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GAO's latest MCS Decision

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In any case, the fact is that if the contract provides that the "rates specified in the contract" are the rates in effect at the time of the exercise of the option, then the option prices have been evaluated, even if not explicitly so.

I agree with that, but I don't think that the GAO would, given the MCS decision.

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Without having seen the agency submissions to the GAO, I would hesitate to judge the quality of the defense in this case. While it may not have proven effective in that it didn't work, the fact that it didn't work doesn't mean it wasn't any good. I suspect that GAO was straining to sustain (although, I do agree that the agency should never have executed a "J&A" if that's what that was).

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While it may not have proven effective in that it didn't work, the fact that it didn't work doesn't mean it wasn't any good.

I know that makes sense at some level, but I'm going to laugh anyway. :lol: I will pass it on to all of my lawyer friends, who, pragmatists that most of them are, will get a kick out of it. :D

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I don't buy Don's assumption theory. I think Vbus nailed it: "I believe that GAO was simply being anal about their interpretation of FAR 17.207(f) that states that the option must have been evaluated as part of the initial competition." That, along with GAO's current obsession with the small business rules and its own notion of socio-economic justice led it to look for a way to sustain the protest.

All the same, we have to deal with the FAR, and the GAO has it right. You have to evaluate an option or prepare a J&A in order to exercise it without competition. A determination that evaluation is not in the government's interests will not let an agency off the hook in that regard.

The obvious and simplest solution is to say that the option will be priced at the rates in effect when the option is exercised and that for evaluation purposes the rate will be the monthly rate of the last year of performance (final option year) times six and adding the total to the contract price. An alternative would be to have each offeror propose option rates. That would be more complicated.

Arguably, the prospect of exercising the option is too speculative to warrant evaluation. See FAR 17.206(a).

A better solution in the long run would be for the FAR councils to say that the option is not to be evaluated and may be exercised without competition. While they're at it, they ought to rewrite the clause, which, as written, is ambiguous. There is practically no hope that the councils will do either of those things.

The agency should reject GAO's recommendation.

Well, the Agency requested reconsideration and the GAO remains entrenched in its anal interpretation and application of the FAR to a temporary extension of services. See http://www.gao.gov/decisions/bidpro/4014722.htm for "B-401472.2, Department of the Army--Reconsideration, December 7, 2009"

OOPS! Parkerr beat me to the punch while I was reading the reconsideration...

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I would have argued that the option prices were evaluated at the time of award because the contractor priced the base and option year rates under the assumption that they could be required to perform at those rates up to an additional six months. I think that it's unreasonable to assume that the inclusion of FAR 52.217-8 in the solicitation had no effect on the proposed prices.

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I would have argued that the option prices were evaluated at the time of award because the contractor priced the base and option year rates under the assumption that they could be required to perform at those rates up to an additional six months. I think that it's unreasonable to assume that the inclusion of FAR 52.217-8 in the solicitation had no effect on the proposed prices.

Don, GAO made the point that there is no evidence that the government evaluated the pricing for the extension period. Even if the extension option possibility affected the pricing, the government, according to GAO,would have to document evaluating it.

Requiring a separate evaluation for a non CLIN contract extension at prices which were determined to be fair and reasonable for the contract period is novel and a real stretch of reasoning. In effect, you now will have to evaluate whether all prices are fair and reasonable twice.

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Based on the reconsideration, we got new guidance from our legal yesterday. Basically they want the KO to document as part of their Price Negotiation Memo the evaluation of the pricing of the 6 month extension should it be exercised. Kicker is that KO must document it for every period where it could potentially be utilized. So if you have Base + 4 years, must evaluate the pricing if used at end of Base, end of Option 1, etc. to ensure fair and reasonable. Add another page to the memo!

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Based on the reconsideration, we got new guidance from our legal yesterday. Basically they want the KO to document as part of their Price Negotiation Memo the evaluation of the pricing of the 6 month extension should it be exercised. Kicker is that KO must document it for every period where it could potentially be utilized. So if you have Base + 4 years, must evaluate the pricing if used at end of Base, end of Option 1, etc. to ensure fair and reasonable. Add another page to the memo!

woops85,

How will you evaluate each potential 6-month option period in terms of total contract price?

Per your example, if you have a Base + 4 Option Year contract and must include in your evaluation the prices for exercising the option at 52.217-8 for 6-months at the end of each of those years, how are you expected to include that option pricing in the total contract price given that you cannot exercise a 6-month option at the end of each option period? Including all option prices in the total price I think would be inappropriate.

Also, how will you describe the Government's price evaluation to offerors in the solicitation?

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woops85,

How will you evaluate each potential 6-month option period in terms of total contract price?

Per your example, if you have a Base + 4 Option Year contract and must include in your evaluation the prices for exercising the option at 52.217-8 for 6-months at the end of each of those years, how are you expected to include that option pricing in the total contract price given that you cannot exercise a 6-month option at the end of each option period? Including all option prices in the total price I think would be inappropriate.

Also, how will you describe the Government's price evaluation to offerors in the solicitation?

One way to do it is assign a weight based on probability. For example, if there's an equal chance the option could get exercised at the end of any year, assign a 20% weight to each 6-month option. Of course, then you factor in the probability that you need the extension as well.

I'm just offering this as a way to comply with the decision. Actually I think the decision is wrong and the CO shouldn't have to evalutae this at all.

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Since 52.217-8 is so ambiguous as to what exactly are the rates specified in the contract, one way to not exceedingly complicate the evaluation of this option may be to say that if 52.217-8 is exercised to cover performance for any period for which the Government had unexercised options available, then those unexercised option prices govern the 52.217-8 extension, plus any allowed adjustment made in accordance with 52.217-8. For extensions for the 6 month period following the last option period you can get separate pricing for those months and evaluate that as part of the award.

What do all of you think of that? (Although it still really doesn't address 17.206(a) - but I don't think there is any way to comply with this GAO decision and 17.206(a) at the same time without just making the assumption it is likely we are going to exercise that option when you think you need to include it in a contract.)

Mike

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Don, GAO made the point that there is no evidence that the government evaluated the pricing for the extension period. Even if the extension option possibility affected the pricing, the government, according to GAO,would have to document evaluating it.

Joel,

My point was that in evaluating the rates for the base and option years, the agency did evaluate the rates for the extension option (the rates would be the same).

However, I've given this more thought and I think that an agency has to multiply the rates by some unit (i.e., hours) and arrive at an actual dollar figure for evaluation purposes. This GAO decision is consistent with past decisions in that respect.

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Joel,

My point was that in evaluating the rates for the base and option years, the agency did evaluate the rates for the extension option (the rates would be the same).

However, I've given this more thought and I think that an agency has to multiply the rates by some unit (i.e., hours) and arrive at an actual dollar figure for evaluation purposes. This GAO decision is consistent with past decisions in that respect.

Don, I don't know the criteria for evaluating options to include the possibility that the contract may be extended at the end of either the initial period or any subsequent period. I would think that if the proposal was the best value for any of the full option periods, it would be okay for less than a full period. Maybe a statement to that effect would suffice Then, the only question should be "What if the final option period is extended?"

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Don, I don't know the criteria for evaluating options to include the possibility that the contract may be extended at the end of either the initial period or any subsequent period. I would think that if the proposal was the best value for any of the full option periods, it would be okay for less than a full period. Maybe a statement to that effect would suffice Then, the only question should be "What if the final option period is extended?"

And do we evaluate prices only, the technical merits of using that firm for a bridge period , both price and technical (best value)?

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Since 52.217-8 is so ambiguous as to what exactly are the rates specified in the contract, one way to not exceedingly complicate the evaluation of this option may be to say that if 52.217-8 is exercised to cover performance for any period for which the Government had unexercised options available, then those unexercised option prices govern the 52.217-8 extension, plus any allowed adjustment made in accordance with 52.217-8. For extensions for the 6 month period following the last option period you can get separate pricing for those months and evaluate that as part of the award.

What do all of you think of that? (Although it still really doesn't address 17.206(a) - but I don't think there is any way to comply with this GAO decision and 17.206(a) at the same time without just making the assumption it is likely we are going to exercise that option when you think you need to include it in a contract.)

Mike

That might work. However, I would get separate pricing for each six month period after the base and option years and include those prices in the total evaluated contract price. I don't think that would be too complicated.

Also, FAR 17.206 says that an agency is required to evaluate options if they are likely to be exercised. It doesn't say that agencies cannot evaluate options if they are unlikely to be exercised.

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That might work. However, I would get separate pricing for each six month period after the base and option years and include those prices in the total evaluated contract price. I don't think that would be too complicated.

Also, FAR 17.206 says that an agency is required to evaluate options if they are likely to be exercised. It doesn't say that agencies cannot evaluate options if they are unlikely to be exercised.

Don, that doesn't make any sense to me. You will be evaluating mutually exclusive options.

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FAR 17.206 Evaluation.

(a ) In awarding the basic contract, the contracting officer shall, except as provided in paragraph (b ) of this section, evaluate offers for any option quantities or periods contained in a solicitation when it has been determined prior to soliciting offers that the Government is likely to exercise the options. (See 17.208.)

(b ) The contracting officer need not evaluate offers for any option quantities when it is determined that evaluation would not be in the best interests of the Government and this determination is approved at a level above the contracting officer. An example of a circumstance that may support a determination not to evaluate offers for option quantities is when there is a reasonable certainty that funds will be unavailable to permit exercise of the option.

If 17.206(a ) states that a CO shall evaluate options after making a determination that the Government is likely to exercise the options, does that imply that a CO 1) shall not, 2) should not, or 3) need not but may evaluate options that the Government does not intend to exercise? (Before going straight to 17.206(b ), note that (b ) is an exception to (a ) and states that a CO need not evaluate options if it makes a [separate?] determination that evaluating the options is not in the Government's best interest.)

I think it would be impossible for a CO to determine that the Government intends to exercise the Option to Extend Services for 6-months at the end of each contract year. That being the case, is it improper for a CO to evaluate them all?

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woops85,

How will you evaluate each potential 6-month option period in terms of total contract price?

Per your example, if you have a Base + 4 Option Year contract and must include in your evaluation the prices for exercising the option at 52.217-8 for 6-months at the end of each of those years, how are you expected to include that option pricing in the total contract price given that you cannot exercise a 6-month option at the end of each option period? Including all option prices in the total price I think would be inappropriate.

Also, how will you describe the Government's price evaluation to offerors in the solicitation?

VBus - No clue yet. Obviously our CO council needs to works this out quick as we have some solicitations currently on the street and will potentially need to amend based on their decision. Maybe I can pass some suggestions from here. :D Initial guidance was to do it but not how to do it

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If 17.206(a ) states that a CO shall evaluate options after making a determination that the Government is likely to exercise the options, does that imply that a CO 1) shall not, 2) should not, or 3) need not but may evaluate options that the Government does not intend to exercise? (Before going straight to 17.206(b ), note that (b ) is an exception to (a ) and states that a CO need not evaluate options if it makes a [separate?] determination that evaluating the options is not in the Government's best interest.)

I think it would be impossible for a CO to determine that the Government intends to exercise the Option to Extend Services for 6-months at the end of each contract year. That being the case, is it improper for a CO to evaluate them all?

Paragraph (a) is a rule that applies to a situation where the Government is likely to exercise an option and it mandates the contracting officer to evaluate the option. The rule does not apply to situations where the Government is not likely to exercise the option. Paragraph ( b ) applies to situations where the Government is not likely to exercise the option and it gives the contracting officer the discretion to not evaluate the option (which implies that the CO can choose to evaluate the option). Notwithstanding the FAR language, paragraph ( b ) really isn't an exception to ( a ). ( a ) and ( b ) are two different rules that apply to two different situations.

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Paragraph (a) is a rule that applies to a situation where the Government is likely to exercise an option and it mandates the contracting officer to evaluate the option. The rule does not apply to situations where the Government is not likely to exercise the option. Paragraph ( b ) applies to situations where the Government is not likely to exercise the option and it gives the contracting officer the discretion to not evaluate the option (which implies that the CO can choose to evaluate the option). Notwithstanding the FAR language, paragraph ( b ) really isn't an exception to ( a ). ( a ) and ( b ) are two different rules that apply to two different situations.

Thanks Don. So it's not the case that if you determine in accordance with (a ) that it is likely you will exercise the option, you shall evaluate the option unless the exception at (b ) applies? I'm honestly trying to get the right read on this.

-

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Thanks Don. So it's not the case that if you determine in accordance with (a ) that it is likely you will exercise the option, you shall evaluate the option unless the exception at (b ) applies? I'm honestly trying to get the right read on this.

-

Vbus,

No, that is the case. I just re-read FAR 17.206 and I think I had it wrong in my earlier post--( b ) is an exception to ( a ).

Regardless, I see nothing in FAR 17.206 that prohibits a contracting officer from evaluating options even if it is unlikely that the options will be exercised.

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Vbus,

No, that is the case. I just re-read FAR 17.206 and I think I had it wrong in my earlier post--( b ) is an exception to ( a ).

Regardless, I see nothing in FAR 17.206 that prohibits a contracting officer from evaluating options even if it is unlikely that the options will be exercised.

Don, thanks - I'm glad you posted this, because, while I agree now, I had read too much into 17.206(a) myself before now. This is a great example of a case where it's easy to read too much into the FAR. I just had a discussion with some of my colleagues where they thought FAR 42.1503(e) limited use of information in PPIRS to 3 yrs. (6 for construction and A/E) of completion, and I said that it doesn't state that, that they were reading too much into the FAR, because it says you SHALL use that information when it is within the 3/6 yr. period, it doesn't say you cannot use information that is older than that. (They may have been influenced too much by the old FAR language re: PPIRS, but that's for another thread - not trying to thread-jack this one.)

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