes a new procurement.

Note: That the -8 price/cost was evaluated prior to award.

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In order for options to be exercised unilaterally, the one with the authority to exercise, must do so with strict compliance of the terms spelled out in the contract. Your option CLINS will have a period of performance associated with tehm, do they not? How do you change that PoP to a reduced amount after exercising the -8 option? Also, you have filled in both clauses saying that you will exercise 30 days prior to contract expiration. How can you meet the 30 days prior to contract expiration requirement for both (unless your "contract expiration" is deemed to include the options I guess you could make that argument)?

I've done a lot of research on options over the years as they have always bugged me but this is one scenario I have never come accross or even considered. We in AF are instructed to not use -9 unless it is the result of protest or delay in awarding follow-on. Someone posted a case where courts ruled that not to be the precedent, but it is what our HQ has instructed for us to follow so we do.

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Don,

Question, in a response to a post I made earlier you provided the following response;

The inspectors are wrong. In Griffin Services, Inc., ASBCA 52280, 02-2 BCA P 31943, the Board ruled that a contracting officer's discretion to exercise an option under FAR 52.217-8 is not limited to the circumstances described at FAR 37.111. Here's an excerpt:

This topic came up again in my office as I am attempting to exercise the 52.217-8 clause.

I was told that I could not use the -8 clause unless, in accordance with FAR 37.111, it is being used to extend the term of the contract due to a delay beyond the circumstances of the contracting office. I was provided GAO Decision B-401472, Major Contracting Services, with a note that stated that GAO determined that the -8 clause could only be used if the delay was beyond the control of the contracting office and met the requirements of Part 6 and 17.207. I was also told that my reasoning for using the -8 clause, while it met the requirements of Part 6 and 17.207, is not due to a delay outside the control of the contracting office, and therefore I cannot use that authority, according to this GAO decision.

I see that there is a conflict between the GAO decision and Griffin Services, Inc., ASBCA 52280. In Griffin Services, Inc., ASBCA 52280, the ASBCA specifically states that the -8 clause is not limited to those circumstances described in 37.111. I've spent several days searching to see if the legal precedence set forth by the ASBCA's ruling in 52280 was ever overturned or questioned and I cannot find any. When I countered with the ASBCA case, I was told that the GAO decision is more recent, and therefore provides legal precedence over the ASBCA's rationale that the use of the -8 clause is not limited to those circumstances listed in 37.111. I've also looked for DPAP and DASN policies where it is specifically stated that the -8 clause can only be used because of bid protests or mistakes and cannot find any policies where the use of the -8 clause is prohibited to be used in this manner so I appear to be at an impasse.

I've asked our office of counsel to weigh in on this, but wanted to ask you, as well as the other members in this forum.

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uva383, I think you need to re-read MCS. It did not say that the -8 clause could be used only if the delay in awarding a new contract arose from causes beyond the control of the agency. What it said was that based on the facts of that case, the exercise of the option was the equivalent of a sole source award and that the agency could not justify a sole source award based on unusual and compelling urgency where the urgency was created by the agency's failure to plan properly. This was based upon the plain language of 10 U.S.C. 2304. Nothing in MCS prevents an agency from using -8 if the need for the use of that authority arises from dilatory actions on the part of the agency in awarding a follow-on contract, provided the guidance in FAR 17.207 is followed. In this regard, complaince with 6.3 would mean that some basis for using other than full and open competitive procedures other than unusual and compelling urgency would have to be present.

From my reading of MCS and Griffin, there is no conflict as the two cases dealt with different issues.

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uva383,

I agree with Retreadfed. The MCS decision had nothing to do with whether the exercise of an option under FAR 52.217-8 was limited by FAR 37.111. It is silent on that issue. The problem in MCS is that the agency exercised an option under FAR 52.217-8 that had not been evaluated as part of the initial competition. The decision states:

The option to extend the contract here under FAR clause 52.217-8 was not evaluated as part of the initial competition, so that the exercise of this option amounts to a contract extension beyond the scope of the contract, and therefore effectively constitutes a new procurement. Laidlaw Envtl. Servs. (GS), Inc.; International Tech. Corp.--Claim for Costs, B-249452, B-250377.2, Nov. 23, 1992, 92-2 CPD ¶ 366 at 4; see Techno-Scis., Inc., B-257686, B-257686.2, Oct. 31, 1994, 94-2 CPD ¶ 164 at 8 n.3. Thus, the agency could not have met the FAR Part 6 standards for full and open competition by simply exercising the option under FAR clause 52.217-8. FAR § 17.207(f); see Antmarin Inc.; Georgios P. Tzanakos; Domar S.r.l., B-296317, July 2005, 2005 CPD ¶ 149 at 8 n. 8. In such circumstances, the agency must justify the use of noncompetitive procurement procedures in accordance with FAR Subpart 6.3 before exercising the unevaluated option. Laidlaw Envtl. Servs. (GS), Inc.; 26, 3 International Tech. Corp.--Claim for Costs, supra.

There's no conflict between MCS and Griffin Services, Inc.

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Guest Jason Lent

In order for options to be exercised unilaterally, the one with the authority to exercise, must do so with strict compliance of the terms spelled out in the contract. Your option CLINS will have a period of performance associated with tehm, do they not? How do you change that PoP to a reduced amount after exercising the -8 option? Also, you have filled in both clauses saying that you will exercise 30 days prior to contract expiration. How can you meet the 30 days prior to contract expiration requirement for both (unless your "contract expiration" is deemed to include the options I guess you could make that argument)?

I've done a lot of research on options over the years as they have always bugged me but this is one scenario I have never come accross or even considered. We in AF are instructed to not use -9 unless it is the result of protest or delay in awarding follow-on. Someone posted a case where courts ruled that not to be the precedent, but it is what our HQ has instructed for us to follow so we do.

In Afghanistan (or anywhere like it, really), you'll come across situations where a site will be "totally, absolutely, and definitely" closed down in six months and you're given only 6 months worth of funding. Then, lo and behold, the site doesn't end up shutting down (a decision usually made 2 weeks prior to the end of the six months, naturally) and the CCO needs to reprocure.

Granted, it isn't the best use of 52.217-8 to use it in lieu of a 12-month POP, but what's a CCO to do?

EDIT: That is, other than trying to justify renegotiating POPs.

Edited by Jason Lent

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