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RachelleR

Exercise option SAF

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Scenario: Contract was awarded for base year and 2 option years that begin and end in October each year (Base Year, 12 Oct 2017 - 11 Oct 2018; Option Year 1, 12 Oct 2018 - 11 Oct 2019; Option Year 2, 12 Oct 2019 - 11 Oct 2020). Funding is O&M. Contracting Officer was prepared to exercise option year 1. Due to system issues Budget Officer was unable to route a PR to Contracting on the last day of the base year period of performance. 52.232-18 Availability of Funds was included in the Contract. Contracting Officer exercised the option SAF rather than let the Contract expire. Office discussion centers around if exercising option year 1 SAF was appropriate since funds were chargeable to current fiscal year vs new fiscal year since it was October. Any insight would be appreciated. 

Edited by RachelleR
Added POP and Funding Type

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Maybe the contracting officer is the real hero in the story?  Absent his or her action, the contract would have expired and the work would have stopped.  The pedants in the office can only have this discussion because of the contracting officer's heroism -- otherwise, they would be blaming the contracting officer for letting the contract expire.  The contracting officer had a problem, and he or she saved the day.

Here is the choice:

  • (A) Do a modification and add the funds to the contract, or
  • (B) Declare the option exercise invalid and tell the contractor the contract is over.

Which action did the office take?

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2 minutes ago, ji20874 said:

Maybe the contracting officer is the real hero in the story?  Absent his or her action, the contract would have expired and the work would have stopped.  

Here is the choice:

  • (A) Do a modification and add the funds to the contract, or
  • (B) Declare the option exercise invalid and tell the contractor the contract is over.

Which action did the office take?

Funded PR was received when system issues were resolved on 15 Oct 2018. Modification to add funding was issued by the Contracting Officer the same day funding was received.

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34 minutes ago, ji20874 said:

That’s good.  So everything is okay, right?  

Yes it's all taken care of. The office discussion is whether this course of action taken by the Contracting Officer was permitted since the funds were chargeable to the current fiscal year vs new fiscal year. Some believe it was not permissible for this reason. I disagree and wanted to hear the perspectives of the WIFCON community. Thanks for your reply.

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So, you have some people in the office who are arguing that the option exercise was invalid?  Who are arguing that the contract should have expired and the work stopped?  

The people in the contracting office should be in favor of the work continuing.  Instead, people there who were not involved are having an academic discussion trying to pin blame on the contracting officer for keeping the work going.  Are they arguing that the option exercise modification and the subsequent funding modification are invalid?  If not, they really should shut up.

Maybe the contracting officer had an understanding, or maybe even an e-mail, that funds were on the way.  That would be good.  An irregularity or hiccup in the production of a purchase request should not be an excuse for a contracting officer to stop the work as part of an academic argument.  I’m supposing the contracting officer’s intentions were honorable.  If the contractor thinks the modifications are invalid, the contractor can speak for itself.

 

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Yes. Unfortunately this has digressed to an academic discussion in my office. The Contracting Officer had an email from the Budget Officer stating funds were available but the PR could not be routed due to system issues.

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8 hours ago, ji20874 said:

I’m supposing the contracting officer’s intentions were honorable.

The intent only matters so much. The question is if the action was proper ( FAR 17.207(c)(1)), and FAR 32.706-1) and within the contracting officer's delegated authority (FAR 1.602-1( b )).

Case law supports the use of options subject to the availability of funds depending on certain facts; case law also maintains the exercise options subject to the availability of funds is improper (invalid), in some cases, too:

Exercise of an option before funds are made available, contingent of the availability of funds, is an invalid exercise, J.E.T.S., Inc., ASBCA 26135, 82-2 BCA ¶15,986; Lear Siegler Inc., ASBCA 30224, 86-3 BCA ¶19,155. However, exercise of an option contingent on the availability of funds is proper if that is called for in the option clause of the contract, Western States Management Servs., Inc., ASBCA 37504, 92-1 BCA ¶24,663; Cessna Aircraft Co., ASBCA 43196, 93-3 BCA ¶25,912.

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The KO probably deserves an attaboy or attagirl award.

However, Rachelle, please explain and expand upon what you meant by : “because the funds were chargeable to the current fiscal year vs new fiscal year.” That hasn’t been discussed  here, unless I missed it. 

A funding delay may again be a problem next October.  By “system issues”, you might be referring to delays in apportioning, allocating and processing distribution of appropriations that are not uncommon in some agencies right after the start of a fiscal year. 

Other options might be to have the parties bilaterally agree to an extension of the government’s right to exercise the next option or to bilaterally modify the option clause to  allow the government to issue the future options contingent to the availability of funds, per above ASBCA Decisions. Also, please note that in the above cited Cessna Decision, the timing was such that the funds were appropriated but not apportioned or allocated when the government exercised the option. 

See also the Appeal of the above  Cessna Aircraft ASBCA Decision at https://caselaw.findlaw.com/us-federal-circuit/1233502.html

Was there a break in service until the funding was put on contract? Or did the Contractor continue performance beginning on October 12th? 

I suggest You ask for competent legal Counsel advice here. My advice is to explore now what can be done next October when the same problem will likely occur. 

At any rate the discussion has overlooked clarification of what funds were expended...

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Jamaal,

So, are you arguing that the option exercise and subsequent modification were invalid, and should be revoked?

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RachelleR,

The FAR allows for a simple letter or telegram notice of award, to be followed later with the formal award.  Such notice of award is official and binding immediately, and yet is done before (days or weeks before) the production of the formal award document.

Perhaps the pedants in your office can choose to look upon—

  • the option exercise as a notice of award (based on the contracting officer’s possession of an e-mail attesting to funds availability); and
  • the subsequent funding action as the formal award? 

The notice of award process was more commonly used in the old days, when it took time to assemble and print and distribute a contract document.  It is still a legal and honorable process that has fallen into disuse because of desktop publishing capabilities that we all have.  

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18 hours ago, RachelleR said:

The office discussion is whether this course of action taken by the Contracting Officer was permitted since the funds were chargeable to the current fiscal year vs new fiscal year.

Earlierr you said 

On 11/10/2018 at 6:11 AM, RachelleR said:

Scenario: Contract was awarded for base year and 2 option years that begin and end in October each year (Base Year, 12 Oct 2017 - 11 Oct 2018; Option Year 1, 12 Oct 2018 - 11 Oct 2019; Option Year 2, 12 Oct 2019 - 11 Oct 2020). Funding is O&M. Contracting Officer was prepared to exercise option year 1. Due to system issues Budget Officer was unable to route a PR to Contracting on the last day of the base year period of performance.

You are OK if the contracting officer exercised the option SAF in anticipation of use of FY 19 annual funds for period 12 Oct 2018 - 11 Oct 2019.

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ji, the DoD and my former Agency’s contracting and Financial (CEFMS) and contracting software systems and accompanying rules and regulations might not allow a KO to issue an award by letter or telegraphic ( or other electronic) means, except in a combat or emergency/contingency operation. 

Someone else in my former agency can feel free to explain or rebut me. 

The reasons likely have to do with the automated systems being able to track all obligations in real time against valid funding and reeling in the rogues and others that haven’t always followed up their actions. It’s true that the government should be able to control and track all obligations in real time.

I have seen where DoD pulled back (proper term?) various committed but unobligated funding for other needs.  

I just don’t know if that the various systems allow an award prior to certification of available funds. Someone who circumvents those systems can find their butts in a crack (pun intended). 

Of course, the unmentionable elephant in the room is often whether the contractor begins performance under conditions of “subject to [subsequent] availability of funds”. 

So maybe the attaboy/girl should be unofficial. Followed by a slap on the wrist with a wet noodle. 

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2 hours ago, joel hoffman said:

The KO probably deserves an attaboy or attagirl award.

However, Rachelle, please explain and expand upon what you meant by : “because the funds were chargeable to the current fiscal year vs new fiscal year.” That hasn’t been discussed  here, unless I missed it. 

A funding delay may again be a problem next October.  By “system issues”, you might be referring to delays in apportioning, allocating and processing distribution of appropriations that are not uncommon in some agencies right after the start of a fiscal year. 

Other options might be to have the parties bilaterally agree to an extension of the government’s right to exercise the next option or to bilaterally modify the option clause to  allow the government to issue the future options contingent to the availability of funds, per above ASBCA Decisions. Also, please note that in the above cited Cessna Decision, the timing was such that the funds were appropriated but not apportioned or allocated when the government exercised the option. 

See also the Appeal of the above  Cessna Aircraft ASBCA Decision at https://caselaw.findlaw.com/us-federal-circuit/1233502.html

Was there a break in service until the funding was put on contract? Or did the Contractor continue performance beginning on October 12th? 

I suggest You ask for competent legal Counsel advice here. My advice is to explore now what can be done next October when the same problem will likely occur. 

At any rate the discussion has overlooked clarification of what funds were expended...

Good Morning, 

Some in the office have the opinion that the Clause Prescription would not have permitted the Contracting Officer to exercise the option SAF since the Clause Prescription specifically    referenced funds chargeable to a new fiscal year (FY20 in this case). The option was exercised SAF of current year funds (FY19 since it was 12 Oct 2018). The PR was certified but the Budget Officer had literal system issues that would not allow him to route the PR to the Contracting Officer on 12 Oct 2018 which is why the Contracting Officer chose to exercise Option Year 1 SAF rather than let the Contract expire. The Contractor was not authorized to perform the services and did not perform the services until the Contracting Officer modified the Contract on 15 Oct 2018 to add funding received from the Budget Officer after IT resolved their system issues. One other detail of note is 52.232-18 was properly included in the Contract at award. Thanks for your insight. Prescription is pasted below.

32.706-1 -- Clauses for Contracting in Advance of Funds.

(a) Insert the clause at 52.232-18, Availability of Funds, in solicitations and contracts if the contract will be chargeable to funds of the new fiscal year and the contract action will be initiated before the funds are available.

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2 hours ago, ji20874 said:

Jamaal,

So, are you arguing that the option exercise and subsequent modification were invalid, and should be revoked?

I don't have enough information to make a case for it being valid or invalid. What clauses are in the contract and how are they written and assigned to the option? What are the services?

I am sure there were several sound solutions to the challenge. I prefer fundamentally sound contracting over gimmicky solutions.

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56 minutes ago, napolik said:

Earlierr you said 

You are OK if the contracting officer exercised the option SAF in anticipation of use of FY 19 annual funds for period 12 Oct 2018 - 11 Oct 2019.

That is exactly what the Contracting Officer did. Thanks for your input.

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6 minutes ago, RachelleR said:

One other detail of note is 52.232-18 was properly included in the Contract at award.

Does this mean the contract included a special clause stating that 52.232-18 applies to the option(s)?

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1 minute ago, Jamaal Valentine said:

Does this mean the contract included a special clause stating that 52.232-18 applies to the option(s)?

No special statement was included. Is there a reason this clause would not apply to the option? Thanks for your time.

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2 minutes ago, RachelleR said:

No special statement was included. Is there a reason this clause would not apply to the option? Thanks for your time.

It would remove any doubt and save an argument that seems likely in that office.

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6 hours ago, joel hoffman said:

So maybe the attaboy/girl should be unofficial. Followed by a slap on the wrist with a wet noodle. 

Yep.

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7 hours ago, RachelleR said:

Good Morning, 

Some in the office have the opinion that the Clause Prescription would not have permitted the Contracting Officer to exercise the option SAF since the Clause Prescription specifically    referenced funds chargeable to a new fiscal year (FY20 in this case). The option was exercised SAF of current year funds (FY19 since it was 12 Oct 2018). The PR was certified but the Budget Officer had literal system issues that would not allow him to route the PR to the Contracting Officer on 12 Oct 2018 which is why the Contracting Officer chose to exercise Option Year 1 SAF rather than let the Contract expire. The Contractor was not authorized to perform the services and did not perform the services until the Contracting Officer modified the Contract on 15 Oct 2018 to add funding received from the Budget Officer after IT resolved their system issues. One other detail of note is 52.232-18 was properly included in the Contract at award. Thanks for your insight. Prescription is pasted below.

32.706-1 -- Clauses for Contracting in Advance of Funds.

(a) Insert the clause at 52.232-18, Availability of Funds, in solicitations and contracts if the contract will be chargeable to funds of the new fiscal year and the contract action will be initiated before the funds are available.

 

7 hours ago, RachelleR said:

That is exactly what the Contracting Officer did. Thanks for your input.

Attaboy/girl!!!!!!!! No slapping here!!!! 

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