Are you required to exercise the option under 52.217-9, Option to Extend prior to 10/01 to avoid the contract expiring? Then after exercising the no-cost modification, issue the funding modification on or after 10/01? I'm asking as I'm curious as to whether there is GAO case law that states the contract is in fact expired if we don't exercise prior to 10/01 (which means we can't put the funds on until at least 10/01 or after)?

On 7/14/2025 at 5:03 AM, John W said:

Are you required to exercise the option under 52.217-9, Option to Extend prior to 10/01 to avoid the contract expiring? Then after exercising the no-cost modification, issue the funding modification on or after 10/01? I'm asking as I'm curious as to whether there is GAO case law that states the contract is in fact expired if we don't exercise prior to 10/01 (which means we can't put the funds on until at least 10/01 or after)?

Depends on what the contract says. If the option is not exercised by the required date the Government loses its unilateral right to exercise. If one were to use the no cost modification idea before the contract period lapses the funding matter will be dictated by what the contract says about availability of funds with regard to the "on or after 10/01" thought. But think about this with regard to your question would the whole scenerio you suggest be in consistent with FAR 17.207 which states in part at (c) "The contracting officer may exercise options only after determining that-

(1) Funds are available;..."

Would changing the option's POP start to beyond 10/1 with a bilateral mod be out of the question? You wouldn't have the funds for it until then anyway.

3 hours ago, Contract Donkey said:

Would changing the option's POP start to beyond 10/1 with a bilateral mod be out of the question? You wouldn't have the funds for it until then anyway.

So is this what you are suggesting?

Unilateral Modification to Excercise the Option with no funding. Either before or after this modification a bilateral modification is made that changes the POP for the option to start after 10/1. If so I am still wonder how such a line of thinking would be consistent with FAR 17.207(c)(1) for the unilateral modification. Again with the caveat on what the contract might say or not say about availability of funds.

I agree with Carl that it depends what the contract says. For future reference, see FAR 17.204(d).

I'm certainly no expert, but wouldn't a letter to the contractor--issued prior to 01 October--informing the contractor that the Government intends to exercise the option on or about 01 October be sufficient, especially if the contractor agrees?

@here_2_help The Government is already required to notify the contractor of it's intent to exercise an option as outlined in 52.217-9. However, a notification in and of itself isn't binding. Clause 52.217-9 clearly states, "The preliminary notice does not commit the Government to an extension."

Is there not any multi-year funding appropriations that isn't expired that you can use to exercise the option with?

There has been no response from the OP for seven days. Maybe they read their contract.

On 7/23/2025 at 10:04 AM, C Culham said:

So is this what you are suggesting?

Unilateral Modification to Excercise the Option with no funding. Either before or after this modification a bilateral modification is made that changes the POP for the option to start after 10/1. If so I am still wonder how such a line of thinking would be consistent with FAR 17.207(c)(1) for the unilateral modification. Again with the caveat on what the contract might say or not say about availability of funds.

IMO availability of funds is a very broad term when you are talking about incremental funding in a cost-plus situation. I would argue you could exercise with $1 (probably should be more) of current funds and push the POP start to when you know more funds will be available. What would be the difference between exercising a $100M CP CLIN with $1M in funding and exercising it with $1? The POP push prevents any limitation of funds issues. If any problems arise with the funding, you can just terminate before the POP starts.

3 hours ago, Contract Donkey said:

What would be the difference between exercising a $100M CP CLIN with $1M in funding and exercising it with $1?

The contract wording of availability of funds and/or incremental funding is a not a broad term as I would suggest strongly that in cost contracts done right there is contract language that sets the side boards for each. Including what the contractor is expected to do when receiving a mod regarding availability of funds/incremental funding pursuant to the contract terms I might add. Reality of contract language versus the smoke and mirrors that CO's use to just keep the world moving forward. I advocate for doing it right as it keeps both the government and the contractor, especially the contractor, out of hot water.

I think Vern is right the OP has probably read their contract and figured out what to really do.

On 7/30/2025 at 11:36 AM, C Culham said:

...in cost contracts done right there is contract language that sets the side boards for each. Including what the contractor is expected to do when receiving a mod regarding availability of funds/incremental funding pursuant to the contract terms...

Are you suggesting the KO should be adding their own language to set those sideboards or are you saying there is something specific in the FAR that says otherwise (please cite)? I'm someone who loves operating in the grey.

19 hours ago, Contract Donkey said:

Are you suggesting the KO should be adding their own language to set those sideboards or are you saying there is something specific in the FAR that says otherwise (please cite)? I'm someone who loves operating in the grey.

Not at all. We have spun off your original comment which is this...

On 7/30/2025 at 4:51 AM, Contract Donkey said:

IMO availability of funds is a very broad term when you are talking about incremental funding in a cost-plus situation.

I would suggest that if the cost contract is done right utilizing a limitation of cost or funds clause that allows for availability of said funds or costs as prescribed by the FAR "availability of funds" is not a "very broad term". In my view a full read of FAR 32.7 and the associated clause(s) that shall be placed in a contract provides that availability of funds equals availability of obligation specific to a contract. I offer in support of my view on funding versus obligation and that contract clauses need no language added than what may be prescribed is this quote from the DoD 7000.14-R Financial Management Regulation Volume 10, Chapter 1 Page 1-7.

"4.2 Limitation of Cost or Funds 4.2.1. The basic requirements for contract funding are described in FAR 32.7, and supplemented by DFARS 232.7. No officer or employee of the Government may create or authorize an obligation in excess of the funds available, or in advance of appropriations, unless otherwise authorized by law (see Volume 14, Chapter 2). Before executing any contract, the contracting officer must obtain written assurance from the responsible fiscal authority that adequate funds are available, or expressly condition the contract upon availability of funds, in accordance with FAR 32.703-2. 4.2.2. Fully-funded, cost-type contracts may include FAR 52.232-20, or incrementally funded, cost-type contracts may include FAR 52.232-22. Under the terms stated therein, the Government’s obligation to the contractor (and the contractor’s obligation to perform) is generally limited to the funds allotted to the contract. Both FAR contract clauses require the contractor to notify the contracting officer 60 days (or as otherwise directed by the contract) prior to the date when it is expected that incurred costs will exceed 75 percent (or 85 percent if specified by the contract) of contract estimated costs for fully-funded cost contracts, or amounts allotted to the contract for incrementally-funded cost contracts."