Jump to content

Option not Exercised on Time - Now What? Does BAA change the response?


CharterParty

Recommended Posts

It is permissible to add "new work" to a contract by bilateral contract modification -- a new contract award for "new work" is not required.

Assuming, arguendo, that the unexercised option becomes "new work" if the Government subsequently decides to purchase it, that "new work" can be added to a contract by bilateral contract modification.

Let's simplify by saying we have two choices for procedures, either (A) competitive procedures* or (B) a J&A.  A J&A is not needed if competitive procedures are used.

And, let's say we have two choices in acquiring the "new work," either (1) issuance of a new contract or (2) adding it to a contract by bilateral contract modification

One can choose (A) and (1), or (A) and (2).

Or, one could choose (B) and (1), or (B) and (2).

In some cases, the R&D work represented by the unexercised option might be seen as still available under the BAA, especially if the BAA is still open.  In such a case, one could possibly choose (A) and (2), as posited by the original posting. 

* If the "new work" falls under FAR 6.102(a), (b), or (c), the competitive procedures are sealed bids, competitive proposals, or a combination of competitive procedures.  If the "new work" falls under FAR 6.102(d)(2), the competitive procedures are a BAA.

 

Link to comment
Share on other sites

  • Replies 61
  • Created
  • Last Reply

Top Posters In This Topic

26 minutes ago, ji20874 said:

If the "new work" falls under FAR 6.102(d)(2), the competitive procedures are a BAA.

Paragraph (d), Other competitive procedures, identifies 3 procedures in three sub-paragraphs - (d)(1) addresses selection of sources for architect-engineer contracts; (d)(2) addresses basic and applied research; and, (d)(3) addresses use of multiple award schedules. Can you issue without a J&A a contract mod for a lapsed option if the contract involves an A/E contract or a GSA schedule?

Link to comment
Share on other sites

20 minutes ago, ji20874 said:

A J&A is not always required to add "new work" to an A-E contract.  One can add "new work" to an A-E contract by bilateral contract modification after either (A) the competitive procedure described in FAR 6.102(d)(1), or (B) a J&A.  

And if you fail to exercise an option for an A/E contract, how do you add the work to the contract? Same question as it applies to a GSA schedule.

Link to comment
Share on other sites

I should have been clearer. I wondered how it was worded. But never mind. 

Link to comment
Share on other sites

The government must exercise an option in accordance with the terms of the contract.  If the government was required to exercise the option in January, and did not do so, it lacks authority under the contract to do so six months later.

When parties bi-laterally agree to modify the contract to exercise an option after the period to do so has expired, it is equivalent to a sole-source award.  That is why a J&A is often required.

But, a FAR Part 6 J&A is not always required.  Imagine a contract with a lapsed option period valued at $8,500.  In that case, the “sole source” award is below the micro-purchase threshold.  Because no J&A would be required to issue a sole source award of such work, then a J&A is not needed to agree to a modification to add the work.  Similarly, if the lapsed option period was valued at $175,000, and a sole source could be justified under FAR Part 13.106(b), then a modification supported by a memo from the KO determining only one source reasonably available would be sufficient.  All the legal requirements for competition (or limiting competition) must be met, and the modification is simply an administrative convenience that takes the place of having to award a new contract.

Now let’s apply those principles to a contract awarded under a BAA.  The period to exercise the option has lapsed.  Therefore, as stated above, the parties cannot simply agree to modify the contract.  One option would be to support the modification with a J&A or FAR 13.106(b) memo as appropriate.  However, that is not necessarily the only option.  The original contract was (likely) negotiated and awarded on a sole source basis under the terms of the BAA. 

So, my advice would be to have the contracting officer review the terms of the BAA.  Assuming:

1) the BAA allows for a direct award of a contract,

2) the work could otherwise be awarded as a new contract under the BAA,

3) the option price is still fair and reasonable, and

4) modifying the contract to exercise the option is in the best interest of the government, THEN

the parties may bi-laterally agree to modify the contract and exercise the option PROVIDED the KO documents the file to reflect the above determinations AND as part of that determination states that although a new contract could be awarded, for administrative convenience the parties have agreed to exercise the lapsed option.

If, for some reason, the underlying BAA requires some form of competition, or if the BAA has expired and a new one has not yet been issued, then the contracting officer must justify the limitation of competition in order to directly negotiate, modify the contract, and exercise the option (e.g., FAR Part 6 J&A or FAR 13.106(b)).

Link to comment
Share on other sites

4 hours ago, Lionel Hutz said:

So, my advice would be to have the contracting officer review the terms of the BAA.  Assuming:

1) the BAA allows for a direct award of a contract,

2) the work could otherwise be awarded as a new contract under the BAA,

3) the option price is still fair and reasonable, and

4) modifying the contract to exercise the option is in the best interest of the government, THEN

the parties may bi-laterally agree to modify the contract and exercise the option PROVIDED the KO documents the file to reflect the above determinations AND as part of that determination states that although a new contract could be awarded, for administrative convenience the parties have agreed to exercise the lapsed option.

Please provide FAR cites and /or GAO decisions supporting your theory.

Link to comment
Share on other sites

41 minutes ago, Jamaal Valentine said:

What about bilaterally modifying the contract option clause notification and availability requirements?  This would allow the government to exercise the option in accordance with the modified option terms.

That would have been the way to go before the contract completion period. But it would have needed to be bilateral supplemental agreement nessitated by non-availability of funding. I think that was the reason. If the previous KO simply failed to provide notice, you would think that someone would have been diligent to bring that up.

 

There’s more to this story than has been identified. 

How do you modify a contract in June for a year long option that will end at the originally scheduled completion?  It was also hinted that the original employees would have been lost had they not been retained. If there were six month or more delay in award of the work, it seems that the original employees would have been reassigned or look for other jobs. Just sayin’.

Link to comment
Share on other sites

23 minutes ago, Jamaal Valentine said:

What about bilaterally modifying the contract option clause notification and availability requirements?  This would allow the government to exercise the option in accordance with the modified option terms.

GAO has held that the preliminary written notification is a measure that benefits the contractor and may be waived by the contractor.  This waiver could be in the form of a modification, but does not have to be.

If the period in which to exercise the option ends before the end of the contract, then the parties could bi-laterally modify the contract to extend the term in which to exercise the option.  For example, "The Government may extend the term of this contract by written notice to the Contractor within 30 and 60 days before the contract expires; provided that the Government gives the Contractor a preliminary written notice of its intent to extend at least 90 days before the contract expires. The preliminary notice does not commit the Government to an extension."  In such a case, the parties could agree two weeks before the contract expires to modify the clause to read, "The Government may extend the term of this contract by written notice to the Contractor at any time before the contract expires," or other such language.  The option could then be exercised in accordance with the terms of the clause as modified.

However, by my read of the regulations and GAO case law, once the contract has expired, the option can no longer be exercised.  There may still be contractual obligations that need to be fulfilled or claims to be resolved, but the contract itself is done.  As I noted above, my suggestion for modifying the contract to exercise the option is a legal fiction.  In reality, the KO is awarding a new contract for the work.  The modification is an administrative convenience.

Link to comment
Share on other sites

Guest PepeTheFrog
On 10/25/2018 at 11:17 AM, CharterParty said:

An agency failed to exercise an option to extend the period of performance and the contract expired in January, in June the contractor and the Agency agree bilaterally to a modification to re-establish and continue originally planned work under the contract to the original option period of performance completion date of December of the year.

This theory of @ji20874 and @Lionel Hutz is admirable to save some work, but PepeTheFrog is not convinced it is sound.

Timing and the existence or non-existence of a contract to modify

First, when you "agree bilaterally to a modification to re-establish" - What contract are you modifying? There is no contract. As stated, "the contract expired in January." There is no modification possible. It's a legal fiction. You need a new contract, not a modification to something that doesn't exist. Isn't this "modification" effectively a new contract?

Awarding a modification "against the BAA" with no J&A

Under this theory, the agency can tack on an unlimited number of bilateral modifications to the original award, as long as the period for submissions of proposals for the BAA is open. In other words, the agency can perform this shortcut indefinitely, over and over, using the same contractor/performer. Does anyone dispute that consequence? If you can do it once, you can do it twice. Does that not seem like a problem, and something that demonstrates why this shortcut violates the spirit and law of CICA?

Administrative convenience of modification versus new contract, but what about the program office's work (evaluation or decision to fund)?

PepeTheFrog understands that a modification is easier to execute than a new contract. That saves some time. But what about the other work of "awarding against the BAA," which includes the non-contracting side of the agency? What about the peer or scientific technical review? Does that happen each time you use this fanciful theory or shortcut? Is it really saving you that much time? Are you saying this entire shortcut happens in the contracting office, and skips the program office review? If so, is that really following the terms and procedures of the BAA?

 

Link to comment
Share on other sites

Guest PepeTheFrog
10 minutes ago, Retreadfed said:

Does the FAR define or state when a contract has expired?  What does it mean when you say that a contract has expired?

No. 

In this scenario, "expired contract" means when the delivery date, completion date, or period of performance is exhausted and there are no available (pre-negotiated) options that can be exercised according to the original terms. "End of the road" as far as dates to perform or deliver or options to extend. 

 

Link to comment
Share on other sites

@Don Mansfield, poor choice of words on my part with “typical Government Contracting Officer response”  the issue is no less important and the referenced case Neil R. Gross & Co., 69 Comp. Gen. 247 (B-237434), 90-1 CPD ¶212: the quote includes a very important reference to the solicitation methodology “We also consider whether the solicitation for the original contract adequately advised offerors of the potential for the type of changes during the course of the contract that in fact occurred … or whether the modification is of a nature which potential offerors would reasonably have anticipated under the changes clause”.    

BAA’s are structured to be open calls, many are Funding Opportunity Notices under 2 CFR 200 in addition to Contract Solicitations or even the new hot topic of OTA vehicles, all into one solicitation vehicle.   The method can advise the entire US industry base of research interests of the US Government and the possibility of grants/contracts/OTAs.  The Government decided how/what type of vehicle best fit the circumstances of the response nothing foretold the award was to be  a FAR based contract.  

Options are not even advertised in a BAA solicitation like in a FAR 15 solicitation.  The question of what option authority is necessary is even a question in my mind given 17.200, which makes the option subpart inapplicable.

 @Don Mansfield you state "taken to its extreme, you would have to say that it's impossible for the work covered by the unexercised option to be out of scope. It may or may not be within scope." 

I am saying that any unexercised option under a contract initially awarded under a BAA with that option is within scope and bi-laterally executable .  

Now more generally if a contract initial award under a BAA included an option that for any reason the Government failed to exercise during its unilateral right period, can both parties agree to perform the work originally agreed to at award? Does it run afoul of CICA or the “Spirit of CICA”? Which specifically separated out the BAA.

All, I really appreciate the discussion.

 

Link to comment
Share on other sites

1 hour ago, PepeTheFrog said:

In this scenario, "expired contract" means when the delivery date, completion date, or period of performance is exhausted and there are no available (pre-negotiated) options that can be exercised according to the original terms.

Is there anything in the FAR, GAO, appeals board or court case that says such a contract cannot be modified to extend its performance period?

Link to comment
Share on other sites

Guest PepeTheFrog
55 minutes ago, Retreadfed said:

Is there anything in the FAR, GAO, appeals board or court case that says such a contract cannot be modified to extend its performance period?

The Competition in Contracting Act (statute), which the FAR implements, requires full and open competition for new work or work that is outside the scope of the original contract, hence the discussion in this thread about where the line is drawn and whether a J&A is required.

What is your point?

Link to comment
Share on other sites

1 hour ago, CharterParty said:

Now more generally if a contract initial award under a BAA included an option that for any reason the Government failed to exercise during its unilateral right period, can both parties agree to perform the work originally agreed to at award? Does it run afoul of CICA or the “Spirit of CICA”? Which specifically separated out the BAA.

As long as the modification is within the scope of the competition, then I don't think it would run afoul of CICA. The fact that the work is R&D and the contract was properly awarded under a BAA, I think it would be difficult for a third-party to win a CICA protest. However, a high likelihood that it's ok is not the same as a rule that it's ok. 

Link to comment
Share on other sites

15 minutes ago, PepeTheFrog said:

The Competition in Contracting Act (statute), which the FAR implements, requires full and open competition for new work or work that is outside the scope of the original contract, hence the discussion in this thread about where the line is drawn and whether a J&A is required.

All frogs must know that there are many contracts (and contract actions) that are exempt from CICA.  So, maybe it would be better to say that CICA “requires full and open competition for SOME new work or work that is outside the scope of the original contract...”  Is the BAA process one of the exceptions to CICA?

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.

×
×
  • Create New...