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Option Period per 52.217-9


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3 hours ago, Retreadfed said:

That case doesn't affect the above conclusions. The KO completely restructured the contract option for production, which the ASBCA said was beyond her authority under the Changes clause and was a Cardinal change, outside the scope of the contract. The Board made that clear but since the Contractor accepted by continuing performance, presumably because it wanted the work rather than having re-compete for it, etc., the Board did not address the legality of the action.

It was a very complex scenario,  an example of what Vern was cautioning against in his 2011 post and reinforces what I was talking about. 

I started copying relevant points in the Decision but it runs for pages. One can read for themselves.

In this case, the Contractor had to re-price the work due to the Cardinal Change to the contract option, which reduced the required quantity from 12 to 5 units.

 

 

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On ‎6‎/‎7‎/‎2019 at 8:19 AM, joel hoffman said:

My advice is to communicate the problem and scenario with the contractor and find out what the impact is (unabsorbed fixed costs? ) and if the contractor can accept the reduction as priced but for the impact, if any. Then work through it bilaterally before extending the term of the contract.

If the contractor wants to reprice the remaining portion of the option, that would be improper and affect the scope of the competition.

Joel, maybe you can clarify this statement.  To me, adjusting the price of the contract to reflect the impact of the reduction in the effort to be performed results in a repricing of the work to be performed.  This was permitted in CTA.  Can you reconcile this statement with the last sentence quoted above, where you say repricing would be improper?

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Retreadfed, I meant repricing of the remaining nine CLINs for current market conditions would be improper, as Vern described.  

Yes, if there are fixed costs that were originally  apportioned to ten CLINs, for instance, the mod could include the unabsorbed fixed costs that were in the deleted CLIN as a separate, new CLIN or it could spread the cost among the nine remaining CLINs. That’s not “repricing” - it only provides for an (equitable) adjustment of  those remaining CLINs.  

There is a technical difference between adjusting the CLIN price to reflect impact costs and “repricing”  , which means abandoning the old price and re-pricing it for current conditions.  The former would involve adding  each CLIN’s proportionate share of unabsorbed fixed cost, for example. The latter means a new bottom up price. 

Bottom up repricing doesn’t leave the contractor whole - good or bad. 

Simply adjusting the price for the impact of the change does leave it whole. 

As an example of the difference, pricing of an adjustment for unit priced overruns outside of the range described in a Variation in Estimated Quantities Clause is supposed to be done only to reflect the difference in unit cost to the contractor to perform the quantity within the range and outside the range (the 1975 “Victory Construction vs US” Claims Court Decision principle).  Note that this assumes that no additional quantities of the unit priced items have been added by change.  Any new or additional quantities added by changes to the work can be separately unit priced. 

In the late 1980’s, the Engineer Board of Contract Appeals embraced the concept of re-pricing overruns beyond 115% of the estimated quantities (the 1989 ENgBCA “Bean Dredging” decision method) but ASBCA disagreed,  as did the Court of Claims a few years later (1993 Foley Construction Co. vs US) , which set the matter straight, reverting to the Victory Construction Co. interpretation of the VEQ clause. The Eng Board had strayed from the Victory Construction principle in “Bean Dredging”. Indeed, the Corps and Eng Bd had tried to reprice the overrun in the earlier 1975 Victory Construction decision but were reversed by the Claims Court. 

Thus, we generally** don’t “reprice” overruns based upon actual cost. We  would only adjust the unit price to reflect the DIFFERENCE in the contractor’s cost to perform work within and outside the VEQ range, if any. 

 **See a 2018 article at http://www.long-intl.com/articles/Long_Intl_Construction_Claims_for_Variation_in_Quantity.pdf

The above article covers VEQ clause adjustments and the recent cases named above. 

Probably more information than necessary but I tend to use terms that I’m used to using.  Sorry. 

Edited by joel hoffman
Clarified and added some citations and references.
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23 hours ago, joel hoffman said:

Probably more information than necessary but I tend to use terms that I’m used to using.  Sorry.

We all do.  While some terms in government contracting have defined meaning, not all do.  Thus, we all have to be careful and not assume that everyone understands the terms that we use.  This reminds me of the quote attributed to Winston Churchill that the Americans and British are two peoples separated by a common language.

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Actually the term “repricing” is described  in various court cases and board decisions,  including “Victory Construction Co. vs US.*  ( https://casetext.com/case/victory-construction-co-inc-v-united-states  ) when they distinguish  between the two methods. If you think about it,  it has been Court and Board actions that defined or refined various terms or bases of price and time adjustments. 

“Price realism” is another term where the Decisions have carved out the idea that “price realism” focuses on underpricing, while “Fair and Reasonable” focuses on overpricing. Neither term is clearly defined thusly from a reading of the FAR.

Another one is “unabsorbed home office overhead”. The Courts have defined the parameters to establish unabsorbed HOOH. 

*Victory Construction Co Inc v. United States, 510 F.2d 1379 (Fed. Cir. 1975)

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