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FAR 52.217-8 states, in part, that "The Government may require continued performance of any services within the limits and at the rates specified in the contract. These rates may be adjusted only as a result of revisions to prevailing labor rates provided by the Secretary of Labor. The option provision may be exercised more than once, but the total extension of performance hereunder shall not exceed 6 months."

Scenario: FFP IDIQ contract that includes FAR 52.217-8. The contract includes various labor categories and rates. The contractor submits a proposal for a task order which consists of 100 hours of engineering support at the contract rate of $150/hour for a total proposed price of $15,000. Period of performance is 12 months. The Gov't issues a modification prior to the end of the POP to extend the task order by 3 months and cites FAR 52.217-8. 

 Question #1: Does this option clause obligate the contractor to continue providing the engineering support services for another 3 months at no additional cost to the Gov't? Or, is the contractor simply obligated to continue working under the $150/hr rate for the 3-month extension, but with a price increase to account for the additional hours? Let's say the 3-month extension translates to an additional 20 hours. Would the Gov't be required to increase the price by $3,000? In other words, when the clause states that "the Government may require continued performance of any services within the limits and at the rates specified in the contract", does "rates" really mean "rates", or does it actually mean "price"?

Question #2: If the answer to Question #1 is that "yes, rates means rates", how is the level of effort determined for the extension period(s) given that the option can be exercised unilaterally?

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7 hours ago, elgueromeromero said:

FAR 52.217-8 states, in part, that "The Government may require continued performance of any services within the limits and at the rates specified in the contract. These rates may be adjusted only as a result of revisions to prevailing labor rates provided by the Secretary of Labor. The option provision may be exercised more than once, but the total extension of performance hereunder shall not exceed 6 months."

Scenario: FFP IDIQ contract that includes FAR 52.217-8. The contract includes various labor categories and rates. The contractor submits a proposal for a task order which consists of 100 hours of engineering support at the contract rate of $150/hour for a total proposed price of $15,000. Period of performance is 12 months. The Gov't issues a modification prior to the end of the POP to extend the task order by 3 months and cites FAR 52.217-8. 

 Question #1: Does this option clause obligate the contractor to continue providing the engineering support services for another 3 months at no additional cost to the Gov't?

No. It means that the government is extending the task order requirement for an additional three month period for the existing services to be paid for at the current “rates” for the existing services. 

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7 hours ago, elgueromeromero said:

Question #2: If the answer to Question #1 is that "yes, rates means rates", how is the level of effort determined for the extension period(s) given that the option can be exercised unilaterally?

It appears to be an extension of the existing level of effort for three more months. Just “fill ‘em and “bill ‘em”.  Better yet - ASK them for clarification or confirmation of your understanding. Surely you have a relationship and communications with your government customer don’t you? 

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It might be helpful to remember the regulatory purpose of the clause.....

FAR 37.111 Extension of services.

Award of contracts for recurring and continuing service requirements are often delayed due to circumstances beyond the control of contracting offices. Examples of circumstances causing such delays are bid protests and alleged mistakes in bid. In order to avoid negotiation of short extensions to existing contracts, the contracting officer may include an option clause (see 17.208(f)) in solicitations and contracts which will enable the Government to require continued performance of any services within the limits and at the rates specified in the contract. However, these rates may be adjusted only as a result of revisions to prevailing labor rates provided by the Secretary of Labor. The option provision may be exercised more than once, but the total extension of performance thereunder shall not exceed 6 months.

 

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 Does this option clause obligate the contractor to continue providing the engineering support services for another 3 months at no additional cost to the Gov't?  No

 Or, is the contractor simply obligated to continue working under the $150/hr rate for the 3-month extension, but with a price increase to account for the additional hours? Yes. 

Let's say the 3-month extension translates to an additional 20 hours. Would the Gov't be required to increase the price by $3,000? Yes,  however, if the work covered by the contract is subject to the SCA, and the contract contains FAR 52.222-41, a new WD would be required and the contract price for the option period would be adjusted IAW that clause.

In other words, when the clause states that "the Government may require continued performance of any services within the limits and at the rates specified in the contract", does "rates" really mean "rates", or does it actually mean "price"?  Rates which are subject to adjustment as required by FAR 52.222-41.

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9 minutes ago, elgueromeromero said:

Any thoughts on how this might be handled in FFP service contracts that are awarded on a lump sum basis and don't contain any contract rates?

Does the contractor submit interim invoices or only one invoice when the contract is completed?  If the former, what is the basis upon which the invoices are submitted?

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57 minutes ago, elgueromeromero said:

Well, this was a hypothetical scenario, but why don't we just say they're based on the completion of definable and measurable steps, which are considered integral and necessary to the achievement of the stated performance objectives.

I would argue clause FAR 52.217-8 isn’t appropriate for that contract then.  That’s not recurring and continuing services.  You likely need to negotiate something with the contracting officer for the extension

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2 hours ago, elgueromeromero said:

Well, this was a hypothetical scenario, but why don't we just say they're based on the completion of definable and measurable steps, which are considered integral and necessary to the achievement of the stated performance objectives.

Oh, my -- talk about a lot of words that don't say anything!  

Hypothetical scenarios work best when they are based on something actionable. For this thread, we started out with an actionable scenario:

17 hours ago, elgueromeromero said:

Scenario: FFP IDIQ contract that includes FAR 52.217-8. The contract includes various labor categories and rates. The contractor submits a proposal for a task order which consists of 100 hours of engineering support at the contract rate of $150/hour for a total proposed price of $15,000. Period of performance is 12 months. The Gov't issues a modification prior to the end of the POP to extend the task order by 3 months and cites FAR 52.217-8. 

Retreadfed already answered the question -- if the option exercise calls for 20 hours of contractor engineering support work, the contractor may reasonably expect the Government to increase the contract price by $3,000 (20 hrs x $150/hr = $3,000).  This assumes the option exercise fits under FAR 37.111 as Carl pointed to.

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On 12/2/2020 at 12:45 AM, elgueromeromero said:

Scenario: FFP IDIQ contract that includes FAR 52.217-8. The contract includes various labor categories and rates. The contractor submits a proposal for a task order which consists of 100 hours of engineering support at the contract rate of $150/hour for a total proposed price of $15,000. Period of performance is 12 months. The Gov't issues a modification prior to the end of the POP to extend the task order by 3 months and cites FAR 52.217-8. 

After re-reading this scenario, I’d say that it isnt a very good “hypothetical example”. A task order for 100 hours over twelve months is an average of 8.33 hours per month of total effort. Is it even worth all your worry for a probable additional 25 manhours? Yes, you’ll get paid for additional efforts.

If you want to know how much effort, ask your contracting officer. You may have to negotiate. The hypo scenario doesn’t make sense for such a small task and your subsequent explanation makes application of the clause to the task or to a time extension as described even more questionable. 

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11 hours ago, formerfed said:

I would argue clause FAR 52.217-8 isn’t appropriate for that contract then.  That’s not recurring and continuing services.  You likely need to negotiate something with the contracting officer for the extension

I agree. 

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Thanks, all. I appreciate the guidance. While I did use hypothetical scenarios, my company is dealing with some real life situations related to this clause. We've seen in more than one of our contracts with the Gov't language related, but in addition to, FAR 52.217-8 that states"...at rates and prices specified in the contract" [emphasis added]. So I wanted to make sure I understood how FAR 52.217-8 is supposed to work, and what rights it gives the Gov't, given the addition of "and prices" that we've seen in our contracts. We've also had a Prime try to force us to keep working for an additional 6 months at no additional cost. When we pushed back, they cited this clause, which was flowed down to us from their prime contract. I was pretty confident they were misinterpreting the clause, but wanted to ask here to be sure. Again, I appreciate everyone's guidance and expertise! 

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48 minutes ago, elgueromeromero said:

Thanks, all. I appreciate the guidance. While I did use hypothetical scenarios, my company is dealing with some real life situations related to this clause. We've seen in more than one of our contracts with the Gov't language related, but in addition to, FAR 52.217-8 that states"...at rates and prices specified in the contract" [emphasis added]. So I wanted to make sure I understood how FAR 52.217-8 is supposed to work, and what rights it gives the Gov't, given the addition of "and prices" that we've seen in our contracts. We've also had a Prime try to force us to keep working for an additional 6 months at no additional cost. When we pushed back, they cited this clause, which was flowed down to us from their prime contract. I was pretty confident they were misinterpreting the clause, but wanted to ask here to be sure. Again, I appreciate everyone's guidance and expertise! 

Good luck! By the way, did the government or the prime contractor add the extra words “and prices”?

If you ever encounter this option clause with the added wording in the future in a govt or contractor solicitation, I would advise you to contact the solicitor prior to the closing date and advise them that the words “and prices” are not in the FAR option clause and ask for an explanation of what they mean by adding those two words.

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1 hour ago, joel hoffman said:

Good luck! By the way, did the government or the prime contractor add the extra words “and prices”?

If you ever encounter this option clause with the added wording in the future in a govt or contractor solicitation, I would advise you to contact the solicitor prior to the closing date and advise them that the words “and prices” are not in the FAR option clause and ask for an explanation of what they mean by adding those two words.

The Gov't added "and prices". Specifically, the USACE. Basically a paragraph that said something along the lines of: in accordance with FAR 52.217-8, the Government may require continued performance of any services within the limits and at the rates and prices specified in the contract. And then they went on to add that it applies to task orders as well. 

Good point on raising the issue during the solicitation phase. I think in this case, we simply didn't notice it until after award. 

 

Thanks

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The clause at FAR 52.217-8 allows for "substantially the same as" usage in a contract.  Wouldn't adding "and prices" fit within "substantially the same as" usage?

Anyway, since the original poster has learned from his or her own history that this clause might cause confusion, he or she can insist on including any needed clarifications in the contract text before the next contract is formed.

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3 hours ago, elgueromeromero said:

We've also had a Prime try to force us to keep working for an additional 6 months at no additional cost.

This practice is not limited to primes.  I worked with a contractor that had a contracting officer do this.  This was done after she had refused to make earlier adjustments to the contract as required by FAR  52.222-41.  The combination of these activities forced the contractor, a WOSB, into bankruptcy and a DOL SCA noncompliance investigation for not paying employees required wages and fringe benefits while the company had no money because of the CO's incompetence and refusal to pay the contractor IAW the contract.

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1 hour ago, Retreadfed said:

I worked with a contractor that had a contracting officer do this.

I hope the contractor filed a timely claim under the Disputes clause of the contract -- that's what the clause is for.  Such a contractor could also contact the agency head or a Congressman or the organization's OSDBU.  

Two claims, really -- the first claim should have been sent the day after the contractor received the option exercise modification with no money.  The second claim should have been sent the day after the contracting officer told the contractor that it had to work for free.

A government contractor needs to understand the contracts it holds.

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Were they working for free or being paid for quantities of unit priced items or rates within a total line item or contract price limit (unused quantities)?

That’s why one must ask for a clarification .  If it is the former (no pay), then that isn’t “substantially the same as” the FAR language or the specifically stated intent of the clause. See Carl’s post.

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Joel,

No one here is suggesting that FAR 52.217-8 allows the Government to obtain services from a contractor without payment.  The "substantially the same as" usage of changing "rates" to "rates and prices" could make sense for many contracts but could never justify obtaining services from a contractor without payment.

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12 hours ago, ji20874 said:

Joel,

No one here is suggesting that FAR 52.217-8 allows the Government to obtain services from a contractor without payment.  The "substantially the same as" usage of changing "rates" to "rates and prices" could make sense for many contracts but could never justify obtaining services from a contractor without payment.

Agree. I was one who clearly made that distinction, ji. 

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So, without any prior government clarification, all here appear to agree that it would be a reasonable interpretation by a proposer to assume that it would be paid for any additional services provided during an extension. No one here suggested otherwise. 

All here appear to agree that it would be an unreasonable interpretation by the government to assume that it could unilaterally require continued services at no additional increase in applicable line item price(s) and/or the total contract price, if such are exceeded during the extension.

Thus - if adding the words “or prices” has substantially the same meaning as  simply “rates”,  there is no patent ambiguity defense available, if the government does not intend to adjust exceeded line item and/or total contract prices, correct?

And - if a proposer asks for a clarification, it can provide its opinion that it will be paid for services ordered under a -8 extension. If the government responds and agrees or if it fails to respond with a different interpretation, there is no patent ambiguity. The government would be on record of knowing the proposer’s reasonable interpretation prior to award.

And - everyone here agrees that a proposer wouldn’t HAVE to request the government to clarify what the extra words mean if the added words are “substantially the same as” the FAR wording AND stated intent of the clause. 

Problem solved.

Edit: But-but, if I, as a proposer, had any question about the government’s interpretation, I’d  go on record by requesting clarification or confirmation that the government would pay for additional services ordered under the -8 clause if line item and/or total contract prices are exceeded. There would be no exception to a contrary government interpretation if the government fails to contradict the proposers reasonable interpretation. The government would have no later patent ambiguity defense. 

Edited by joel hoffman
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