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Evaluating Options


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Does anyone know how options are evaluated before they are exercised? Where can I info about this?

FAR 17.207 contains information about the determination Contracting Officers must made. Part of that says:

"© The contracting officer may exercise options only after determining that?

(1) Funds are available;

(2) The requirement covered by the option fulfills an existing Government need;

(3) The exercise of the option is the most advantageous method of fulfilling the Government?s need, price and other factors (see paragraphs (d) and (e) of this section) considered; and

(4) The option was synopsized in accordance with Part 5 unless exempted by 5.202(a)(11) or other appropriate exemptions in 5.202.

(d) The contracting officer, after considering price and other factors, shall make the determination on the basis of one of the following:

(1) A new solicitation fails to produce a better price or a more advantageous offer than that offered by the option. If it is anticipated that the best price available is the option price or that this is the more advantageous offer, the contracting officer should not use this method of testing the market.

(2) An informal analysis of prices or an examination of the market indicates that the option price is better than prices available in the market or that the option is the more advantageous offer.

(3) The time between the award of the contract containing the option and the exercise of the option is so short that it indicates the option price is the lowest price obtainable or the more advantageous offer. The contracting officer shall take into consideration such factors as market stability and comparison of the time since award with the usual duration of contracts for such supplies or services.

(e) The determination of other factors under paragraph ©(3) of this section?

(1) Should take into account the Government?s need for continuity of operations and potential costs of disrupting operations; and

(2) May consider the effect on small business

So most of the time, the Contracting Officer uses information under d(2) above and determines that exercise of the option is the most advantageous method. If the contract award was recent, the Contracting Officer can made the determination based on d(3). It's rare than a new solicitation is for the same or similar commodity gets issued as in d(1).

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