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SubK

FAR Clause 52.217-8Option to Extend Services / Pricing

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We have received an RFP for a base year, and one 6 month period, that is considered an Option to Extend the contract.  The solicitation includes this:

I.  SIX MONTH EXTENSION

IAW FAR Clause 52.217-8, Option to Extend Services (Nov 1999), 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 of 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.

The Government may require continued performance of the contract IAW FAR Clause 52.217-8.  If the option to extend services clause is exercised, the price for current option period will be pro-rated IAW FAR Clause 52.217-8 at the rates specified for that option period.

17.203 -- Solicitations.
(a) Solicitations shall include appropriate option provisions and clauses when resulting contracts will provide for the exercise of options (see 17.208).
(b) Solicitations containing option provisions shall state the basis of evaluation, either exclusive or inclusive of the option and, when appropriate, shall inform offerors that it is anticipated that the Government may exercise the option at time of award.
(c) Solicitations normally should allow option quantities to be offered without limitation as to price, and there shall be no limitation as to price if the option quantity is to be considered in the evaluation for award (see 17.206).
(d) Solicitations that allow the offer of options at unit prices which differ from the unit prices for the basic requirement shall state that offerors may offer varying prices for options, depending on the quantities actually ordered and the dates when ordered.
(e) If it is anticipated that the Government may exercise an option at the time of award and if the condition specified in paragraph (d) above applies, solicitations shall specify the price at which the Government will evaluate the option (highest option price offered or option price for specified requirements).
(f) Solicitations may, in unusual circumstances, require that options be offered at prices no higher than those for the initial requirement; e.g., when --
(1) The option cannot be evaluated under 17.206; or
(2) Future competition for the option is impracticable.
(g) Solicitations that require the offering of an option at prices no higher than those for the initial requirement shall --
(1) Specify that the Government will accept an offer containing an option price higher than the base price only if the acceptance does not prejudice any other offeror; and
(2) Limit option quantities for additional supplies to not more than 50 percent of the initial quantity of the same contract line item. In unusual circumstances, an authorized person at a level above the contracting officer may approve a greater percentage of quantity.
(h) Include the value of options in determining if the acquisition will exceed the World Trade Organization Government Procurement Agreement or Free Trade Agreement thresholds.

 

 

My question is, are we allowed to include escalation on the 6 month extension period since they are including it in the evaluation of the total price? A co-worker of mine, who is not in contracting says we are not allowed to, but he is not sure.

 

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It sounds like the solicitation does not allow you to propose a price for the -8 option.  Is that right?

If you cannot propose a price for the -8 option, then you cannot include an escalation.,

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24 minutes ago, ji20874 said:

It sounds like the solicitation does not allow you to propose a price for the -8 option.  Is that right?

If you cannot propose a price for the -8 option, then you cannot include an escalation.,

Yes, the solicitation allows us, and asks us to price the six month extension. In the solicitation they state it is an option to extend the contract for a period up to six months, and ask us to price it. 

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If you can price it, then go ahead and escalate it -- unless, of course, the contract will include the clause at FAR 52.222-43 or -44 -- if so, then you cannot escalate for Service Contract Act wages (para. ( b ) of each clause)  but you can escalate for other reasons.

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2 minutes ago, ji20874 said:

If you can price it, then go ahead and escalate it -- unless, of course, the contract will include the clause at FAR 52.222-43 or -44 -- if so, then you cannot escalate for Service Contract Act wages (para. ( b ) of each clause)  but you can escalate for other reasons.

The LCAT's are not subject to SCA.  Do you happen to have a FAR Clause to reference or rational behind this?  Is it because  17.203 -- Solicitations - (C) that I quoted above?  I just want to have something to stand on when I present this to him.  Thanks!

 

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If the solicitation allows you to price the -8 option, and the solicitation does not require that options be offered at prices no higher than those for the base requirement (see FAR 17.203( g )), and you're not subject to the escalation restraint of para. ( b ) of the clauses at FAR 52.222-43 or -44, then you can price it however you wish, right?

There is no FAR reference to say you can price it however you wish.  But there are FAR references that say you can't in certain circumstances, and I addressed them as far as I know them -- there may be others.

Similarly, there is no law that affirmatively allows you to cross the street.  There might be laws banning or limiting your crossing of the street, but there is no law affirmatively allowing you to cross the street.

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18 hours ago, ji20874 said:

If the solicitation allows you to price the -8 option, and the solicitation does not require that options be offered at prices no higher than those for the base requirement (see FAR 17.203( g )), and you're not subject to the escalation restraint of para. ( b ) of the clauses at FAR 52.222-43 or -44, then you can price it however you wish, right?

There is no FAR reference to say you can price it however you wish.  But there are FAR references that say you can't in certain circumstances, and I addressed them as far as I know them -- there may be others.

Similarly, there is no law that affirmatively allows you to cross the street.  There might be laws banning or limiting your crossing of the street, but there is no law affirmatively allowing you to cross the street.

After having this conversation again with my co-worker his rational is that statement "These rates may be adjusted only as a result of revisions of prevailing labor rates provided by the Secretary of Labor."  To me, "These rates" refers to the rates specified in the contract, being our NTE rates for that period of performance, and if the base year of the Solicitation falls on OP 1, we use OP 1 NTE rates from the IDIQ, and if that 6 month extension falls in OP 2 of the IDIQ base rates we COULD use those NTE rates.  

Appearantly he called the contracting officer and this is an email he sent me:

 

I called the CO and he said the FAR is pretty explicit in its guidance—its’ not allowed.  However, there was a GAO protest filed about this and the Govt sided with the protester who had escalated rates in their proposal.  Apparently the Air Force has decided use the guidance from that GAO case that stated if you add escalation they will honor it, so BL, we can escalate but I would prefer not to…I’ll leave it up to you guys.

Here is the verbiage form the FAR: 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.

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SubK:

There is no established governmentwide policy or procedure about the pricing of the options in the 52.217-8 clause. None of us can advise you on the basis of established governmentwide policy or procedure. The most that anyone can tell you is what they would do if they were in your position. In my opinion, you would be foolish to act on such advice.  If you proceed without explicit CO instructions you run the risk of having your proposal rejected.

Do yourself a favor and ask the CO for explicit, written proposal preparation instructions about -8 option pricing, then follow those instructions or make a no-bid decision.

Good luck.

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Guest Jason Lent

SubK--

Read this again:

Quote

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.

If you price the six months of performance at whatever rate, those are the rates "specified in the contract"; any adjustment after the fact that isn't a matter of wage rate revisions (such as to make up for lost revenue or something like that) wouldn't be allowed. But, as Vern suggested, reach out to the Contracting Officer for clarification since it is their acquisition.

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FAR Clause 52.217-8 Option to Extend Services

     Quite often I see in RFP's that the government will evaluate the price of all options.  On rare occasion I've seen this called out specifically as one of the options to be evaluated.

      But never have I seen Sch B tables (CLIN tables) extended to call out this option.  It does seem a dis-respectable practice to not explicitly call them out, like hiding something in the fine print.   WHY does the government avoid routinely including Sch B tables for this option?

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13 hours ago, rsenn said:

FAR Clause 52.217-8 Option to Extend Services

     Quite often I see in RFP's that the government will evaluate the price of all options.  On rare occasion I've seen this called out specifically as one of the options to be evaluated.

      But never have I seen Sch B tables (CLIN tables) extended to call out this option.  It does seem a dis-respectable practice to not explicitly call them out, like hiding something in the fine print.   WHY does the government avoid routinely including Sch B tables for this option?

If you are asking why the government doesn't include separate CLIN(s) for extension of services under 52.217-8, that clause maintains current contract pricing (unless otherwise specified).  It is explained in a July 2013 Briefing Papers article by Stuart B. Nibley and Sheila A. Armstrong, entitled "The Government's Exercise of Options", found at:

http://www.klgates.com/files/Upload/BP_July_2013.pdf

 

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1 hour ago, Vern Edwards said:

Joel:

On what page does that explanation appear?

Vern, please see the discussion beginning on page 4 under "Which Option Clause Applies?", in particular, the first two paragraphs but also on page 5.  

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Thanks, Joel, but the question was:

17 hours ago, rsenn said:

But never have I seen Sch B tables (CLIN tables) extended to call out this option.  It does seem a dis-respectable practice to not explicitly call them out, like hiding something in the fine print.   WHY does the government avoid routinely including Sch B tables for this option?

Emphasis added.

I didn't see anything in that article that provides a direct answer to that question. I searched the article for the phrase "line item," but nowhere did I see a mention of line items in connection with that clause. Did I miss it?

I think the answer to the question is that until the GAO's decision in Major Contracting Services, Inc., B-401472, 2009 CPD ¶ 170, no one thought it was necessary to have a CLIN for the 52.217-8 option. See "Exercising Options: An Unanticipated Issue," The Nash & Cibinic Report (June 2010). I still don't think it's essential, but some agencies have been doing it. rsenn says he's never seen it, but that's because he hasn't looked at enough RFPs.

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See below. 

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Vern, that was a July 2013 Briefing Papers article, which is later than the Major Contracting Services, Inc. Decision and the 2010 Nash and Cibinic Report.  The authors of the 2013 article indicated that the temporary extension under the -8 clause would maintain current contract pricing, which is in contrast to an extension under the -9 clause, where the contract schedule determines contract pricing for each option.

So, how would the government structure a CLIN or CLINs for an extension of contract services under the -8 clause that could occur at one of several points of time and for, say one, two, three, four, five or six months, when it can simply decide to have the contractor continue the services under the current contract pricing?

Perhaps I'm misinterpreting rsenn's question. I think that he/she asked why the government 'avoids' [doesn't] include Schedule B 'tables'  [contract line items] for 'this' [-8] option?  

I thought that the article explained why. 

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23 minutes ago, joel hoffman said:

The authors of the 2013 article indicated that the temporary extension under the -8 clause would maintain current contract pricing, which is in contrast to an extension under the -9 clause, where the contract schedule determines contract pricing for ach option.

So, how would the government structure a CLIN or CLINs for an extension of contract services under the -8 clause that could occur at one of several points of time and for, say one, two, three, four, five or six months, when it can simply decide to have the contractor continue the services under the current contract pricing?

There would be any number of ways to do it. The clause says that performance will be "at the rates specified in the contract." Many agencies have presumed that those would be the montly rates of the year of performance in which the option is first exercised. That appears to be what the BRPapers authors thought. But that need not be the case. But an agency could require offerors to propose monthly rates. An agency could say that the monthly rates would be the average of the rates of the years preceding the exercise of the option. Etc. No biggie.

Signing off this thread now.

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Just now, Vern Edwards said:

There would be any number of ways to do it. The clause says that performance will be "at the rates specified in the contract." Many agencies have presumed that those would be the montly rates of the year of performance in which the option is first exercised, but that need not be the case. The agency could require offerors to propose monthly rates. The agency could say that the monthly rates would be the average of the rates of the years preceding the exercise of the option. Etc. No biggie.

Ok, thanks. But they don't necessarily have to establish a separate CLIN and I would expect that it would be easier not to. They apparently now do have to evaluate the price as part of the initial award process, as discussed in previous threads in this Forum. 

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