The question is simple (I hope).  Can one exercise an option CLIN on a cost-type, service task order (TO) without any funding?  My experience has been that at least some funding needs to accompany exercise of an option CLIN on a service contract (at the TO level) but I could be wrong.

What if the CLIN is for Other Direct Costs (ODCs) only?

Does exercising the option create an obligation?

Good question!  The specific option CLIN in question is not for performance but ODCs, which are cost-reimbursable.  So, my answer is yes, an obligation would be created to the extent that travel costs (for example) incurred by the contractor must be reimbursed by the Gov't.  Of course that is as long as those travel costs are determined to be fair and reasonable by the Contracting Officer.

6 hours ago, L Wallace said:

The specific option CLIN in question is not for performance but ODCs, which are cost-reimbursable. 

I presume that "not for performance" means that the line item does not identify a separately deliverable item of service or supply. If so, then since October 1, 2019 it has been improper to establish a line item that does not identify a separately deliverable supply or service. See FAR 4.1000 and 4.1003.

If your contract was written before Oct. 1, 2019, when people often established CLINs for things such as travel costs, then it may be that the intent of the "option" was to authorize and track travel associated with a funded CLIN, in which case you should talk to your accounting and finance office. You may not need additional funds.

If your contract were being written today, and if you wanted to establish a mechanism for authorizing and tracking something like travel costs, then I think you could establish an "informational subline item" under a funded line item for that purpose. See FAR 4.1004, especially (b)(1). If you did that, and if the funded line item included funds for the travel, then you would not need funds for the informational subline item.

 

9 hours ago, L Wallace said:

Good question!  The specific option CLIN in question is not for performance but ODCs, which are cost-reimbursable.  So, my answer is yes, an obligation would be created to the extent that travel costs (for example) incurred by the contractor must be reimbursed by the Gov't.  Of course that is as long as those travel costs are determined to be fair and reasonable by the Contracting Officer.

From a contractor viewpoint, it sounds like this CLIN is being used to contractually say something like "ok, now you can travel." In any event, if I were the contractor, I would not travel unless there was already contract funding that did not specifically restrict its use for travel and this funding was not already budgeted by contractor for something else. If the current contract funding was contractually restricted for travel, I would not travel until there was funding for travel. The CLIN appears to me to be contractually too vague to be clearly understood.          

Edited February 8, 20214 yr by Neil Roberts
added "be"

14 hours ago, Neil Roberts said:

...Of course that is as long as those travel costs are determined to be fair and reasonable by the Contracting Officer.

By the way, "fair and reasonable" is not the usual FAR standard for reimbursement under a cost type contracts. The usual standard is "allowable", see FAR 52.216-7 which would normally be included in such a contract. Per FAR 31.201, "allowable" can mean reasonable and allocable. Did your contract include a "fair and reasonable" standard instead?

Just to correct the record, I did not make the above statement "...Of Course that is as long as those travel costs are determined to be fair and reasonable by the Contracting Officer." That was a misprint. The above statement was made by the poster, L. Wallace.

Edited February 9, 20214 yr by Neil Roberts
correct who actually made the statement in question.

4 hours ago, Neil Roberts said:

By the way, "fair and reasonable" is not the usual FAR standard for reimbursement under a cost type contracts. The usual standard is "allowable", see FAR 52.216-7 which would normally be included in such a contract. Per FAR 31.201, "allowable" can mean reasonable and allocable. Did your contract include a "fair and reasonable" standard instead?

No Neil, I meant allowable.  You are absolutely correct about that but that has very little to do with the question at hand.

All I'm trying to definitively determine is if funding is required (or not) for this ODC/Travel Option CLIN at the TO level in order to be exercised.  

Just for clarification, the CLIN Noun is exactly "ODC/Travel" and again, it is a cost-reimbursable CLIN (as it should be).  

Yes Vern, the contract was written prior to 2019. 

Thank you everyone for your responses!

On 2/5/2021 at 2:02 PM, L Wallace said:

The question is simple (I hope).  Can one exercise an option CLIN on a cost-type, service task order (TO) without any funding?  My experience has been that at least some funding needs to accompany exercise of an option CLIN on a service contract (at the TO level) but I could be wrong.

What if the CLIN is for Other Direct Costs (ODCs) only?

I will try to address answering your question better than I did before. The question is not that simple. It depends. If you are searching for some FAR or internal Government rules about exercising an option and funding in your stated situation, I am not an expert, but I would be surprised there were FAR guidance along those lines. I do consider myself well versed about how contractors may view contract language. A cost reimbursement contract should include a definitized estimated cost for work other than the option. The CLIN option for additional work (i.e., incurring travel expenses, as you say) should have been negotiated and definitzed with an estimated cost. If the contract included clause language such as FAR 52.232-20 (a), the contract was in essence, fully funded up to the contract estimated cost amount. When you exercise the CLIN option, you should issue a change notice that includes increasing the contract estimated cost by the additional estimated cost agreed to for the option. When you do so, funding is "automatically" increased because of the clause, but you may have to obtain some approval from the government for this increased funded amount. I don't know. If the intent of your CLIN is something other than a typical type option above, there is not enough information for me to comment.      

Edited February 10, 20214 yr by Neil Roberts
edit sentence language

OK, thanks Neil!