My office primarily issues FFP service contracts and CTOs for environmental studies, plans, designs, remediation and associated services.
Because environmental remediation frequently results in situations where greater contamination is discovered after field work begins, our CTOs have often included Options for increased quantities of services such as excavation that read "Option for addl excavation at a unit price of $54 per cubic foot up to 5000 cubic feet" or "Option for up to 3 additional project meetings at a unit price of $500 per meeting."
Our office has recently come under new management and at a recent staff meeting, the new director informed us that these types of options were not appropriate in FFP contracts since they didn't identify a specific price; and that including them effectively converted our FFP contracts into "Time and Materials" contracts.
I thought that was wrong and said so and was assigned to research it. I sent him the language below from the FAR that I believe supports these options, but he wasn't fully convinced and has asked me to find examples from outside our command. Note: Part of the reason the issue came up was that some of our contracts incorrectly had options without specific limits (i.e. "additional excavation at $54 per cubic foot" with no maximum expressed) and the option was being treated as perpetually renewable by the customer.
Do you see anything wrong these types of option as long as the terms are specified? And are these types of options commonly used for any other types of work.
(a) The contract SHALL specify limits on the purchase of additional ... services, or the overall duration of the term of the contract, including any extension.
(f) Contracts MAY express options for increased quantities of ... services in terms of --
(1) Percentage of specific line items,
(2) Increase in specific line items; or
(3) Additional numbered line items identified as the option."
"17.207 Exercise of options.
(f) Before exercising an option, the contracting officer SHALL make a written determination ... that exercise is in accordance with the terms of the option, the requirements of [§17.207], and Part 6*. To satisfy ... full and open competition, the option MUST have been evaluated as part of the initial competition and be exercisable at an amount specified in or reasonably determinable from the terms of the basic contract, e.g. --
(1) A specific dollar amount;
(2) An amount to be determined by applying provisions (or a formula) provided in the basic contract, but NOT including renegotiation of the price for work in a fixed-price type contract;"