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No-Cost Extension (NCE) of Option contracts

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14 minutes ago, WC79 said:

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.

ji has already provided you with the answer to that question.  There is no set limit on the length of a schedule extension.  The standard used to determine the length of a schedule extension for an excusable delay is the impact the excusable delay had on the contractor's ability to complete the contract.  The extension may be the same as, shorter than or longer than the period of excusable delay depending on the facts of the case.  It is up to the contractor to show what the extension should be.

You say the contractor had excusable delays, but you do not seem to want to apply the general principle for computing the length of an extension.  If you do not follow the normal procedure, what standard are you using to determine the length of the extension?

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2 hours ago, WC79 said:

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.  

If the contract included something like FAR 52.217-8 or -9 (Option to Extend Services/Term), it may apply and there are time limitation therein. Are you searching for some guidance outside the provisions in the contract?

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There are no codified time limitations.  

If you aren’t relying on the Excusable Delays clause (it seems you are not, even though you introduced excusable delays as the reason), two questions come to mind—

     -What clause (or principle) are you relying on?

     -Are you going to obtain consideration from the contractor?

I hope you aren’t simply giving a gift to the contractor, with mutual agreement.

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As far as I know, there is not a limit other than whatever period , after which the already obligated funds will no longer be available for payment. Your finance office will be able to tell you that. 

Do you need to extend the contract period longer than the excusable delays? 

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2 hours ago, WC79 said:

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.

My view is there is a limitation on the amount of time because the amount of permissible extension of the POP is "none" unless you are relying on a contract clause. Extending the period of performance without a contract basis may be outside your warrant, and in my mind, "covers up" the actual performance of the contractor, which many are entitled to know. Merely because a contractor is "running late" in performance under a cost reimbursement contract, does not provide a rational basis for slipping the POP schedule required by the Agency. I have not researched the extent to which I can point you to a FAR provision that specifically covers this situation and supports my position. But if I did find one, I suspect you would not be happy with what it says. I think I am saying what several other responses have already expressed in other words.    

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From FAR 16.306 (d):

“(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.”

Here there are excusable delays to the progress of work and the contractor (apparently) hasn’t expended all the costs. The government says it wants this contractor to complete the work. There is no indication that the contractor is responsible for the delays. The government says the delays are excusable.

The contractor apparently wants to complete all the work -  within the current cost limitation and fee. 

If the government can require more work when the contractor expends all funds prior to completing the work, then surely the government may extend the contract time.when the contractor has excusable reasons for not being able to complete all the required work within the period of performance.  

In addition, there is some reason why this is a cost reimbursement contract rather than fixed price - e.g. the actual amount of effort to complete the intended work or the exact complexity of the work couldn’t be accurately determined at the time of contracting. 

Here, the government wants the contractor to be able to complete the effort. 

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

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.

The CO may be able to replace the funds.  Any contract mod to extend the POP should be based on this which may mean caveating the extension with "funds are not presently available beyond xx/xx/xx".

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22 hours ago, here_2_help said:

REGARDLESS of what the PoP says. No modification necessary.

The contract must be read as a whole.  Ignoring a stated POP would not be proper.  A mod would be necessary.

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2 hours ago, jwomack said:

The contract must be read as a whole.  Ignoring a stated POP would not be proper.  A mod would be necessary.

Well, I beg to differ with your interpretation. So does DCAA. See CAM 6-202.3

 

Quote

A completion or delivered product specified in a cost-type contract normally commits the contractor to complete and deliver the specified product within the estimated cost. In the event the work cannot be completed within the estimated cost, the Government may require more effort without an increase in fee [see FAR 16.306(d)(1)]. Also, under FAR 52.249-6(a), the contracting officer could terminate the contract prior to full expenditure of the estimated cost. However, unless the contract is terminated, or exceeds stated contract limitations, the contractor is normally obligated to continue to perform under the contract up to the estimated total contract cost. Therefore, questioning costs based only on the fact that they were incurred after the performance period would be inappropriate.

(Emphasis added.)

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1 hour ago, here_2_help said:

However, unless the contract is terminated, or exceeds stated contract limitations, the contractor is normally obligated to continue to perform under the contract up to the estimated total contract cost. Therefore, questioning costs based only on the fact that they were incurred after the performance period would be inappropriate.

DCAA's guidance is not binding on or applicable to actions taken by contracting officers.  Moreover, DCAA has cited to no FAR clause or decision to support the notion that a contractor is obligated to continue to perform after the due date in order to spend the government's money.  Further, this guidance overlooks a key element of cost reimbursement contracting.  That is, the contractor agrees to use its best efforts to complete the contract within the estimated contract cost and by the required delivery date.  If the contractor does not use its best efforts to timely complete the contract on time, the contract may be terminated for default.  However, the government may agree to a schedule extension instead of a default termination.  In that case, the government may insist on consideration in the form of reduced fee.  This schedule extension and fee reduction would need to be reflected in a contract mod.  On the other hand, if the failure to complete the contract on time is due to an excusable delay, FAR 52.249-14 then comes into play.  Subsection (c) of that clause states "If the Contracting Officer determines that any failure to perform results from one or more of the causes above, the delivery schedule shall be revised."  This revision is done through a contract mod.

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16 minutes ago, Retreadfed said:

DCAA's guidance is not binding on or applicable to actions taken by contracting officers.  Moreover, DCAA has cited to no FAR clause or decision to support the notion that a contractor is obligated to continue to perform after the due date in order to spend the government's money.  Further, this guidance overlooks a key element of cost reimbursement contracting.  That is, the contractor agrees to use its best efforts to complete the contract within the estimated contract cost and by the required delivery date.  If the contractor does not use its best efforts to timely complete the contract on time, the contract may be terminated for default.  However, the government may agree to a schedule extension instead of a default termination.  In that case, the government may insist on consideration in the form of reduced fee.  This schedule extension and fee reduction would need to be reflected in a contract mod.  On the other hand, if the failure to complete the contract on time is due to an excusable delay, FAR 52.249-14 then comes into play.  Subsection (c) of that clause states "If the Contracting Officer determines that any failure to perform results from one or more of the causes above, the delivery schedule shall be revised."  This revision is done through a contract mod.

Let's agree to disagree. I believe a CO has authority (within limits) to use business judgment, especially when both contracting parties agree on the desired outcome. I believe that a simple PoP extension, with no increase in price, is well within the CO's authority. I believe that, in many cases, the PoP does not need to be formally extended; in those cases, the contractor can continue working and billing.

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25 minutes ago, here_2_help said:

I believe that, in many cases, the PoP does not need to be formally extended

Such as when?  Can you give an example?

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3 hours ago, Retreadfed said:

Such as when?  Can you give an example?

Yes, I can. And I already did. Right in this thread.

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On ‎9‎/‎9‎/‎2019 at 10:34 AM, here_2_help said:

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

Is this what you were referring to?  If so, how would the mutual agreement be reflected if not in a contract mod?  Remember, government contracts are integrated agreements.  That means the entire contract is reflected in the four corners of the contract, including portions of the contract that are incorporated by reference with no oral terms or external writings being a part of the contract.

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@here_2_help & @Retreadfed,

I think you are talking past each other. Should the contract be modified to reflect a new completion date? Yes. If the CO doesn't modify the contract and the contractor keeps working, will they keep getting paid? Probably, yes (as long as DCAA is reviewing the invoices). 

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On ‎9‎/‎10‎/‎2019 at 10:14 AM, here_2_help said:

or exceeds stated contract limitations

The POP is a stated contract limitation.

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On ‎9‎/‎12‎/‎2019 at 5:05 AM, jwomack said:

The POP is a stated contract limitation.

Which can be waived by mutual consent. Or even by the lack of action by the customer.

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A lot of this discussion is ignoring the original question.  The facts as represented are that the contractor has experienced some excusable delays in regard to performance of a cost reimbursement contract.  As a consequence, the contractor has asked for a schedule extension supposedly with no additional funds being added to the contract (although the Limitation of Cost clause would still be applicable to the contract so that there is a possibility that additional funds may be requested later).  This situation implicates FAR 52.249-14 which states in part "If the Contracting Officer determines that any failure to perform results from one or more of the causes above, the delivery schedule shall be revised."  This schedule revision can be done by mutual agreement or unilaterally by the contracting officer through the issuance of a final decision under the Disputes clause which would entitle the contractor to appeal that decision.  In any event, the clear meaning is that the schedule revision is to be reflected in a mod to the contract.  The original question was whether there was a limit on the length of the schedule extension.  I believe the general consensus is that there is no limit but that the agency should not grant the contractor whatever extension the contractor wants, but that the contractor should be required to demonstrate what impact the excusable delays had on the contractor's ability to complete the contract within the original performance period.

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deleted

Edited by Neil Roberts
delete not complete

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Yes, Retreadfed, but I got the impression from the poster's responses that the posted question is outside of FAR 52.249-14.

Edited by Neil Roberts
delete last word

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32 minutes ago, Neil Roberts said:

Yes, Retreadfed, but I got the impression from the poster's responses that the posted question is outside of FAR 52.249-14.

That seems to be his/her position.  However, we have not been provided with a rationale as to why the general rule on schedule extensions for excusable delays should not be followed or what other standard would be used to determine the length of the extension instead.

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Looking back, I see we didn’t help wc79 much.  The question is there a limit on extensions.  Somehow it evolved in excusable delays and how should delays be calculated.  Lots of reasons exist for delays outside of FAR 52-249-14.  Common ones are resignation of key people, equipment malfunctioning,  inventory of supplies depleted, and capacity conflicts.  Sure those all should be part of contingency planning, but plans often fail. If the government wants to negotiate an extension that’s acceptable and receives consideration, what’s the issue?

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Y’all seem to think that there is something wrong with s contractor’s performance in a completion contract if they didn’t finish the work within the period of performance. 

Well if it was that cut and dry, why was it a  cost reimbursement contract, instead of firm fixed price, FFP with unit prices or time and material? Generally, it would be because there were enough unknowns, contingencies or other factors beyond control to precisely estimate and/or price the quantity difficulty of the overall effort. It may even have to do with indeterminable regulatory permitting. 

The contractor on a cost reimbursement contract is expected to make a “best effort”, not guarantee completion within the “stated contract limitation”. 

There can also be excusable, compensable delays and excusable, non-compensable (concurrent contractor and non-contractor) delays that prevent completion within the contract limitations. 

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