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I am in a services contracting office that made a decision to exercise two Option-Year periods concurrently. The contract's base-year period ends June 21, 2019, and Option-Period 1 starts on June 22, 2019; However, the program office has made the [questionable/potentially illegal] decision to also exercise Option-Period 2, which is not scheduled to commence until June 22, 2020, with an end-date of June 21, 2021. The intent is to exercise Option-Periods 1 and 2 by rolling the CLIN ceiling values of Option-Periods 1 and 2 into their respective base-period CLIN ceiling values. The contracting office cited the following advantages to the methodology of rolling the option-year CLINs into their respective base-period CLINs: 1) Programs can use unexpended funds on the base CLINs immediately, 2) Reduction in the number of CLINs for contract close-out, and 3) Reduction in contract administration overhead.

The concern at hand is not whether or not it is okay to exercise the contract's Option-Period 1, as the base-year is coming to an end, but is it legal to exercise Option-Period 2 concurrently with Option-Period 1. Are there statutory regulations (FAR 17 or 37) to support exercising two option-year periods concurrently for service contracts. Please advise. Thank you much.

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What do you mean by CLIN ceiling value and what year an type of funds will be used to fund the work for option year 2 in this scenario?

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What does the option clause say? The clause should indicate when the option(s) may be exercised. (If they want to exercise option 2 early, first modify the option clause language so that option 2 can be exercised in strict accordance with its [new] terms ... then exercise option 2)

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@Retreadfed CLIN ceiling value just means the value of the CLIN in terms of the price of the CLIN (Cost + Plus Fixed Fee = Price). The color of money/funds type is RDT&E, which is two-year money, I believe. The funding will be FY19 money I think and since the PoP and CLIN values of both Option-Years 1 & 2 will be rolled into the base CLIN, I’m assuming (don’t judge me, lol) that the funding aspect will just carry forward once the option is exercised using RDT&E funds. I hope that answers your question. Thanks so much for your response. 

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@Jamaal Valentine The contract is CPFF with the following option clauses: 52.217-8 (to extend services) and 52.217-9 (to extend the term of the contract. I use 52.217-9 for my Notice or Intent to the CTR, and as my mod authority. Neither of the clauses have been modified to reflect the early exercise of Option 2. If the PCO doesn’t modify either of the Option clauses in the contract before exercising both Option 1 and 2, will this be considered an illegal contact action? Thanks much for your response. 

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1 hour ago, BigBirdContracting81 said:

If the PCO doesn’t modify either of the Option clauses in the contract before exercising both Option 1 and 2, will this be considered an illegal contact action?

Alliant Techsystems, Inc. v. United States, 178 F.3d 1260, 1275 (Fed. Cir. 1999), 41 GC ¶ 308 (“[A]n attempt to exercise an option outside its terms does not constitute a valid exercise of the option.”); 

Griffin Servs., Inc., ASBCA No. 52280 et al., 02-2 BCA ¶ 31,943, at 157,803 (“The Government’s exercise of an option must be unconditional and done in strict accordance with its terms. Any attempt by the Government offeree to alter the conditions of the option will render the exercise of it ineffective.”);

Contel Page Servs. Inc., ASBCA No. 32100, 87-1 BCA ¶ 19,540, at 98,734 (an option must be unconditionally accepted and any attempt to alter the option terms will render exercise of the option ineffective); 

Holly Corp., ASBCA No. 24975, 83-1 BCA ¶ 16,327, at 81,164 (“the notice by which the power of an option holder is exercised must be unconditional and in exact accord with the terms of the option” (citing Corbin on Contracts § 264 (1963)).

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A contract usually specifies the end date by which an option must be exercised — if so, exercising earlier than anticipated is fine.

FY2019 RDT&E funds may be obligated in FY2019 or 2020.  It is generally okay to exercise a FY2020 option using FY2019 RDT&E funds.

Indeed, good for the program office!  

BigBird, Does your contract specify a period (with a beginning and end date) for exercising the option, or just an end date?  If it is the latter, why are you charging the program office with “illegal” activities?  It is fine to research when you don’t know the answer, as you don’t, but you shouldn’t carelessly charge your colleagues as criminals until AFTER you have done your research.  Please look at your contract and let us know if it specifies a period or just an end date.

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@ji20874 If you had thoroughly READ my question, you would know that I DID NOT charge my Contracting activity with any illegal conduct. I simply asked IF exercising two separate option periods concurrently would be considered illegal , simple as THAT. It seems as though you are looking to start trouble with me simply for my asking of a question regarding a contract action of which I have no knowledge. I NEVER accused ANYONE of DOING ANYTHING illegal. I simply asked if the action is taken to exercise two separate option-periods concurrently is it considered legal. Simple as that. Also, if you’d THOROUGHLY read my question, instead of looking for trouble or a way to insult me then you’d know that it was a sincere, harmless question, And, I included the contract period of performance dates for both options in my initial post question. Anyhoo, thanks for your time. Take Care. 

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“Illegal” was your word, not mine.  Unfortunately, it is too common among us for one party to use words like illegal and unethical for matters where there is a difference of opinion in practice.  I didn’t read your original posting as honest intellectual inquiry — rather, it seemed to me that you had already judged your program office’s action as “questionable/potentially illegal” (your words), even though you later admitted that you have no knowledge of the rules in this area.  Please be more careful.  Continue to engage and ask.  Give your colleagues every benefit of the doubt.  Still, my apologies if I mis-read your original posting.

Anyway, you didn’t answer the question:  Does your contract contain (1) a period (with a start date and an end date) for the exercise of the option; or (2) only an end date?  No. (2) is the more common approach, from my experience — if your contract had (2), then maybe all is well with exercising the option sooner rather than later.

There may be other issues (like whether these are severable services) that others will look at as the proposed modification works its way through the system — but these go beyond your question about exercising an option sooner rather than later.

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@BigBirdContracting81

You're welcome.

Also, here is the pertinent part of FAR 52.217-9(a):

"(a) The Government may extend the term of this contract by written notice to the Contractor within _____ [insert the period of time within which the Contracting Officer may exercise the option]; provided that the Government gives the Contractor a preliminary written notice of its intent to extend at least ___ days [60 days unless a different number of days is inserted] before the contract expires." (bold emphasis added)

Regarding option 2, when may the government extend the term? (that's what I meant, in my original post, when I asked what the option clause said)

By the way, @ji20874 is a wealth of knowledge...I doubt he was starting trouble with you. Relax.

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@ji20874 You are right, I did use the term "illegal". I used it impulsively by reason of fear of the unknown. My original posting was an honest intellectual inquiry but I presented it in a "fire, aim, ready" fashion. Please forgive and pardon my rant. I got nervous that I was potentially "in trouble" for my use of the words "illegal" and "unethical" on this forum, as I am new to Wifcon. I've been told many times by sharp, well-seasoned contracts folks like you and @Jamaal Valentine that the contracting community is small so be careful to not burn any bridges or ruffle the wrong feathers...which totally wasn't my intention here. Between my 8-year career in industry (Boeing) and nearly 4 years in Government (DoD), I'm happy to admit there's still a great deal about contracting that I don't know or quite understand, so I appreciate the good, well-intentioned advice.

Here's the setup of my contract: Contract Type: CPFF, Acquisition Type: Services - particularly Advisory and Assistance Services (A&AS) (FAR Part 37.2) for non-personal services. Yes, the contract contains a period with a start and an end date for the base-period (ending in June) and its subsequent option-periods. Here's the contract's Period of Performance Data: Base Year: June 22, 2016 to June 21, 2019, Option Period 1: June 22, 2019 to June 21, 2020, Option Period 2: June 22, 2020 to June 21, 2021.

The intent is to exercise Option-Periods 1 and 2 by rolling the CLIN values of Option-Periods 1 and 2 into their respective base-period CLIN values. The contracting office cited the following advantages to the methodology of rolling the option-year CLINs into their respective base-period CLINs: 1) Programs can use unexpended funds on the base CLINs immediately, 2) Reduction in the number of CLINs for contract close-out, and 3) Reduction in contract administration overhead

@ji20874 @Jamaal Valentine, Did I provide the right information this time relative to the start and end dates of the respective Option-Periods? I will await your reply. Thanks a bunch!

 

 

 

 

 

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@ji20874, @Jamaal Valentine Additionally, here's what the option clauses currently state in the contract:

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 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 66 months. The Contracting
Officer may exercise the option by written notice to the Contractor no later than 30 days prior to
the expiration of the contract.
(End of clause)


52.217-9     OPTION TO EXTEND THE TERM OF THE CONTRACT (MAR 2000)

(a) The Government may extend the term of this contract by written notice to the Contractor no
later than 30 days prior to the expiration of the contract; provided that the Government gives the
Contractor a preliminary written notice of its intent to extend at least 60 days before the
contract expires. The preliminary notice does not commit the Government to an extension.

(b) If the Government exercises this option, the extended contract shall be considered to include
this option clause.

(c) The total duration of this contract, including the exercise of any options under this clause,
shall not exceed 60 months.
(End of clause)

 

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5 hours ago, Jamaal Valentine said:

a) The Government may extend the term of this contract by written notice to the Contractor within _____ [insert the period of time within which the Contracting Officer may exercise the option]; provided that the Government gives the Contractor a preliminary written notice of its intent to extend at least ___ days [60 days unless a different number of days is inserted] before the contract expires." (bold emphasis added)

This has got to be some of the worst language in the FAR.  It seems like everyone has a different interpretation, for example, "insert the period of time within which the Contracting Officer may exercise the option"  seems to suggest that  "from 1500 GMT 21 MAR 2018 to 1500 GMT 21 APR 2018" would be just okey-dokey because it specifies a "period of time".  But that would be stupid.

Personally, I follow the lead of the clause author and write in "X days before the contract expires" after "within".  Still hate the language though.  What the heck were they thinking when they wrote that one???

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4 minutes ago, BigBirdContracting81 said:

the total extension of performance hereunder shall not exceed 66 months.

66 months????  So you can extend the contract for  5-1/2 years in addition to the base + option periods???

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@Jamaal Valentine Hey there. Although 52.217-9 states: “The total duration of this contract, including the exercise of any options under this clause, shall not exceed 60 months”, I do not believe Option 2 can be exercised concurrently with Option 1 since the contract was awarded with explicit PoP beginning and end dates for both options. (Am I making sense?)

Also, this is a services contract for non-personal A&AS. 

37.106 Funding and term of service contracts states: (I’m trying to determine whether or not this would also affect whether or not the Option-Years could be exercised concurrently). 
(a) When contracts for services are funded by annual appropriations, the term of contracts so funded shall not extend beyond the end of the fiscal year of the appropriation except when authorized by law (see paragraph(b) of this section for certain service contracts, 32.703-2 for contracts conditioned upon availability of funds, and 32.703-3 for contracts crossing fiscal years).
(b) The head of an executive agency, except NASA, may enter into a contract, exercise an option, or place an order under a contract for severable services for a period that begins in one fiscal year and ends in the next fiscal year if the period of the contract awarded, option exercised, or order placed does not exceed oneyear (10 U.S.C.2410a and 41 U.S.C.3902). Funds made available for a fiscal year may be obligated for the total amount of an action entered into under this authority.

 

 

 

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BigBird,

Based on your understanding, what is the earliest possible date the Government can exercise Option 2?  We know the latest date is 30 days before the contract expires, but what is the earliest date?

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@BigBirdContracting81

I don't read a limitation on the earliest date the option can be exercised in accordance with the clause. Do you? Why do you think June 22, 2020 is the earliest date?

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I’m with Jamaal.  You don’t have an earliest date to exercise the option.  June 22, 2020, is the start date of the period of performance, not the earliest date for option exercise.  Your contract clause at FAR 52.217-9 doesn’t have an earliest date, so you may exercise the option weeks or months in advance of that date, maybe even a whole year in advance, provided you have funds — and it sounds like you do (RDT&E funds with a multi- year obligation period).

In fact, you cannot exercise Option 2 on June 22, 2020 — that’s the day the contract will expire, and you must exercise the option at least 30 days before that, right?  So based on what you have shared from your contract, it seems the latest date you can exercise is May 23, 2020 (30 days before the contract would otherwise expire), and there is no earliest date.

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@ji20874, @Jamaal Valentine I gotcha. I misread and misinterpreted FAR 52.217-9 completely, 🤦🏽‍♀️. What I believe you guys are trying to get me to understand is that the Option-Period PoP start date and the earliest date for Option exercise, according to FAR 52.217-9, are two completely different things. Reading, well, reading thoroughly with a clear understanding of that facts is fundamental, huh 🧐🤔😂

The biggest concern, and point of contention for the budget folks is that although we use RDT&E funds (2-year availability of funds), our program office treats those RDT&E funds like O&M money, meaning we obligate within the current year fiscal year. Our program office within the Agency does not use its RDT&E funds as though they have a multi-year obligation period. Everything is obligated within the current fiscal year.  With that said, the greatest concern here, especially from the budget analysts within our office, is that because the program office has made the decision to roll the CLIN values and the Period of Performance of both Option-CLIN  periods into the base-CLIN period, the concerns are that we could potentially be antideficient since we don’t use our RDT&E money as 2-year money. Another concern from our budget community is that because we are rolling both option periods into the base period, including the CLIN values, what is the incentive to the contractor to not overrun since they now have all this extra CLIN value added from the Option periods. In our office, once we roll the Option period(s), (PoP including CLIN values from the respective option-periods), into the base-year CLINS, we then cancel the Option CLINs in our PD2/SPS contract writing system. The concerns are realizing contract overrun at the end of the contract’s overall PoP because there is no way to incentivize the contractor to not overrun since they now have all this additional CLIN value from the Option Periods...which again, become cancelled after they are rolled into the base effort. My apologies if this all sounds confusing, but this is the way my program office does its business. The more feedback the merrier. You guys have been very helpful and insightful. 

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