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MustangBob

Exercising 52.217-8 in a Sole Source contract, not specified in J&A.

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Hello All,

After being a member of WIFCON for some time and spending tons of time reading the blogs and posts on the forum, it's time for my first post.

I have inherited a situation...... I have a Sole Source contract that was originally awarded for a 6 month base and two 3 month options. The contract was put in place because of a GAO Protest, of which, my agency had to take corrective action. The sole source contract included the 52.217-8 clause since the inclusion of options was appropriate. The J&A for the sole source contract didn't specify the inclusion of the -8 clause and -8 was not evaluated at time of award. More time is needed to award the new contract and exercising the -8 clause was my plan (Of course justifying the use with a J&A).....

The main issue- our legal office is stating that since the J&A was silent of the -8 clause, we can't use it. Furthermore, they are stating that the -8 clause shouldn't be used in sole source contracts. This is the first time I have heard this.

I am more than aware of all the GAO cases in regards to using 52.217-8 etc etc and Vern's Blog "Exercising Options: There is more to it than just the FAR", but I am at loss of words in providing a response back our legal office. A break in service is not an option.

Any advice?

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Your original J&A did not specify every clause to be included in the contract, and that is fine.

But regardless, you intend to get a new J&A to support the exercise of the -8 option. That is fine.

In my opinion, your legal office errs in saying you cannot use the -8 option. With a J&A, of course you can.

I recommend you ask your attorney to provide any citation supporting the assertion that the -8 clause cannot be used in a sole source contract (hint, he or she can't provide a citation because there isn't one -- not in the FAR, and as far as I can ascertain, not in the case law). The text in FAR 37.111 and FAR Subpart 17.2 makes no distinction between competitive and sole source contracts. If the attorney holds fast, ask for a written legal opinion.

I also recommend you inform the appropriate decision-maker or program manager that your legal office will not allow you to extend the existing contract, even though it would be legal with a J&A -- that person needs to be aware of your legal office's obstructionism and the imminent fact of an upcoming break in service.

But really, the -8 matter is not relevant. Even if the -8 clause wasn't in the contract, you could still do a J&A and extend the contract for whatever period of time is reasonable and agreed to by your J&A approving official. That's the magic of a J&A.

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Did the legal office say that the -8 clause "shouldn'"t or "can't " be used in sole source contracts" ? The implication of using "shouldn't" would seem to be the same as using "should" versus "shall". That, is using the clause would not normally be the expected course of action. However, it's use wouldn't be prohibited, if appropriate to use it under certain circumstances

At any rate, you didn't evaluate the options during negotiations and you apparently didnt mention the possibility of the contract possibly being in place for up to a year. The related thread at http://www.wifcon.com/discussion/index.php?/topic/1571-52217-8-and-expiring-task-order/ would imply to me that another J&A for a sole source action is now necessary and that you must also consider the pricing of the two option, where applicable to what you want to do.

What did the legal office recommend in order not to suffer a loss of service between contracts?

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Thanks for the responses!

I am 100% on board that another J&A would need to be written to exercise the -8 clause since it wasn't evaluated at time of award (based on GAO)..... Roger that!

Legal is saying that there is nothing to prohibit the use of the -8 clause so long 1) it was considered at time of award, and 2) was included in the originating Sole Source Contract J&A, prior to award of that contract.

Further states that the J&A for a sole source award are typically based on the sole source award lasting for limited period of time and the 6 months allowed under the -8 clause is not discussed. They go on to further state that it sounds like the clause wasn't properly considered.....

My argument right now is that the J&A states that there will be options used... if options will be used in the contract, shouldn't the applicable clauses be incorporated? I have done tons of Sole Source contracts and never had to specify that the -8 clause is incorporated etc etc. I have never seen a prescription say, don't use clause in a sole source contract.

Prior to submitting this topic, I did ask for a rational (GAO case/ or agency policy). Still waiting for a response. I did send several GAO cases and some WIFCON posts :)

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I would tend to agree with these statements:

I am 100% on board that another J&A would need to be written to exercise the -8 clause since it wasn't evaluated at time of award (based on GAO)..... Roger that!

Legal is saying that there is nothing to prohibit the use of the -8 clause so long 1) it was considered at time of award, and 2) was included in the originating Sole Source Contract J&A, prior to award of that contract.

Further states that the J&A for a sole source award are typically based on the sole source award lasting for limited period of time and the 6 months allowed under the -8 clause is not discussed. They go on to further state that it sounds like the clause wasn't properly considered.....

It would seem apparent that describing the options to extend performance up to twice the initial period would have been directly relevant to the purpose and intent of the Justification and Approval document and that you should have evaluated the pricing under such circumstances. After all, weren't you alerting the J&A readers and/or approval authority of the scope of the action you proposed to take?

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Sounds like your legal office is saying that -8 price should have been considered at time of initial sole source award and issuance of J&A not that the actual clause itself be included or referenced in the J&A. Regardless, you have to draft a new J&A. I would just draft it.

"Legal is saying that there is nothing to prohibit the use of the -8 clause so long 1) it was considered at time of award, and 2) was included in the originating Sole Source Contract J&A, prior to award of that contract.

In "1)" change "it" with "price" then the statement makes sense.

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Mustang -

Per your post #4 I suggest you are not doing the J&A to justify the use of -8 you must do a J&A to justify an new procurement. Reference.....did you see this (below)....in this thread....http://www.wifcon.com/discussion/index.php?/topic/2298-far-clause-52217-8-and-9/

"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."

With regard to the -8 in a sole source first -8 is not a required clause in any contract it is only used when applicable. So to imply that it is automatic to put it in is wrong thinking in my view.

Further when you propose the -8 or -9 for a contract the FAR is explicit that you are to include a provision in the associated solicitation to evaluate that option so if at your agency you do not issue a solicitation for a sole source then the conclusion of your legal might make some sense.

In the end I think your legal is on the right track but they just have not explained themselves very well.

Do the J&A for a "new" procurement and move along!

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Carl, assuming that the option mechanism is out of scope, I would suggest that the new J&A could be used to justify extending the current period, whether it be for three or three plus option for three more months or whatever. The "new" procurement could be added to the existing contract as an out of scope supplemental agreement for administrative convenience, couldn't it?

I would agree that,technically, it is no longer an "option" that the Government could unilaterally exercise. If so, I wouldn't waste time debating details here. I'd be concentrating on justifying and getting approval, then negotiating the extension.

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I'm trying not to copy and paste their entire response, but no, Legal is stating that since the -8 clause wasn't mentioned in the originating J&A for the sole source contract, that we can't use the clause even though the contract has both -8 and -9 clauses included and they are appropriate as there are options on the contract. No "ifs, ands, or buts."

It's almost as if they are saying, "because you didn't have the changes clause specifically addressed in the originating J&A" , you cannot make any changes to the sole source contract regardless of what they are. That was my interpretation of their response.

I'm not implying that the -8 was automatic, but based on the circumstance surrounding the contract and how hot the environment is for protests, including this clause is a given (even though not required). No?

I know that I would need to do a J&A for the exercising of -8 since it was not originally evaluated at time of award. My assumption is the same as Joel's in regards to:

J&A could be used to justify extending the current period, whether it be for three or three plus option for three more months or whatever

I didn't interpret the GAO case to state that I needed to do an entirely new contract.

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Mustang, your assumption isn't exactly the same as mine. I don't think that you you can "exercise the option" because it is out of scope. You did not evaluate the price when you extended the contract. Thus, it isn't a valid "option". Put another way, it is no longer an "option" that the government can unilaterally "exercise". The options are dead, although the parties could technically agree to the same prices, assuming that both parties are satisfied ( after you evaluate them).

It would now need to be a bi-lateral action, either by a separate contract or as an out of scope supplemental agreement under the existing contractt.

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The contract was never extended. we've used up the 1 yr PoP and only have the -8 to potentially extend.

So it sounds like I am reading the GAO case incorrectly then. Because we didn't evaluate -8, we can't use it even though it was included in the RFQ and on the contract?

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The contract was never extended. we've used up the 1 yr PoP and only have the -8 to potentially extend.

So it sounds like I am reading the GAO case incorrectly then. Because we didn't evaluate -8, we can't use it even though it was included in the RFQ and on the contract?

My bad, I misunderstood the situation. At any rate, the lawyers said, no. What did they suggest you do to avoid a lapse? You said it isn't an option (no pun intended).

If you negotiate an out of scope extension did they say it could be administratively added to the contract?

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That's the problem, they said "no", but didn't suggest anything to avoid a lapse. They provided no rationale or any agency policy to support their opinion. I am used to an opinion from GC to include some kind of reference to GAO cases/agency policies etc. so that I can see/learn where/how they formed their opinion.

I'm waiting their response to their rationale..... We'll see what they have to say.

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Joel –

It could be that I am confused by the discussion so let me try this….especially since more stuff trickles out with each post….

RFQ issued and Sole Source Awarded based on Approved J&A

Contract length 6 months with two 3 month options (FAR Clause 52.217-9)

Contract work started and is now at 1 year. Here it is assumed that the 6 months base was completed and the two 3 month options exercised as I cannot see how there could be a “1 yr POP” any other way unless there still is more info to come.

Now Mustang wants to extend the contract for an additional period (6 months right?) via 52.217-8 BUT admits that 52.217-8, even though in the RFQ and awarded contract, was not evaluated at award.

Now go back and read the reference I provided and it is clear the new 6 months is a “new” procurement and is to be handled as such either as a supplemental agreement to an existing contract or as a new stand alone but either way a new J&A for a "new" is required because any extension under -8 was not evaluated.

To argue any validity of -8 seems to me to be a waste of time. And, I would add that if one wanted to use it next time in a sole source then evaluate it at award just like it would be if it was in a competitive procurement.

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Joel It could be that I am confused by the discussion so let me try this.especially since more stuff trickles out with each post.RFQ issued and Sole Source Awarded based on Approved J&AContract length 6 months with two 3 month options (FAR Clause 52.217-9)Contract work started and is now at 1 year. Here it is assumed that the 6 months base was completed and the two 3 month options exercised as I cannot see how there could be a 1 yr POP any other way unless there still is more info to come.Now Mustang wants to extend the contract for an additional period (6 months right?) via 52.217-8 BUT admits that 52.217-8, even though in the RFQ and awarded contract, was not evaluated at award.Now go back and read the reference I provided and it is clear the new 6 months is a new procurement and is to be handled as such either as a supplemental agreement to an existing contract or as a new stand alone but either way a new J&A for a "new" is required because any extension under -8 was not evaluated.To argue any validity of -8 seems to me to be a waste of time. And, I would add that if one wanted to use it next time in a sole source then evaluate it at award just like it would be if it was in a competitive procurement.

Carl, I agree with you.thanks

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Sorry for not clarifying in enough detail, but Culham you're assumption is correct. The 6 month base period and two 3 month options have all been exercised. I shouldn't have cut corners by saying 1 yr PoP. Sorry about that, but you guys do realize that it's hard to go into a lot of detail on this forum without spilling the full can of beans on an active issue/procurement, right?

At my previous agency that I worked for, if -8 wasn't evaluated at time of award and it was needed due to specific reasons, we did the J&A and handled it as a supplemental agreement. That's what I would like to do, but my new agency isn't familiar with Sole source contracts or the use of the -8 clause. Thus my issue while trying to avoid a huge break in services.

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Just back from a wonderful vacation with the grandtwins and reading the discussions. My apologies for not doing the research to check my memory about the rules on options.

The legal opinion is described as saying that you cannot exercise the -8 option because it was not included in the J&A. There are two very practical consequences of this option. First, you must negotiate a new contract because there is no option available, which will require a proposal, evaluation, etc., and which may require a break in service. Second, you will not be able to take advantage of the current contract pricing which is built into the -8 option.

Does the legal opinion give specific citations to support its conclusions? If you can provide those citations, it might help address the specific question (i.e., can you exercise the -8 option if you get a new J&A?).

My understanding of the GAO decision on exercise of an unevaluated -8 option is that the option exercise IS authorized if there is a new J&A. Thus, I disagree with comments like:

Mustang, your assumption isn't exactly the same as mine. I don't think that you you can "exercise the option" because it is out of scope. You did not evaluate the price when you extended the contract. Thus, it isn't a valid "option". Put another way, it is no longer an "option" that the government can unilaterally "exercise". The options are dead, although the parties could technically agree to the same prices, assuming that both parties are satisfied ( after you evaluate them).

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Guest Vern Edwards

The FAR does not preclude the use of an option in a sole source contract. If FAR Part 6 applies to the acquisition, the J&A should cover the option; see FAR 17.205( b ).

It is true that the CO cannot exercise the option if the J&A did not cover it (or if the J&A is no longer valid), but a J&A can be written and obtained for the option prior to its exercise. The question is whether the option would be binding on the contractor. I think it would, but I don't know that with certainty.

If the J&A does cover the option:

The requirement to "evaluate" an option price in order to be able to exercise it applies when an acquisition is competitive. One does not "evaluate" a price from a sole source. One analyzes the proposed price and negotiates a fair and reasonable price agreement.

If the option was unpriced at the time of contract award, it can be priced prior to its exercise, as long as the J&A is still valid.

If the option was priced, but the price was not determined to be fair and reasonable, it can be determined to be fair and reasonable prior to its exercise, assuming that it is in fact so and the J&A is still valid.

If the price is no longer fair and reasonable, the price can be renegotiated on a sole source basis if the J&A is still valid.

If the contract was awarded using simplified acquisition procedures, then FAR Part 6 does not apply. See FAR 6.001(a).

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Since this one year (6 MO + 3MO+3MO) contract was due to a bid protest, I will bet that 6.302-2 Urgent and Compelling was used as the Justification. If so, the issue is that a J&A for urgent and compelling cannot exceed one year and that -8 clause made it a year and a half. The GAO just got done ripping us for having a one year urgent and compelling contracts with the -8 clause in them. You need a new J&A but you may still get GAO or OIG static about making more than one urgent contract in a row for the same service.

However, what is a CO to do in situations like this.......bring the boots home? They also recommended we make a new contract and not extend the current by mod but I choose to ignore them on that point.

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One does not "evaluate" a price from a sole source. One analyzes the proposed price and negotiates a fair and reasonable price agreement.

See 15.404-1 (a) (1)

" The contracting officer is responsible for evaluating the reasonableness of the offered prices. The analytical techniques and procedures described in this section may be used, singly or in combination with others, to ensure that the final price is fair and reasonable. The complexity and circumstances of each acquisition should determine the level of detail of the analysis required."

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Guest Vern Edwards

I don't need you to quote FAR to me, Joel.

Competition is the norm. The requirement to evaluate price in FAR 17.2 applies to competitive acquisitions. If you didn't evaluate the option price prior to award then you did not comply with CICA, under which price or cost is a mandatory evaluation factor. See FAR 15.304( c)(1). That's why you cannot exercise the option if you did not evaluate price. That's why the passage you quoted says "prices," plural. FAR 15.305(a)(1) describes price evaluation, which entails comparisons of competing proposed prices.

In a sole source procurement there are no other proposed prices. Thus, when including an option in a sole source contract, the only requirement with respect to price is the same as for all contracts, to determine that the price is fair and reasonable.

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The paragraph I referred to also applies to sole source negotiated contracts.

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Guest Vern Edwards

It applies to all contracts, but you don't "evaluate" a sole source price. You analyze it. The wording in the paragraph is "evaluating the... prices" -- plural.

See also FAR 17.206, where the wording is "evaluate offers" -- plural.

See the Comptroller General's letter, The Honorable Caspar W. Weinberger The Secretary of Defense, B-217655, April 23, 1986, to learn the origin of the requirement to evaluate option prices. A pertinent quote from that letter:

Of the 64 contracts GAO reviewed, 21 had option or follow-on years that were excluded from the evaluation for the initial competitive contract awards, although there was a substantial likelihood that these contracts would be extended or renewed. Therefore, the selection of these contractors was not based on proposed prices for all the years of expected performance. The periods competitively evaluated at the time of the initial awards were valued at $556 million. GAO conservatively estimated the value of the periods excluded from the evaluations at $1 billion.

Regulations allow options to be included in the evaluation for the initial award. However, the regulations do not require this practice for service contracts which are very likely to be extended. This lack of a requirement contributed to the exclusion of umbrella contract options from the evaluation for initial awards. In one instance that GAO found and previously reported, the government may have saved $8.3 million by including all years of the contracting cycle, instead of just the initial period, in the evaluation for the initial competitive contract award.

Emphasis added. The GAO recommended that COs be required to evaluate options, and the FAR Councils added the requirement now in FAR 17.206 and 17.207. See FAC 84-37, 53 FR 17858, May 18, 1988:

FAR Subpart 17.2 and Part 52 are revised to clarify when agencies should evaluate offers for option quantities in awarding the basic contract and when exercise of an option will satisfy the requirements of full and open competition.

Emphasis added.

In the context of FAR Subparts 15.3 and 15.4, and of the history of FAR Subpart 17.2, it makes no sense to speak of "evaluating" sole source prices.

I don't know what point you are trying to make, but whatever it is your argument is silly and I won't devote any more time to it. If you want to call analysis of a sole source price "price evaluation" go right ahead.

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Guest Vern Edwards

Mustang, your assumption isn't exactly the same as mine. I don't think that you you can "exercise the option" because it is out of scope. You did not evaluate the price when you extended the contract. Thus, it isn't a valid "option". Put another way, it is no longer an "option" that the government can unilaterally "exercise". The options are dead, although the parties could technically agree to the same prices, assuming that both parties are satisfied ( after you evaluate them).

It would now need to be a bi-lateral action, either by a separate contract or as an out of scope supplemental agreement under the existing contractt.

The purpose of an option is to enlarge the scope of a contract. To say that you cannot exercise an option because it is out of scope is silly.

It is equally silly to say that a CO cannot exercise an option in a sole source contract because he or she did not evaluate the option.

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