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Preliminary and Written Notice Under 52.217-9

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Assume one has a service contract with this clause incorporated:

Option to Extend the Term of the Contract (Mar 2000)

  1. (a) The Government may extend the term of this contract by written notice to the Contractor within 5 days 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.

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

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

(End of clause)

 

1) Does the person providing preliminary notice have to be the CO?

2) If the Government exercises the option via written notice "early", say 10 days prior to contract expiration, is said option exercise invalid??

3) Why was paragraph b necessary in this clause? If a contract is extended, aren't existing terms and conditions in the conformed contract incorporated by default?

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1. Yes.  See FAR 1.602.  There could be others I guess above the CO like Head of Agency but no lower than CO unless the CO delegated that person such authority which would be very unusual.

2. Yes by my read as long as the 60 days was met.  No reference so others might substantiate a different view but for me the wording suggests the minimum or in other words not something less than five days.

3. Verification to ensure understanding.  No doubt there is some case law behind the wording since it is straight from the FAR.

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17 hours ago, Sunstrider said:

a) The Government may extend the term of this contract by written notice to the Contractor within 5 days...

If I may, I would like to piggyback on this topic. Specifically this sentence portion. To those knowledgable professionals that do post a response, could you please tell me what "within 5 days" means to you? Within 5 days of what? Personally I would not accept such a contract clause as written. I don't understand this portion of it and I consider it critical to understand. Since  this is  FAR clause that has been around a long time, I am going to assume I don't know what it means out of my lack of experience with this clause. Thanks.

Edited by Neil Roberts
typo

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15 hours ago, Sunstrider said:

1) Does the person providing preliminary notice have to be the CO?

2) If the Government exercises the option via written notice "early", say 10 days prior to contract expiration, is said option exercise invalid??

3) Why was paragraph b necessary in this clause? If a contract is extended, aren't existing terms and conditions in the conformed contract incorporated by default?

1) Probably not.  I know that in practice, in the civilian agencies I am familiar with, the CO rarely sends out these preliminary notices.  A Contract Specialist or Admin usually sends the notice on behalf of the CO.  These folks might have some delegated CO authority or something though.  But it is 'intent'- its not binding.

2) No, I don't think so.  I interpret that sentence as meaning 5 days is the minimum period between receipt of the option exercise and when the contractor is responsible for work (under the extended term).  I consider the 'within 5 days' statement a way of preventing this: The CO sends an option exercise at 11:58 PM the day the contract expires, and expects the contractors to show up at 8 AM the next day.  Could be wrong though.

3) I think the intent of this sentence is to (indirectly) confirm that the clause can be used repeatedly to extend the term (up to the limit of para c).  The alternative would be an interpretation of the clause where the term can be extended only one time.  

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Paragraph (a), first sentence is poorly written and ambiguous, upon initial read. 

“Within 5 days” of what?

The Cambridge Diction defines the preposition “within” as:

“inside or not beyond (a particular area, limit, or period of time)”.

so from 0-5 days from (?) is within five days of the completion period? Within five days of the start of the option period? Or is five days supposed to be the minimum notice period before ( ?): “at least five days before...”

Should it say:

“The Government may extend the term of this contract by written notice to the Contractor at least 5 days before [?],  provided that the Government gives the Contractor a preliminary written notice of its intent to extend at least 60 days before the contract expires.

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I agree with Neil and Joel.  The clause is so poorly worded that it might not be enforceable because there was no meeting of the minds over what it meant. 

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Yeah, this clause, which I've used at least a hundred times, sucks, now that I am reading it carefully.  Here is better....you listening FAR Council?

 

Option to Extend the Period of Performance (Jul 2019)

(a) The Government may  extend the period of performance of this contract through the unilateral exercise of options under this clause, if two conditions are met:

 1) The Government gives to the Contractor notice that the option has been exercised at least 5 days before the contract expires, and

 2) The Government gives to the Contractor preliminary written notice its intent at least 60 days before the contract expires.

(b) If these two conditions are not met, the option may be exercised only through a bilateral contract modification (supplemental agreement).

(c) The total period of performance of this contract, including all extensions, shall not exceed 60 months.

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3 hours ago, General.Zhukov said:

Yeah, this clause, which I've used at least a hundred times, sucks, now that I am reading it carefully.  Here is better....you listening FAR Council?

 

Option to Extend the Period of Performance (Jul 2019)

(a) The Government may  extend the period of performance of this contract through the unilateral exercise of options under this clause, if two conditions are met:

 1) The Government gives to the Contractor notice that the option has been exercised at least 5 days before the contract expires, and

 2) The Government gives to the Contractor preliminary written notice its intent at least 60 days before the contract expires.

(b) If these two conditions are not met, the option may be exercised only through a bilateral contract modification (supplemental agreement).

(c) The total period of performance of this contract, including all extensions, shall not exceed 60 months.

FAR 2.101 defines "option" as a "unilateral right in a contract by which, for a specified time, the Government may elect to purchase additional supplies or services called for by the contract, or may elect to extend the term of the contract." As such, I'd revise the terms used to produce the following:

 

Option to Extend the Period of Performance (Jul 2019)

(a) The Government may  extend the period of performance of this contract through the exercise of options under this clause, if two conditions are met:

 1) The Government gives to the Contractor notice that the option has been exercised at least 5 days before the contract expires, and

 2) The Government gives to the Contractor preliminary written notice its intent to exercise the option at least 60 days before the contract expires.

(b) If the conditions in (a) are not met, the term of the contract may be be extended to the next option only through a bilateral contract modification (supplemental agreement).

(c) The total period of performance of this contract, including all extensions, shall not exceed 60 months.

 

If you agree with this, here's my next question. When bilaterally signing due to untimely notices, does one cite 52.217-9 in Block 13D?

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7 hours ago, General.Zhukov said:

2) No, I don't think so.  I interpret that sentence as meaning 5 days is the minimum period between receipt of the option exercise and when the contractor is responsible for work (under the extended term).  I consider the 'within 5 days' statement a way of preventing this: The CO sends an option exercise at 11:58 PM the day the contract expires, and expects the contractors to show up at 8 AM the next day.  Could be wrong though.

I see. If this is the true intent of the clause, then there's the heads-up provided with the preliminary notice of intent, and then there's actual exercise of the option which requires a minimum lead time for the Contractor to duly maintain continuous performance. This seems very reasonable, especially since the timeliness requirements of these notices are always tailored/negotiated up front... 👍

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34 minutes ago, Sunstrider said:

FAR 2.101 defines "option" as a "unilateral right in a contract by which, for a specified time, the Government may elect to purchase additional supplies or services called for by the contract, or may elect to extend the term of the contract." As such, I'd revise the terms used to produce the following:

 

Option to Extend the Period of Performance (Jul 2019)

(a) The Government may  extend the period of performance of this contract through the exercise of options under this clause, if two conditions are met:

 1) The Government gives to the Contractor notice that the option has been exercised at least 5 days before the contract expires, and

 2) The Government gives to the Contractor preliminary written notice its intent to exercise the option at least 60 days before the contract expires.

(b) If the conditions in (a) are not met, the term of the contract may be be extended to the next option only through a bilateral contract modification (supplemental agreement).

(c) The total period of performance of this contract, including all extensions, shall not exceed 60 months.

 

If you agree with this, here's my next question. When bilaterally signing due to untimely notices, does one cite 52.217-9 in Block 13D?

Well that scenario would be covered by the reworded clause entitled “option to extend the period of performance”. So yes. 

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On 7/19/2019 at 10:39 AM, Neil Roberts said:

If I may, I would like to piggyback on this topic. Specifically this sentence portion. To those knowledgable professionals that do post a response, could you please tell me what "within 5 days" means to you? Within 5 days of what? Personally I would not accept such a contract clause as written. I don't understand this portion of it and I consider it critical to understand. Since  this is  FAR clause that has been around a long time, I am going to assume I don't know what it means out of my lack of experience with this clause. Thanks.

As written, I would say it means within 5 days of the preliminary written notice.

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19 minutes ago, Jamaal Valentine said:

As written, I would say it means within 5 days of the preliminary written notice.

Hmmm, more indication of an ambiguity... 

i personnally don’t think that is a logical interpretation.  There would seldom be  funding available 2 months (55 days) prior to  contracts renewing on or soon after the start of the next FY.  

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On 7/18/2019 at 6:39 PM, Neil Roberts said:

could you please tell me what "within 5 days" means to you? Within 5 days of what?

Thanks, all. I think I got the picture!

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1 a) Before tossing away any use of "within" in the option clause 52.217-9, consider the possibility of exercising an option after contract completion date: see FAR 17.204 paragraphs b through d:

"(b) The contract shall state the period within which the option may be exercised.

(c) The period shall be set so as to provide the contractor adequate lead time to ensure continuous production.

(d) The period may extend beyond the contract completion date for service contracts. This is necessary for situations when exercise of the option would result in the obligation of funds that are not available in the fiscal year in which the contract would otherwise be completed."

A mistaken conception of "contract expiration" could contribute to the loss of this as an authorized  flexibility, especially if experimental edits of the -9 clause become popular...why voluntarily surrender territory already given us by regulation?

Note: Vern Edwards advised in an earlier Forum discussion concerning contract expiration:

"Contracts don't have expiration dates. Contracts have (1) a delivery date, (2) a completion date, or (3) a period of performance. (In addition, an IDIQ contract has an ordering period.) Contracts do not "expire" until all obligations of both parties have been fulfilled."  

 

 

 

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On 7/19/2019 at 7:29 PM, joel hoffman said:

(b) If the conditions in (a) are not met, the term of the contract may be be extended to the next option only through a bilateral contract modification (supplemental agreement).

FAR-flung, the proposed paragraph (b) above should cover the situation you are referring to - but would require mutual agreement.

The contractor might have demob and mob costs or other impacts, such as loss or re-assignment of personnel due to a break/delay.  At that point, it should be up to the contractor to accept or decline to continue performance at the previously agreed price. The government should not have a unilateral right to force continued performance after a break or delay in performance.

No need to over complicate the clause. Either way, there should be a nexus between the end of performance period and bilaterally extending performance, like, for example,  “as soon as possible after receipt of funds intended for continuation of the previous effort”.

And yes, one would cite the option clause as the authority, because the situation would be covered under that clause. 

The language you proposed would allow the government unilaterally to delay the continuation without regard for any impact on the contractor or it’s employees of a break in performance. The contractor should be allowed to make a business decision whether or not to absorb any related cost or personnel impacts if it agrees to resume performance at the agreed price. 

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On 7/20/2019 at 9:18 PM, joel hoffman said:

Hmmm, more indication of an ambiguity... 

i personnally don’t think that is a logical interpretation.  There would seldom be  funding available 2 months (55 days) prior to  contracts renewing on or soon after the start of the next FY.  

Where is 'fiscal year' mentioned in the option language or in the post for that matter? The option clause gives a timeline for a preliminary written notice (at least 60 days before the contract expires).

What does within 5 days mean, biases aside, based on the clause as written above? Within 5 days of what? (we both know what training and experience says it's supposed to mean)

Logical: expected or sensible under the circumstances.

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On 7/18/2019 at 7:47 PM, Sunstrider said:

Option to Extend the Term of the Contract (Mar 2000)

  1. (a) The Government may extend the term of this contract by written notice to the Contractor within 5 days 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.

So, is your interpretation below that the clause says that the government can only extend the contract within 5 days of giving the written notice? The Preliminary notice must be made at least 60 days prior to the end of the current period of performance.

So that interpretation appears to mean that the government could only extend the term of the contract (by exercising an option) between 55-60 days before the contract expires. 

That is illogical to me. It would require funding to be available  55-60 days prior to the next period. 

On 7/20/2019 at 7:00 AM, Jamaal Valentine said:

As written, I would say it means within 5 days of the preliminary written notice.

The clause doesn’t commit the government to extend the contract, which is logical, if there is no funding yet available. Your interpretation would only allow five days from the preliminary notice to fund and exercise the option. . 

It would seem logical for the clause to provide for a preliminary notice and a window between that and five days before expiration of the performance period to exercise the option with funding for (at least part of ?) the next period. 

That would allow the contractor to plan ahead for continuation but allow the government some time to obtain funding. If no award before five days remains, the contractor would have (a little) time to plan for the end of the contract performance and beyond. 

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That’s just my reading interpretation of the apparent intent of that paragraph of the clause.  But “within five days” of the end of the performance period means 0-5 days- not “at least five days”. Allowing an extension to be made only between 0-5 days before the end doesn’t make sense, either.

Thus, though not as written, the only logical interpretation would seem to me to be “at least five days before expiration”. 

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The same language exists in 52.217-8 and always causes issues as some feel that you have to wait "within" 30 days (or whatever number you put in the blank) to exercise that clause, and others feel that it has to be prior to that time frame. Legalese and English are not synonymous.  

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1 hour ago, Desparado said:

The same language exists in 52.217-8 and always causes issues as some feel that you have to wait "within" 30 days (or whatever number you put in the blank) to exercise that clause, and others feel that it has to be prior to that time frame. Legalese and English are not synonymous.  

 

desparado, the clause at 52.217-8 is set up for the writer to define the period, not just fill in the number of days.

And here is the policy for including the two clauses: 

“17.204 -- Contracts.

(a) The contract shall specify limits on the purchase of additional supplies or services, or the overall duration of the term of the contract, including any extension.

(b) The contract shall state the period within which the option may be exercised.

(c) The period shall be set so as to provide the contractor adequate lead time to ensure continuous production.

(d) The period may extend beyond the contract completion date for service contracts. This is necessary for situations when exercise of the option would result in the obligation of funds that are not available in the fiscal year in which the contract would otherwise be completed.

(e) Unless otherwise approved in accordance with agency procedures, the total of the basic and option periods shall not exceed 5 years in the case of services, and the total of the basic and option quantities shall not exceed the requirement for 5 years in the case of supplies. These limitations do not apply to information technology contracts. However, statutes applicable to various classes of contracts, for example, the Contract Labor Standards statute (see 22.1002-1), may place additional restrictions on the length of contracts.”

(I'm going to check out the actual FAR clause language for the 52.217-9 clause) and then edit if necessary) 

EDIT:  see below plus the bolded paragraph above.  All of our criticism of the FAR clause and suggested rewrites were unnecessary!   Geeze!!!!!!!!

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Ok, duh, well dummy me for assuming that the wording in the original post was the actual wording in the FAR clause!!!!!!!!!

Here it is: 

“52.217-9 -- Option to Extend the Term of the Contract.

As prescribed in 17.208(g), insert a clause substantially the same as the following:

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 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. 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 ___________ (months)(years).

(End of Clause)”

The FAR isn’t ambiguous!  The original post is ambiguous.  The spec writer has to define the period,  not just state a number of days!!!

I guess that sunstrider was referring to language in a specific contract.

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I’m sorry that I wasted my time and others’ time on this thread.

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2 hours ago, joel hoffman said:

I’m sorry that I wasted my time and others’ time on this thread.

You didn't waste my time. I never noticed the language at FAR 17.204(d).

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2 hours ago, joel hoffman said:

I’m sorry that I wasted my time and others’ time on this thread.

I don't see that this discussion has been a waste of time.  Sunstrider brought up a good point, i.e., contractors cannot rely on the government to know what it is doing when writing contracts.  You might be surprised how many contractors, particularly small business concerns, get in trouble because they trusted the government when entering into a contract.

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