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No-Cost Extension (NCE) of Option contracts

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I have a non-severable (12 month) option of a contract in which the contractor's requesting a no-cost extension to complete work on the contract. Are there any limitations on the amount of time the contract can be extended for at no additional cost? 

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Services?

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You'd asked for limitations as to extending non-severable services.

If appropriated funds are utilized, one limitation is that the period of performance cannot be extended 5 years beyond the last available date of the funds for new obligations, else you'd be in violation of the Anti-Deficiency Act.

For instance, for an O&M contract awarded on 1 Oct 2015, that means the no-cost extension may not be beyond 30 September 2021 with that same funding.

As for your contract, what is/will be the cause of delay in performance? Is there a cost underrun/overrun?

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The contractor wants more time.  I assume there is no reason for an adjustment (equitable or otherwise) in performance time because of any clause in the contract — if there was, you would have said so already.  So, there is no Government delay, no excusable delay, no change under the Changes clause, and so forth...

The contracting officer may terminate the contract for the contractor’s default; or if he or she is still hopeful that the work by be completed reasonably soon, and the work still has value to the Government, he or she may forbear termination and unilaterally establish a new period of performance end date.  The contracting officer should consider reducing the fee because of the lowered value of the contractor’s services, and should make note of the schedule failing in CPARS.

There is no limit on the amount of time the contracting officer may grant.  This is a business decision.  If contract funds evaporate before they are paid, the contracting officer can replace them with other funds.

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1 hour ago, ji20874 said:

The contractor wants more time.  I assume there is no reason for an adjustment (equitable or otherwise) in performance time because of any clause in the contract — if there was, you would have said so already.  So, there is no Government delay, no excusable delay, no change under the Changes clause, and so forth...

The contracting officer may terminate the contract for the contractor’s default; or if he or she is still hopeful that the work by be completed reasonably soon, and the work still has value to the Government, he or she may forbear termination and unilaterally establish a new period of performance end date.  The contracting officer should consider reducing the fee because of the lowered value of the contractor’s services, and should make note of the schedule failing in CPARS.

There is no limit on the amount of time the contracting officer may grant.  This is a business decision.  If contract funds evaporate before they are paid, the contracting officer can replace them with other funds.

How can the government terminate the cost plus contractor for default? It is likely that all the contractor agreed to was a best effort to complete the work within schedule and within budget.

In other words, I will try to spend all your money and use all your time to do as much as reasonably possible. 

It didn’t guarantee to finish everything within budget and within the contract period. 

And what does “no cost extension” mean on a cost reimbursement service contract? “We will finish the work for zero reimbursement”?  I think that it may mean  that no additional fee will be payed to finish and that sufficient funds might remain to complete the work within the current funding limitations. 

 

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This may mean an extension with no change in contract costs - planned work just gets stretched out within existing funds.  If so, this occasionally happens and the government should get something in return for acceptance of the extension like a reduction in fee.

A TfD is possible but what does that get you?  

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3 hours ago, joel hoffman said:

How can the government terminate the cost plus contractor for default? It is likely that all the contractor agreed to was a best effort to complete the work within schedule and within budget.

A cost-reimbursement contract can be established on a completion basis or a term basis.  I supposed it was likely on a completion basis.  The original poster didn't share very much.  

Sure, negotiating a period of performance extension for an exchange of consideration is a possibility.  That will make sense in some cases.

But a T4D is also a possibility if the contractor failed to complete the task it promised to complete or failed to apply a promised level of effort. A contractor should keep its promises, and a contracting officer should manage the contract to get the deal that both parties bargained for.  If it is a term contract, and the contractor failed to provide the promised level of effort during the established period, well, that's default.  But as I wrote, even if the contractor didn't keep its promises, the contracting officer could forbear a T4D as a business decision.

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There isn’t enough information known to determine cause for the non-completion, the requirement or the type of obligation.

But I think that the question has been answered. 

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9 hours ago, formerfed said:

This may mean an extension with no change in contract costs - planned work just gets stretched out within existing funds.  If so, this occasionally happens and the government should get something in return for acceptance of the extension like a reduction in fee.

A TfD is possible but what does that get you?  

We don’t have enough information to assume that a T4D is warranted or would be legally sufficient on this particular cost reimbursement contract.

In general, for cost contracts: 

“16.301-2   Application.

(a) The contracting officer shall use cost-reimbursement contracts only when—

(1) Circumstances do not allow the agency to define its requirements sufficiently to allow for a fixed-price type contract (see 7.105); or

(2) Uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use any type of fixed-price contract.”

And from 16.306 (d) for a CPFF contract: 

“d) Completion and term forms. A cost-plus-fixed-fee contract may take one of two basic forms—completion or term.

(1) The completion form describes the scope of work by stating a definite goal or target and specifying an end product. This form of contract normally requires the contractor to complete and deliver the specified end product (e.g., a final report of research accomplishing the goal or target) within the estimated cost, if possible, as a condition for payment of the entire fixed fee. However, in the event the work cannot be completed within the estimated cost, the Government may require more effort without increase in fee, provided the Government increases the estimated cost.

(2) The term form describes the scope of work in general terms and obligates the contractor to devote a specified level of effort for a stated time period. Under this form, if the performance is considered satisfactory by the Government, the fixed fee is payable at the expiration of the agreed-upon period, upon contractor statement that the level of effort specified in the contract has been expended in performing the contract work. Renewal for further periods of performance is a new acquisition that involves new cost and fee arrangements.

(3) Because of the differences in obligation assumed by the contractor, the completion form is preferred over the term form whenever the work, or specific milestones for the work, can be defined well enough to permit development of estimates within which the contractor can be expected to complete the work.

(4) The term form shall not be used unless the contractor is obligated by the contract to provide a specific level of effort within a definite time period.”

However, Unless the questioner has more information to share, i think that the question may have been answered.

I just wanted to clarify that we don’t have enough information to say that a sustainable TFD is warranted or even possible here. 

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3 hours ago, joel hoffman said:

We don’t have enough information to assume that a T4D is warranted or would be legally sufficient on this particular cost reimbursement contract.

Right, and no one in this thread has made that assumption.  But based on what has been shared, a T4D is possibly an appropriate action (whether it is a completion form or a term form cost-reimbursement contract).  More information, more facts, will help to narrow the range of possibilities.  It is too soon for us to disallow T4D as a possibility.

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On 9/6/2019 at 11:58 PM, WC79 said:

I have a non-severable (12 month) option of a contract

Could you clarify whether you are considering exercising this option or has it has already been exercised? The posting appears to be ambiguous to me because if it has already been exercised, I don't quite understand what relevance there is to it having been an option.

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5 hours ago, ji20874 said:

Right, and no one in this thread has made that assumption. 

18 hours ago, formerfed said:

A TfD is possible but what does that get you?  

Hmmm. 

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I said that I wanted to clarify that we don’t have enough information to say that a sustainable TFD is warranted or even possible here.

That wasn’t part of or pertinent to the original question. 

 

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7 hours ago, ji20874 said:

 But based on what has been shared, a T4D is possibly an appropriate action (whether it is a completion form or a term form cost-reimbursement contract). 

Nothing has been shared yet by the OP  to support or even suggest that a T4D is possibly appropriate for the instant contract. 

The OP didn’t suggest a Termination. 

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Joel, you keep quoting me on TfD. I didn’t bring it up to begin with - ji29874 did.  I agree we know almost zero details so Im surp4is3d we’re talking about it. 

In all honesty, it’s a huge investment in administrative time and expense.  Contractors often appeal to the BCA.  One agency that tracks legal and procurement office labor costs to bill program offices said a small manner cost them $120,000.  With a cost reimbursement contract, nothing much is gained except less fee involved.  There’s no excess reprocurement charges.   The contractor gets a black mark but is that worse than an unsatisfactory CPARS.

I have a feeling the OP is simply asking about a extension with no change in existing contract costs.  

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14 hours ago, formerfed said:

I have a feeling the OP is simply asking about a extension with no change in existing contract costs.  

Formerfed, I agree with you, if  “no change in existing contract costs” means no change in maximum contract cost limitation.

We simply don’t know what “no cost” means in the context of the original post. A clarification by the OP would be nice to know.

The contractor may want to be reimbursed for costs during the extension as long as they don’t exceed the cost limitation and may or may not want to earn the full fee if not already paid.

All we can assume is that not all of the work that needs to be accomplished was completed within the period of performance (for reasons unknown) and the contractor wants more time to be able to complete it. 

That isn’t necessarily any grounds for a default termination. Possible that the exact extent or complexity of the work was not determinable at the outset or during performance. We don’t know.but that would be a logical reason why it is a cost reimbursement contract,  not FP. 

At any rate, the possibility of a TFD is not pertinent to the OP’s question.

One can’t generalize about a T4D on a cost reimbursement contract without a lot more information, which I don’t expect the OP to provide here. 

 

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On ‎9‎/‎7‎/‎2019 at 8:54 PM, ji20874 said:

The contractor wants more time.  I assume there is no reason for an adjustment (equitable or otherwise) in performance time because of any clause in the contract — if there was, you would have said so already.  So, there is no Government delay, no excusable delay, no change under the Changes clause, and so forth...

The contracting officer may terminate the contract for the contractor’s default; or if he or she is still hopeful that the work by be completed reasonably soon, and the work still has value to the Government, he or she may forbear termination and unilaterally establish a new period of performance end date.  The contracting officer should consider reducing the fee because of the lowered value of the contractor’s services, and should make note of the schedule failing in CPARS.

There is no limit on the amount of time the contracting officer may grant.  This is a business decision.  If contract funds evaporate before they are paid, the contracting officer can replace them with other funds.

This is a completion contract. The reasoning behind the request for extension is valid. I would like to know if there any limitations on the amount of time a no cost extension (no additional cost to the government) can granted for. Someone once mentioned that it can not be extended beyond 50% of the original period of performance. I can not find anything supporting that rational. 

This is an extension to a current option that's yet to end.

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The contractors performing on the contract. There's been some excusable delays that led to the request. My question is solely around the amount of time a contract can be extended for. Just wondering if there was anything I may have missed.  

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An excusable delay is a bar for termination for default.  The Government can provide additional time only as necessary to recover from the excusable delay.  There is no codified limit on the time adjustment.

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1 minute ago, ji20874 said:

An excusable delay is a bar for termination for default.  The Government can provide additional time only as necessary to recover from the excusable delay.  There is no codified limit on the time adjustment.

Thank you. The government is does not intend on terminating the contract as we have a vested interested in the outcome. The contractor will need more time to complete.

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Are you relying on the contract clause at FAR 52.249-14, Excusable Delays?

If so, and if the contractor proves that its failure to perform is attributable to an excusable delay and proves the time impact, that is the amount of time you grant in the revised period of performance. 

If not, what contract clause are you relying on?

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Excuse my ignorance, but if there are funds remaining and the parties agree, can't the PoP simply be extended by mutual agreement?

Moreoever, I think there's a strong argument to be made that, unless the contract is a CPFF (Term), Level of Effort, or one that specifies use of specific GFY funding, the contractor can keep working (so long as there is funding available) REGARDLESS of what the PoP says. No modification necessary.

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2 minutes ago, here_2_help said:

Excuse my ignorance, but if there are funds remaining and the parties agree, can't the PoP simply be extended by mutual agreement?

Moreoever, I think there's a strong argument to be made that, unless the contract is a CPFF (Term), Level of Effort, or one that specifies use of specific GFY funding, the contractor can keep working (so long as there is funding available) REGARDLESS of what the PoP says. No modification necessary.

That is the stance I'm currently taking. Extending the POP with mutual agreement. I want to make sure that there are no limitations on the amount of time needed.

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