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eriand2

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  1. jvanhorne.....In its 2011 Google decision COFC relied upon the Distributed Solutions and Savantage cases to rule that FAR Part 6 was violated for the lack of a J&A due to the DOI decision to require Microsoft as a directed subcontractor. It ruled that the mere decision itself was a procurement and required a J&A. Google had protested before COFC Interior's decision (procurement) to make the network service providers (the prime contractors) subcontract with Microsoft as the supplier of software. The court ruled Interior did not follow the FAR Part 6 J&A process required by CICA in its attempt to use a D&F to justify the restriction. The DOI contract had to be re-competed and under the new 2012 award Onix Networking (the prime) will subcontract to Google to provide the software that the prime will use to meet the service requirements of Interior.
  2. dcarver Try reading FAR Part 16. You will see that contrary to your assumption..... I "came up" with nothing. The source of the definitions I cite is FAR Part 16.
  3. Don Acquisition, While questioned and challenged, my position needs no further explanation...it speaks for itself....you of course are free to have a differing view. While my position is clearly open to reasonable debate, it is a fact that the Varilease court failed to "join the issue" in its decision and therefore the case law created by Varilease cannot be said to have ruled on the issue I raise.
  4. Dcarver, FAR 16.504 (a) "(a) Description. An indefinite-quantity contract provides for an indefinite quantity, within stated limits, of supplies or services during a fixed period. The Government places orders for individual requirements. Quantity limits may be stated as number of units or as dollar values." Among the “stated limits” of an IDQ contract are those described in FAR 16 which states that the contract shall require a “stated minimum” and a “stated maximum” of supplies or service to be ordered and furnished during the “fixed period” established by the contract. The base year and each option year of an IDQ contract are separate “fixed periods” under the IDIQ contract and each are to contain a separate minimum and maximum quantity. If the “fixed period” as used in FAR 16 is viewed as the period covered by the base year plus the entire time period covered by the un-exercised option periods, under that interpretation the required minimum quantity could be ordered, per FAR 16, at any time during this hypothetial unitary “fixed period”, to include the last option year (i.e., the last year of the purported unitary “fixed period”) as nothing in FAR 16, so interpreted, would require any orders to be placed in the base year of the contract because FAR 16 only requires orders for the minimum be placed “during” the “fixed period”. Such a view of the required “fixed period” is absurd, as such a result could never have been intended under FAR 16 as it would clearly render the Government’s promise illusory as there is no obligation to exercise the option years after the base year expires. Therefore, since the term “fixed period” does not include the time periods covered by the option years, a contract cannot provide for a single stated maximum for all the contract ordering periods which are separate fixed periods. Hence, option years cannot contain only a stated maximum. Every SF 30 that is used to exercise an option year states “Except as provided herein, all terms and conditions of the document referenced in item 9A(Sol.) or 10A(contracts), as heretofore changed, remains unchanged and in full force and effect.” Many contracting activities have written their contracts to preclude SF 30 from carrying the mandatory minimum into option years by stating that the mandatory minimum shall only apply to the base year. It is ironic that these contracting activities, nevertheless, feel compelled to ignore the application of SF 30 with respect to the minimum but nevertheless apply the operative effect of SF 30 only to the stated maximums to each option year, ostensibly, pursuant to the requirements of FAR 16 which obviously address the need for both a stated maximum and a stated minimum. It is clear from FAR 16 that the stated limits of the contractor’s and Government’s obligations (i.e., stated minimum and maximum) must both co-exist in the same fixed period. The exercise of these options (i.e., those containing only stated maximums) involve the Government in “contract obligations” that are “neither fish nor fowl” and therefore are not supported by an authorized contract type as required by FAR 16 and therefore are prohibited by FAR Part 16.102 ( "Contract types not described in this regulation shall not be used, except as a deviation under Subpart 1.4."
  5. Retreadfed, eriand2, are you saying that when an option is exercised a new contract is formed? The option contracts allow for additional "fixed periods" to be created, if exercised, within which orders may be placed. Those option contracts are a part of the IDIQ contract inasmuch as they are CLINs under the IDIQ contract initially awarded and rely upon the base period's consideration for their creation but the underlying obligations that arise upon exercise cannot rely upon the base period's consideration -- they need their own consideration i.e. the $100,000 for Blackacre.
  6. Vern....sorry for being a smart alec...couldn't control myself. While my position is clearly open to reasonable debate, it is a fact the court failed to "join the issue" in its decision and therefore the case law created by the court in Varilease cannot be said to have ruled on the issue I raise.
  7. Whynot, The first three lines of your 4th paragraph up to the word "expires" captures my point. However, I am not suggesting that "exercising an option" is what creates the option contract as you suggest. Rather, the option contract is already created at the moment of the base period's award. The minimum for the base period serves as consideration for both 1) the obligation to honor DOs up to the stated max of the base period and 2) the obligation to keep the offers open for the option periods (option contracts). So, in terms of explaining my position, you're not exactly on point when you say these option contracts need "their own consideration separate from the prior period's consideration". Rather, it's the underlying obligations of each option contract that need their own consideration separate from the prior period's consideration. The option contracts allow for additional "fixed periods" to be created, if exercised, within which orders may be placed. Those option contracts are a part of the IDIQ contract inasmuch as they are CLINs under the IDIQ contract initially awarded and rely upon the base period's consideration for their creation but the underlying obligations that arise upon exercise cannot rely upon the base period's consideration -- they need their own consideration i.e. the $100,000 for Blackacre.
  8. Vern...and how long was there no outcry or commentary about those who thought the earth was flat?
  9. I acknowledge no such thing. Formation of the contract obligation underlying the OPTION CONTRACT (i.e., the option CLIN which merely keeps the offer open) may not rely upon something that has already been given in support of the base year obligation to honor delivery orders up to the base year‘s stated maximum. Formation of the new contract obligation underlying the OPTION CONTRACT cannot look back into time and “reuse” that which already been given to support of the contractor’s base year obligation to honor delivery orders up to the base year‘s stated maximum. I offer my above “Black Acre” example again: if you own “Black Acre” and I give you $1000 for the right to buy “Black Acre” for $100,000 for a 12 month period, this creates an option contract with the $1000 serving as consideration for the option contract itself (merely keeps the offer open) and the $100,000 serving as the consideration for the actual contract obligation for the purchase of “Black Acre” when it arises. When the option contract is exercised the $100,000 must be advanced. Likewise a minimum must be advanced to serve as consideration for the purchase of a new obligation to honor delivery orders up t a stated maximum for the new “fixed period” required by FAR Part 16. While it is true, as stated in my prior post, that the first year's minimum is not past consideration relative to the formation of the option contract obligation (i.e., the option CLIN) which option contract is formed contemporaneously with the initial award of the base year (i.e., the base year’s min serves a double duty as both consideration for the base year and the option contract), the first year's minimum is past consideration (i.e., “no consideration” and therefore not good consideration) relative to the prospective contract obligation underlying the OPTION CONTRACT and may not be used to form that new contract obligation upon the option contract's exercise.
  10. Don Acquisition While it is true that the first year's minimum is not past consideration in application to the formation of the option contract obligation (i.e., the option CLIN) which arises in the base year and forces the contractor to keep its offer open, the exercise of that option (i.e., acceptance of the offer) requires consideration to form the new underlying contract obligation where none previously existed and may not rely upon something that has already been given or some act that has already been performed in support of the base year’s obligation to honor delivery orders up to the base year ‘s stated maximum. There is a difference between the option contract itself and the the underlying contract obligation to honor deliver orders up to a stated maximum.
  11. Yes. . . sort of. . .the funds obligated in the first year of the contract serve only two purposes: 1) consideration for the base year ordering period and 2) consideration for the option contract created by awarding the option CLIN (i.e., contract obligation establishing only the irrevocable offer). If the irrevocable offer is accepted, the funds obligated in the first year are not consideration to perform the underlying contract obligation (i.e., obligation to honor orders to the stated maximum). So even though I referred to a "second contract" in the above post, it is more like this: #1 = basic IDIQ contract; #2 = option contract obligation and #3 = underlying contract obligation created upon exercise of #2 provided all the elements of a contract are present at the time of exercise. All three (#1, #2 and #3) are in the context of one IDIQ contract but only #1 and #2 are extant contract obligations on initial award. As to #3, all the elements of a contract must be present for the underlying contract obligation to arise and the funds obligated in the first year are past consideration for this new contract obligation intended to arise within the context of the overall IDIQ contract. Both the option contract and the underlying contract must be supported by consideration. While the Fifth Circuit, Court of Appeals addresses state law in its PLANTATION KEY DEVELOPERS decision, it is nevertheless addresses my understanding of the common law of contracts to which, in my opinion, federal government contracts are subject: Colonial fails to recognize its agreement for what it is, an option contract. An option contract has two elements: 1) the underlying contract which is not binding until accepted; and 2) the agreement to hold open to the optionee the opportunity to accept. Frissell v. Nichols, 94 Fla. 403, 114 So. 431, 433 (1927). Both the option and the underlying contract must be supported by consideration . Donahue v. Davis, 68 So.2d 163 (Fla.1953); Koplin v. Bennett, 155 So.2d 568 (Fla. 1st DCA 1963). In this case, the consideration for the option to bind Colonial to a six month extension was the $60,000 which Plantation had already paid. Plantation was obligated to pay the additional $30,000 only if it chose To exercise its option and To bind Colonial to the quoted rates for the extended period. PLANTATION KEY DEVELOPERS, INC v. COLONIAL MORTGAGE COMPANY OF INDIANA, INC , 589 F.2d 164, February, 6 1979. We may differ on our understanding of this matter but at least we have clarified the issue at hand..... Best Regards, Eriand
  12. "An option to purchase consists of two elements: (1) the offer to sell, which does not become a contract until accepted; and (2) the completed contract to leave the offer open for a specified time." 77 Am. Jur. 2d Vendor and Purchaser § 28, American Jurisprudence, Second Edition, May 2012, Vendor and Purchaser, Romualdo P. Eclavea, J.D., Rachel M. Kane, M.A., J.D., Jeffrey J. Shampo, J.D., Eric C. Surette, J.D., and Mary Babb Morris, J.D., of the staff of the National Legal Research Group, Inc. An option contract is a continuing offer that's supported by consideration which must be kept open. The obligation is unilateral and binding only on the one making the promise. The recipient of the promise has the legal power to consummate a second contract, since an option contract "consists of two elements: (1) the offer to sell, which does not become a contract until accepted; and (2) the completed contract to leave the offer open for a specified time." Both the option and the underlying contract must be supported by consideration. An IDIQ optional ordering period CLIN is an option contract. That option contract gives the Government the right to enter into a contract obligation where none ever existed.When one accepts that offer by exercising the option, consideration must coincide in time with acceptance of the irrevocable offer to honor delivery orders up to stated maximum. However, the guaranteed minimum from the base period is past consideration. Current and good consideration is needed to provide the requisite consideration for acceptance of the irrevocable offer to form a contract obligation to honor delivery orders up to stated maximum. If an IDIQ contract option period does not have a minimum it would be like the above "Black Acre" example I gave not having the $100,000 for the actual purchase of Black Acre i.e., the second contract. I can't simplify any more for you. No, I am not fixated on the Woll case. It was just low hanging fruit. There are three (3) other Court of Claims Government contract cases with the same holding. General Bronze Corp. v. U. S. 168 Ct.Cl. 176, 338 F.2d 117, November 13, 1964. "In the succinct words of Professor Williston: The doctrine that past consideration is no consideration represents the overwhelming weight of authority and is almost universally followed. This has been the law since early times. 1 Williston on Contracts Sec. 142 (3d ed. 1957)." Houdaille Industries, Inc. v. U.S., 138 Ct.Cl. 301, 151 F.Supp. 298, May 08, 1957 "It stated only that the work was already completed and only referred to that prior acceptance. Moreover, the work under the contract had been accepted almost four years earlier. Therefore, the recital relied upon by defendant can refer only to past consideration, if consideration at all, which the law of contracts treats as no consideration." Sheppard v. U.S., Fed.Cl., 2011 WL 6370078 Fed.Cl., December 20, 2011. "The court notes that Mr. Sheppard's incarceration cannot serve as the consideration exchanged for the government's purported obligations under the asserted contract. See id. (The general rule almost universally followed is that past consideration is no consideration)." My post is a teaching point, not an attempt to persuade.
  13. Try this version: My review is limited to whether good and valid consideration is present to create a “contractual obligation” upon exercise of the option contract (i.e., option CLIN). The contractual obligation of which I speak is the obligation to honor unilaterally issued delivery orders up to a stated maximum.The issue I’ve framed is not, as you suggest, whether this “contractual obligation” is a new or separate contract. I am not concerned about whether this “contractual obligation" arises in the context of a new or separate contract.I do nevertheless agree;that there is no question but that an option contract is a part of an IDIQ contract (base and contract option ordering periods) and is therefore not a new and separate contract – it’s part of the awarded IDIQ contract. That option contract came into being at the time the IDIQ contract’s base period was awarded and its consideration is found in the consideration for the base period. Obviously no new consideration is required for the option contract and, as you state, there is no issue of reliance upon past consideration in creating that option contract. However, one should not confuse the consideration required for the option contract with the consideration needed for thecontractual obligation; intended to be created upon exercise of that option contract. The legal consideration for the former (i.e., the option contract") is embedded in the in the base year consideration which serves as double duty (i.e., consideration for the base year and for the option contract). However, the exercise of that option contract and its consideration is a different matter. In order for the “contractual obligation” to come into existence upon exercise of the option contract (option CLIN) that “contractual obligation” must be supported by good and valid consideration. At the time of initial award of any IDIQ contract containing option contract CLINs, the space/time continuum occupied by a future ordering period contains no contractual obligation to honor unilaterally issued delivery orders up to a stated maximum. That obligation arises, if at all, only at the time the option contract is exercised. For example, if you own “Black Acre” and I give you $1000 for the right to buy “Black Acre” for $100,000 for a 12 month period, this creates an option contract with the $1000 serving as consideration for the option contract (itself) and the $100,000 serving as the consideration for the actual contract for the purchase of “Black Acre” when I exercise the option contract. Upon exercise of the option contract, the $100,000 must be current and valid consideration (not past consideration) in order to create a contract obligation to purchase and sell “Black Acre”. Likewise, the obligation to honor unilaterally issued delivery orders up to a stated maximum only arises at the time the option contract is exercised which cannot at the time of option exercise go looking in the past for its consideration. Whether viewed as the extension of a prior contract obligation or the entering into a separate contract, in either instance the “contract obligation” first arises at a time where none had ever previously existed. Therefore, it remains that the court in Varilease failed to recognize and address the use of past consideration and its adequacy to support the obligation to honor unilaterally issued delivery orders up to a stated maximum. As such, it failed to join and resolve all issues relevant to the inquiry the court undertook. In this respect, I consider Varilease to be a flawed decision. The below contract law principle cited in the Woll v. U.S decision is apposite, as it is highly pertinent and germane to the issue the Varilease court neglected to address. "As a fundamental proposition, a contract must be supported by sufficient and valuable consideration ... [and] past consideration is no consideration." United States Court of Federal Claims, Nick WOLL, Plaintiff, v. The UNITED STATES, Defendant, No. 98-564C. Dec. 8, 1999.
  14. <p style="margin-left: 40px"> </p> <p style="margin-left: 40px"> </p> <p> </p> <p> </p> <p>My review is limited to whether good and valid consideration is present to create a “contractual obligation” upon exercise of the option contract (i.e., option CLIN). The "contractual obligation" of which I speak is the obligation to honor unilaterally issued delivery orders up to a stated maximum. The issue I’ve framed is not, as you suggest, whether this “contractual obligation” is a new or separate contract.</p> <p> </p> <p>I am not concerned about whether this “contractual obligation" arises in the context of a "new or separate contract." I do nevertheless agree that there is no question but that an option contract is a part of an IDIQ contract (base and contract option ordering periods) and is therefore not a new and separate contract – it’s part of the awarded IDIQ contract. That option contract came into being at the time the IDIQ contract’s base period was awarded and its consideration is found in the consideration for the base period. Obviously no new consideration is required for the option contract and, as you state, there is no issue of reliance upon past consideration in creating that option contract. </p> <p> </p> <p>However, one should not confuse the consideration required for the option contract with the consideration needed for the "contractual obligation" intended to be created upon exercise of that option contract. The legal consideration for the former (i.e., the option contract") is embedded in the in the base year's consideration which serves as double duty (i.e., consideration for the base year and for the option contract). However, the exercise of that option contract and its consideration is a different matter. </p> <p> </p> <p>In order for the “contractual obligation” to come into existence upon exercise of the option contract (option CLIN) that “contractual obligation” must be supported by good and valid consideration. At the time of initial award of any IDIQ contract containing option contract CLINs, the space/time continuum occupied by a future ordering period contains no contractual obligation to honor unilaterally issued delivery orders up to a stated maximum. That obligation arises, if at all, only at the time the option contract is exercised.</p> <p> </p> <p>For example, if you own “Black Acre” and I give you $1000 for the right to buy “Black Acre” for $100,000 for a 12 month period, this creates an option contract with the $1000 serving as consideration for the option contract (itself) and the $100,000 serving as the consideration for the actual contract for the purchase of “Black Acre” when I exercise the option contract. Upon exercise of the option contract, the $100,000 must be current and valid consideration (not past consideration) in order to create a contract obligation to purchase and sell “Black Acre”. </p> <p> </p> <p>Likewise, the obligation to honor unilaterally issued delivery orders up to a stated maximum only arises at the time the option contract is exercised which cannot at the time of option exercise "go looking" in the past for its consideration. Whether viewed as the extension of a prior contract obligation or the entering into a separate contract, in either instance the “contract obligation” first arises at a time where none had ever previously existed.</p> <p> </p> <p>Therefore, it remains that the court in <em>Varilease </em>failed to recognize and address the use of past consideration and its adequacy to support the obligation to honor unilaterally issued delivery orders up to a stated maximum. As such, it failed to join and resolve all issues relevant to the inquiry the court undertook. In this respect, I consider <em>Varilease </em>to be a flawed decision. <em> </em>The below contract law principle cited in the <u>Woll v. U.S</u> decision is apposite, as it is highly pertinent and germane to the issue the Varilease court neglected to address.</p> <p> </p> <p>"<em>As a fundamental proposition, "a contract must be supported by sufficient and valuable consideration ... [and] past consideration is no consideration." </em>United States Court of Federal Claims, <u>Nick WOLL, Plaintiff, v. The UNITED STATES, Defendant.</u> No. 98-564C. Dec. 8, 1999.</p> <ol> </ol>
  15. VARILEASE is an interesting case, but it has one major flaw i.e., the court in VARILEASE failed to take into account that both at common law and under the Federal case law, a contract obligation can’t be supported by past consideration as recognized by the Court of Federal Claims: "As a fundamental proposition, "a contract must be supported by sufficient and valuable consideration ... [and] past consideration is no consideration." United States Court of Federal Claims, Nick WOLL, Plaintiff, v. The UNITED STATES, Defendant. No. 98-564C. Dec. 8, 1999. I fully understand my analysis of the Varilease decision is not widely embraced, if at all, by the DoD legal community. Nevertheless, the court's decision failed to recognize and address the established black letter law in federal government contracting, that is, "past consideration is not good consideration." In that respect, an academic and scholarly review of the court's decision, in my opinion, must conclude the decision is flawed due to its failure to join and resolve all issues relevant to the inquiry the court undertook. In this regard, at the time of initial award of any IDIQ contract with optional ordering periods, the space occupied by a future optional ordering period contains no contractual obligation to acquire any product or service. That contractual obligation only arises at the time the optional ordering period is exercised which purchase of supplies or service cannot "go looking" in the past for its consideration in the base year. The consideration for the supply/service purchase obligation intended to arise at option exercise must be concurrent with the creation of this new contract obligation.
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