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"Option" Means a Unilateral Right


Guardian

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Per the title of this discussion, FAR section 2.101 states, "'Option' means 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."

My office seeks to extend the term of a contract by several months on a sole source basis.  Our attorney offered his legal opinion, saying he believed such an action was within scope of the original action and therefore permissible.  I am doing the contract extension via a modification by the mutual agreement of the parties.

When I sent my package for review, the comment was as follows, "This [contract extension] is an Option (to be labeled sequentially one number after the current option we are under."  When I pointed out the above FAR citation and my understanding of an Option as a term of art, i.e., an instrument being the unilateral right of the Government, I was told that "Options can be bilateral," and to call it an Option and move on.

Does anyone know of any justification for the reviewer's assertion?

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17 minutes ago, Guardian said:

Does anyone know of any justification for the reviewer's assertion?

What clause are you citing as the authority for the modification?  Also, you said you were doing the mod "by the mutual agreement of the parties."  Why isn't  an action based on the mutual agreement of the parties a bilateral action?

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17 minutes ago, Retreadfed said:

What clause are you citing as the authority for the modification?  Also, you said you were doing the mod "by the mutual agreement of the parties."  Why isn't  an action based on the mutual agreement of the parties a bilateral action?

It's a supplemental agreement within scope.  What clause am I citing?  Well Don Mansfield probably does not think I need to cite any clause. Is not a signature from an authorized representative of the contractor enough?  Hmm, perhaps I would cite the commercial items clause, paragraph c (52.212-4(c) Changes), but isn't that superfluous?  Why isn't an action based on the mutual agreement of the parties a bilateral action, you ask?  It is, I agree with you; never said it was not.

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2 hours ago, bob7947 said:

Did the contract, as originally awarded, have an option provision in it?

Yes, Bob, FAR clause 52.217-9 is incorporated.

 

2 hours ago, ji20874 said:

There is no justification.  It is not an option unless it was labeled as such when the contract was awarded.  

In addition to the proposed contract extension by mutual agreement of the parties for which there is a funding commitment, the office wants to incorporate three "short" options as safety nets in case we fall behind on our milestones in awarding the recompeted contract.  I indicated that we need to modify to increase the ceiling in paragraph c of that same option clause, "...shall not exceed xx (months) (years)," as we are approaching the maximum number of months therein specified.  Do you see any issues with this approach?

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EDIT : I composed and posted the following prior to seeing the “Next dribbled part of the story” in the above post by the OP!!!!!!!!

If you want to extend a commercial contract, it would be a change to the contract period. As such, the Commercial Contract terms and conditions clause at 52.212-4 changes paragraph (c) provides only for bilateral changes. It doesn’t allow unilateral changes if the action isn’t under an existing option at the time of the original contract competition.

The question is whether the government can extend the period of performance as an in-scope change with respect to the scope of the original competition. Or does it have to justify an exception to full and open competition? 

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So you want to expand the period of the contract beyond whatever options were originally included under 52.217-9...

The reason is to be able to cover a period prior to the next re-compete.

From the limited info , it looks like you would have to justify an exception to full and open competition then and issue a mod as an out of scope supplemental agreement. 

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29 minutes ago, joel hoffman said:

So you want to expand the period of the contract beyond whatever options were originally included under 52.217-9...

The reason is to be able to cover a period prior to the next re-compete.

From the limited info , it looks like you would have to justify an exception to full and open competition then and issue a mod as an out of scope supplemental agreement.

Yes, bottom line, we do want to expand the contract beyond whatever options were originally included under 52.217-9 and yes, the reason is to be able to cover a period prior to the next recompete. The reviewers and I all agree we need a sole source justification (or JEFO if you like--I'm not getting too bogged down with the specifics for purposes of anonymity).  We all agree that the funded extension needs to be accomplished bilaterally.  The difference of opinion is simple.  The reviewers are insisting we call the extension (bilateral) an option on the SSJ and on the modification itself.  I said, but an option is unilateral (per the terms stipulated in the option clause) and this is anything but.  Therefore, per the FAR and definition of "option" as a term of art, what they are proposing is not an option. The reviewers retorted, "options can be bilateral or unilateral."  Well, I respectfully disagree.

 

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58 minutes ago, Guardian said:

When I sent my package for review, the comment was as follows, "This [contract extension] is an Option (to be labeled sequentially one number after the current option we are under."  When I pointed out the above FAR citation and my understanding of an Option as a term of art, i.e., an instrument being the unilateral right of the Government, I was told that "Options can be bilateral," and to call it an Option and move on.

Does anyone know of any justification for the reviewer's assertion?

The office wants to incorporate three "short" options as safety nets in case we fall behind on our milestones in awarding the recompeted contract.

Guardian, I hope I understand the contemplated transaction correctly. it seems to me that including options (that were not previously part of the contract) within the bilateral contract extension offer is perhaps why the reviewer mentioned classifying the transaction as an option. It seems to me from a transaction standpoint, one could say that this bilateral contract extension offer includes option(s). If the included options are considered the major impact, and the transaction can only be called an extension (or some other word), or an option, I would call it an option.  That would be my potential explanation for the reviewers assertion that the transaction "is an Option." After the offer for the option is accepted by the contractor and definitized, the offer may then be exercised unilaterally by the Government.

    

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In the original posting, the additional work was in-scope.  As the thread evolves, now it is out-or-scope and needs a sole-source justification.  Now, the proposed modification includes exercising options already in the contract as well as the new work?  
 

Call it whatever you want.  As long as you have an appropriate sole-source justification and both parties agree, it doesn’t matter what you call it.  But I still wouldn’t call the new work an option.

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16 minutes ago, joel hoffman said:

You are adding options - period.  It’s a bilateral change to the terms and conditions, an out of scope supplemental agreement. That would be the authority.

The option is not the authority. It is the product of the mod.

its like any other out of scope supplemental agreement.  The actual mod is simple. The challenge will be in defining the exception for other than full and open competition.

 

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Guardian, if calling it an option still really bothers you, and the reviewer has to sign off on the transaction or the reviewers opinion carries great weight, if I were you I would call it whatever the reviewer says it is provided the reviewer puts it and writing. I would document the file with my own view.

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I’d insist on doing it correctly, including requiring the reviewer to justify their opinion or direction.

I’ve seen numerous instances of superseded or just plain wrong practices and procedures being passed down by supervisors or higher level employees to the next gen. of KO’s and specialists.

Example: KO’s at more than one USACE Districts would insist, as late as circa 2015 that “we aren’t allowed to discuss any aspect of a proposal that meets the minimum RFP requirements, even if it is undesirable.” That and resistance to more proactive price discussions should have gone out the window with the 1997 rewrite of Part 15 source selection procedures (FAC 97-02) in response to FASA and FARA.  The FAR now encourages bargaining for better performance, when advantageous to obtain the best value for the government.
https://www.govinfo.gov/content/pkg/FR-1997-09-30/html/97-25666.htm 

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I generally agree with the all the posts in this thread and hope the OP has gotten enough information to carve out reasons why  the reviewers assertion was made.

I doubt if the following is one reason why the reviewer might have asserted that an option could be bilateral.  That said I am adding it to the thread as an interesting read that I found while doing what I do when a post peaks my interest.   In our world of contracting (FAR and otherwise) anything could be possible depending on the specifics of the facts.  I hope you enjoy the read as I did.

https://casetext.com/case/united-biscuit-company-of-america-v-wirtz

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15 hours ago, ji20874 said:

In the original posting, the additional work was in-scope.  As the thread evolves, now it is out-or-scope and needs a sole-source justification.  Now, the proposed modification includes exercising options already in the contract as well as the new work?  
 

Call it whatever you want.  As long as you have an appropriate sole-source justification and both parties agree, it doesn’t matter what you call it.  But I still wouldn’t call the new work an option.

Since I inherited this action from another CO (who was involved in requesting the original legal review), I reached back out to one of our reviewing attorneys again this morning to obtain clarification.  The attorney indicates that the work is within the general scope of the original contract, i.e., no cardinal changes are being made.  My understanding of the litmus test for determining a proposed action to be "within the general scope" is whether it seems more than likely that the contracting parties could have reasonably anticipated such a change at the time of original award.  Another attorney went a step further, asking "have the capabilities changed to an extent" that any of the original offerors could make the argument that they might have otherwise submitted a better proposal than the one selected for award?  In our case, I believe the answers are "yes" and "no," respectively.  If I ask myself as a CO, could the Government and this contractor have reasonably anticipated at the time of award, that after four-years (assuming we exercised all the options, which we did) we might need to extend for a few additional months while awarding a recompeted action?  The answer is a resounding "yes;" it happens often enough in the world of federal contracting, and by the way, these are commercial items we are purchasing; we have to effectuate any changes bilaterally.

Why you might ask, are we publicizing a sole source justification?  For one, our agency's policy requires us to do so.  The fact that we are exceeding the obligation on the original contract, usually sounds the alarm, that we need a justification.  In short, the same attorneys who advised us of their opinion that this is within scope, also advised us to write and publish a justification.  I know this is handled both ways among varying agencies (justification versus no justification).  My question would be, what harm could it possibly do, other than cost the Government administratively for something perhaps no one in the contractor community is very much concerned about?  To that, I would reply, better to publicize an SSJ to apprise everyone of our intentions, than risk a protest, which would be really costly, and if a contractor is going to protest, then let them do so now upon reading our justification

I think we are both in agreement on the meaning of the term, "option."  I view it as a "term of art" and the FAR is specific in its definition. 

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8 hours ago, joel hoffman said:

I’d insist on doing it correctly, including requiring the reviewer to justify their opinion or direction.

I’ve seen numerous instances of superseded or just plain wrong practices and procedures being passed down by supervisors or higher level employees to the next gen. of KO’s and specialists.

It is good to hear this from a veteran KO, Joel.  Aside from the differences of opinion on terms and processes, what has always concerned me the most is a reviewer's unwillingness to support their review comments.  It never ceases to amaze me that such approaches are tolerated by those individuals' supervisors. My asking for justification is seemingly taken as an affront.  I was recently told by a hiring manager that highly-skilled 1102s, which he defined as those at the post-GS-13 grade-levels, were the most difficult to hire, because the pool of qualified applicants is so light.  Yet, when a practitioner is anything but apathetic, reads, applies great thought and shows concern for their work product, those same individuals are made to feel like nuisances.  Others have told me there are a select few agencies where the culture is not like this.  However, I think the problem is widespread enough and certainly much worse in particular offices, unfortunately because of a few individuals.  I am currently leading a team, mentoring newer KOs and I tell everyone up front to challenge my assertions at will, just come at me with your best research.  When someone ends their assertions by writing "plain and simple," that is a red flag for me.  Many of us nowadays went to law or graduate school or were officers in the military.  Does a director really think that by ending their unsupported claim with such bromides is enough to assuage a talented discerning KO's legitimate concerns?   Even worse is when they conclude the conversation by saying "just do it; no more discussion."

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26 minutes ago, Guardian said:

...what has always concerned me the most is a reviewer's unwillingness to support their review comments...

Amen.  And the likely reason for the unwillingness is that their review comments are invalid in the first place.

There are three types of reviewer comments--

  1. Substantial comments, every one of which deserves a citation, which are based on policy or regulation;
  2. Recommendations, with are practical comments based on the reviewer's personal experience; and
  3. Editorial comments, such as typos, style, and so forth.

I like for the review comments to be grouped as above, or if not, for each comment to be clearly labeled as what it is.  Reviewers don't like to do this, because many of them--

  1. Do not understand the regulations competently;
  2. Do not have depth and breadth of experience to give good recommendations; and
  3. Do not understand grammar and so forth.

Rather, they prefer to give comments which the contracting officer MUST adjudicate in the reviewer's favor before the package is allowed to go to the next reviewer or the approving official.  If the contracting officer is actually right and proves his or her point, the reviewer is offended and will never let that contracting officer have any peace or professional autonomy.  Institutional ignorance passed from generation to generation, and contracting officers are infantilized while reviewers become more ossified. 

Of course, I am speaking broadly here.  There are exceptions to every rule.

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9 hours ago, joel hoffman said:

I’d insist on doing it correctly, including requiring the reviewer to justify their opinion or direction.

I am sympathetic to this approach. and I support it if the organizational culture allows for it, but we need to be practical and realistic.  I want the original poster to succeed, flourish, and grow so he or she can start teaching correct principles to others.  If he or she insists, enemies will be made who might adversely affect his or her career.  Neil Roberts gave good advice above.

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On 2/27/2020 at 4:18 PM, ji20874 said:

I am sympathetic to this approach. and I support it if the organizational culture allows for it, but we need to be practical and realistic.  I want the original poster to succeed, flourish, and grow so he or she can start teaching correct principles to others.  If he or she insists, enemies will be made who might adversely affect his or her career.  Neil Roberts gave good advice above.

I’m just saying that, from the information provided,  if the mod here is a bilateral change to ADD new option(s) for extended periods of services, one doesn’t exercise a new option in the same mod that creates/adds it.

A bilateral agreement  to initially extend the contract period is simply a bilateral change to the POP. You wouldn’t make it an “option”.

And your organization has determined it to be in-scope. 

Providing for possible future additional extension(s), within that same bilateral mod for the initial extension of service period would also be a change to add  new option(s).

Unless you exercise an existing option, the authority to extend the period of services and to add  new options on a contract for commercial items or commercial services is a change.

The Commercial item Terms and conditions clause at 52.212-4 (c) covers bilateral changes to the terms and conditions. A commercial item “change” isn’t limited by the language of 52.212-4(c) to only in-scope changes.

In contrast, the standard FAR changes clause is limited in coverage to in-scope changes that can be unilaterally directed or constructive, in-scope changes.

Of course, a commercial item “change” that is out of scope to a contract or action exceeding the Simplified Acquisition limit would require an exception to full and open competition.

(I was also reminded that GSA FSS or other agency GWAC’s might not allow changes to orders that add products or services not on the existing contract).

Edited by joel hoffman
Clarifications and attempt to simplify response
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