Jump to content
The Wifcon Forums and Blogs
Desparado

Unpriced Options - Legal?

Recommended Posts

http://www.wifcon.com/arc/forum433.htm

Perhaps you should include a justification for other than full and open competition ("J&A") or some equivalent documentation appropriate to the type of procurement. 

FAR 17.207(f) seems to say that an unpriced option cannot satisfy the Competition in Contracting Act's requirement of full and open competition.

If you are in some other competitive standard, the justification would be slightly different, but it seems like exercising an unpriced option is considered "new work" that is subject to competition.

"(f) Before exercising an option, the contracting officer shall make a written determination for the contract file that exercise is in accordance with the terms of the option, the requirements of this section, and Part 6. To satisfy requirements of Part 6 regarding full and open competition, the option must have been evaluated as part of the initial competition and be exercisable at an amount specified in or reasonably determinable from the terms of the basic contract, e.g. --

(1) A specific dollar amount;

(2) An amount to be determined by applying provisions (or a formula) provided in the basic contract, but not including renegotiation of the price for work in a fixed-price type contract;

(3) In the case of a cost-type contract, if --

(4) A specific price that is subject to an economic price adjustment provision; or

(5) A specific price that is subject to change as the result of changes to prevailing labor rates provided by the Secretary of Labor.

(i) The option contains a fixed or maximum fee; or

(ii) The fixed or maximum fee amount is determinable by applying a formula contained in the basic contract (but see 16.102(c));"

Share this post


Link to post
Share on other sites

Would it make a difference if it was A&E work where we award to the most highly qualified and cost is not part of the competition?

Share this post


Link to post
Share on other sites
2 hours ago, Desparado said:

So does that then mean that we cannot have ANY options in an A&E contract??  Seems pretty restrictive.

Not at all. You can have options in an A-E contract, but the rules in FAR subpart 17.2 don't apply. FAR 17.200:

Quote

This subpart prescribes policies and procedures for the use of option solicitation provisions and contract clauses. Except as provided in agency regulations, this subpart does not apply to contracts for (a)services involving the construction, alteration, or repair (including dredging, excavating, and painting) of buildings, bridges, roads, or other kinds of real property; (b)architect-engineer services; and (c)research and development services. However, it does not preclude the use of options in those contracts.

The use of options in A-E contracts is not regulated by the FAR. Nothing says you can't do it, so you can (FAR 1.102(d)).

Share this post


Link to post
Share on other sites
20 hours ago, Don Mansfield said:

The use of options in A-E contracts is not regulated by the FAR. Nothing says you can't do it, so you can (FAR 1.102(d)).

So if we do use options and the FAR does not apply, how does that affect the idea of unpriced options?  Since cost is not a competitive factor in A&E selection, is the taboo on unpriced options applicable?

Share this post


Link to post
Share on other sites

BTW - I have this in Contract Administration because I am discussing task orders on multiple award A&E contracts.  The underlying contracts are silent on this issue.

Share this post


Link to post
Share on other sites

Task orders for A-E services on multiple award A-E contracts are not competed on the basis of price. 

You use the QBS procedures to select a firm, then negotiate the price to perform the task. 

Share this post


Link to post
Share on other sites

Joel - 100% agree, but we have some in our agency that state that we still have to get a full cost proposal even though the nature of our A&E work contains several unknowns that make it impossible to price upfront.

Share this post


Link to post
Share on other sites

16.505

(d) The statutory multiple award preference implemented by this subpart does not apply to architect-engineer contracts subject to the procedures in subpart 36.6. However, agencies are not precluded from making multiple awards for architect-engineer services using the procedures in this subpart, provided the selection of contractors and placement of orders are consistent with subpart 36.6.

Ask the “some” in your agency that justify their position that you must price A-E task order proposals or price base award A-E contracts. Price is not a factor in the task order selection, unless you are unable to reach agreement on a fair and reasonable price with the most highly rated firm. 

Share this post


Link to post
Share on other sites

Oh believe me, I have...  They are sticking to the article in the original post that these equate to unpriced options and are therefore illegal.

We are making selection based solely on technical, then reaching agreement on a fair and reasonable price for the first phase of work (there are several phases but the latter phases are undefinable at a level low enough to facilitate getting a cost proposal), but their contention is that we still have to get a full cost proposal for all phases upfront.

Share this post


Link to post
Share on other sites

Based upon what source for the requirement?  FAR 17.2?  

As for timing, are “some” saying that this is supposed to be priced during the negotiations for the task order price? 

There are no prices at the MAC -pool level. 

 

Share this post


Link to post
Share on other sites

Of course, “some” know that 17.207 isn’t applicable here, correct? 

Edit: The scope of services for any options would have to be within the scope of the original A-E or task order A-E competition.

But the fact remains that this is a qualifications based selection (QBS) not  a priced based or  Best Value based selection.

Share this post


Link to post
Share on other sites

Agree on all points.  They state we do not have the authority to issue a task order without pricing for all phases and options.

Share this post


Link to post
Share on other sites

Based upon what?You’re going to have to make them justify their position.

In order to price and option one must know what the scope of work for the option will be. Same with all phases

Share this post


Link to post
Share on other sites
On ‎5‎/‎13‎/‎2019 at 9:59 AM, Desparado said:

I've utilized unpriced options in the past but recently a co-worker has raised that these were determined by GAO back in 1986 ( https://www.gao.gov/assets/150/144237.pdf ) to basically be sole-source contracts.

The GAO report resulted in a change to FAR 17.207(f) (see FAC 84-37, 53 FR 17858; Miscellaneous Amendments: Item X - Options). The change had no effect on options in A-E contracts.

Share this post


Link to post
Share on other sites
5 hours ago, Desparado said:

They state we do not have the authority to issue a task order without pricing for all phases and options.

Is not the situation being looked at from the wrong perspective?  

Task order award and subsequent task order changes are subject to the parameters of the parent IDIQ.  FAR references to part 17 regarding options is misplaced in my view.   As the OP's facts are peeled away the real fact is the FAR does not apply to the placement of an option in a task order, the parent IDIQ does and what it allows or does not allow.  Answering the OP's questions piecemeal without seeing the underlying parent IDIQ is a very slippery slope.  But as others have ventured out so will I.

Fact - OP wants to do un-priced options and/or un-priced anticipated phases on a task order under an IDIQ contract. 

If the parent contract and the task order is silent on how this can be approached then the OP could wing it but may cause another holder of the MAC to take the matter to the agency ombudsman as an issue related to fair opportunity.  If the parent contract and/or the task order addresses the ability for un-priced options or  phases so much the better.

If the former I would believe that the ombudsman would look to issues of scope etc. to address whether a contractor received fair opportunity consideration for the un-priced option or phase and might apply principles of competition but I do not believe they would apply.  The four corners of the contract apply.

Bottomline it is not a question about "legal" it is a question about what is contractually allowed with regard to un-priced options and/or phases as to whether they are allowed by the parent IDIQ contract fair opportunity ordering terms and conditions or the task order itself.

Share this post


Link to post
Share on other sites
44 minutes ago, C Culham said:

FAR references to part 17 regarding options is misplaced in my view.  

I agree.  I have never been persuaded that FAR Subpart 17.2, Options, reaches to orders under multiple-award IDIQ contracts.  

Share this post


Link to post
Share on other sites

The price should be of no concern to  other A-E firms. None of the firms will prepare price proposals at the time of response to the task order request. The concern would be whether or not the work is within the scope of the task order competition. 

I don’t think that the base ID/IQ contract has to specifically address the possibility of options for follow on phases of a task order project, as long as the project to be designed is within the scope of the multiple ID/IQ base (“parent”) contract.

The fact is that the situation here apparently precludes being able to definitize pricing or the specific design parameters  of follow on design phases at the outset. 

Ive seen an A-E umbrella single award ID/IQ contract, which included follow on designs to be based upon a pilot plant , site adapted and updated to include lessons learned and engineering change proposals, etc. as the pilot plant design matured and construction, systemization, pilot testing and operations  progressed for that first plant. 

Share this post


Link to post
Share on other sites
22 hours ago, Desparado said:

Oh believe me, I have...  They are sticking to the article in the original post that these equate to unpriced options and are therefore illegal.

We are making selection based solely on technical, then reaching agreement on a fair and reasonable price for the first phase of work (there are several phases but the latter phases are undefinable at a level low enough to facilitate getting a cost proposal), but their contention is that we still have to get a full cost proposal for all phases upfront.

So, they are basing their reasoning on a 1986 GAO report that discusses options on service contracts that were competed with price as a factor and that would now be subject to 17.207 (not applicable to A-E contracting). 

How is that applicable to an AE contract,? And here, the follow on phases can’t be definitized up front.  There are some controls on the cost of A-E design services , most notably the 6% statutory limits, plus negotiating a fair and reasonable price for any follow on work. 

If the firm won’t reasonably negotiate follow on prices, technically, you could replace them. I never heard of our organization being held hostage by an incumbent A-E firm. By and large A-E firms want to maintain good designer-owner professional relationships. Relationships are critical when future work is based upon QBS and client satisfaction, which is expressed in past performance, as well as personal experience of those often on the A-E selection  boards. 

“17.200   Scope of subpart.

This subpart prescribes policies and procedures for the use of option solicitation provisions and contract clauses. Except as provided in agency regulations, this subpart does not apply to contracts for

(a) Services involving the construction, alteration, or repair (including dredging, excavating, and painting) of buildings, bridges, roads, or other kinds of real property;

(b) Architect-engineer services; and

(c) Research and development services.

However, it does not preclude the use of options in those contracts.

[61 FR 41469, Aug. 8, 1996]”

Share this post


Link to post
Share on other sites

They don't argue that there can be options... but insist they much be priced.

They are really just going with the basic concept that any award has to have a negotiated cost/price (even if a ceiling) to be legal and binding.

Share this post


Link to post
Share on other sites

Also consider this.  If the A-E firm is logically and practically the only choice for the follow on design phases*, you could issue separate follow on task orders using an exception to the fair opportunity requirements in 16.505.  

But that would be a clunky way to accomplish the same purpose and wouldn’t produce any different result or method of pricing the follow on A-E work.

*it should be obvious, for continuity in accountability and responsibility for design, warranty of design, familiarity with the basis of design and the initial developed design, not to mention the cost and time involved to substitute another firm .Follow on phases would likely depend on the initial design. If  they don’t and if the integrated program schedule permits, then you could consider separate task order using fair opportunity.  I’m guessing not though, here.

Share this post


Link to post
Share on other sites

That was one suggestion as well.  But, like you, I find that clunky and unnecessary.  Sadly, my lack of A&E knowledge puts me at a disadvantage in these discussions with the HQ peeps.

Share this post


Link to post
Share on other sites
8 minutes ago, Desparado said:

They don't argue that there can be options... but insist they much be priced.

They are really just going with the basic concept that any award has to have a negotiated cost/price (even if a ceiling) to be legal and binding.

That basic concept is flawed where QBS is the basis of award and where 17.2 is not really applicable and the government could logically not be required to use fair opportunity for the follow on phases. 

“Some” apparently don’t understand the complexities of A-E contracting for complex projects or programs and are trying to force fit requirements for best value contracting to QBS. 

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


×
×
  • Create New...