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I've dug around a little bit and can't find an answer to my question. It seems to me that the FAR option clauses only apply to Services and/or Supplies, but are a poor fit for Construction Projects. Scenario: Construction is Maintenance/Repair/Renovation Work. The intent is to renovate a building. The base line item may include renovating the buildings HVAC and Electrical, but then we might include Option 1 to provide Video Surveillance System, Option 2 combine room 130A and 130B to a single room. Option 3 provide new carpet/flooring.

The only clause that remotely fits is 52.217-7 - Option for Increased Quantity - Separately Priced Line Item. However the clause itself states "...delivery of added items shall continue at the same rate of like items that are called for under the contract, unless the parties otherwise agree." The clause lends itself to stating that we have a base line item for 100 widgets and an option item for 50 additional widgets. However in construction we have renovation of building HVAC versus option of providing new flooring. In my opinion this is not a "like item". Additionally, the prescription for that clause at FAR 17.208(e) states "when the inclusion of an option is appropriate and the option quantity is identified as a separately priced line item HAVING THE SAME NOMENCLATURE as a corresponding basic contract line item." So you would need a base line item for HVAC and an option line item for additional HVAC.

Another scenario might be with New Construction, Design and Build an administrative building with the overall purpose of housing government employees, however an option line items for a gym and locker room might be included, but might not be awarded if there isn't enough money for it. I have same problems with the Option clause here.

Is my reasoning incorrect? or is there a more appropriate way/acquisition strategy to include Options on Construction Contracts?

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hutch_05,

FAR 17.200 states:

This subpart prescribes policies and procedures for the use of option solicitation provisions and contract clauses. Except as provided in agency regulations, this subpart does not apply to contracts for (a) services involving the construction, alteration, or repair (including dredging, excavating, and painting) of buildings, bridges, roads, or other kinds of real property; (B) architect-engineer services; and ( c ) research and development services. However, it does not preclude the use of options in those contracts.

You just made a very basic, yet common, mistake in reading the FAR--determining the applicability of rules. If information in the FAR does not apply to all acquisitions, the FAR will typically specify the applicability of the information in a given part or subpart. A statement of applicability may be found in the ?Scope? section of a part or subpart, a separate ?Applicability? subpart or section, or somewhere else within the part or subpart. The statement of applicability can be stated in terms of the dollar value of the acquisition, the type of contract, the location of performance, the purpose of the contract (supplies, services, or construction), etc. The statement of applicability may state that the information in the part applies to a distinct set of acquisitions, does not apply to a distinct set of acquisitions, or both. Below are some examples of statements of applicability.

45.000 Scope of part.

This part prescribes policies and procedures for providing Government property to contractors, contractors? management and use of Government property, and reporting, redistributing, and disposing of contractor inventory. It does not apply to property under any statutory leasing authority, (except as to non-Government use of property under 45.301(f)); to property to which the Government has acquired a lien or title solely because of partial, advance, progress, or performance-based payments; to disposal of real property; or to software and intellectual property.

***************************

44.000 Scope of part.

(a) This part prescribes policies and procedures for consent to subcontracts or advance notification of subcontracts, and for review, evaluation, and approval of contractors? purchasing systems.

(B)The consent and advance notification requirements of Subpart 44.2 are not applicable to prime contracts for commercial items acquired pursuant to Part 12.

****************************

17.500 Scope of subpart.

(a) This subpart prescribes policies and procedures applicable to all interagency acquisitions under any authority, except as provided for in paragraph (B) of this section.

(B)This subpart does not apply to orders of $500,000 or less issued against Federal Supply Schedules.

In addition to express statements of applicability, the FAR may also contain sections entitled ?Exceptions?, ?Exclusions?, ?Exemptions?, etc., that further narrow the applicability of stated policies and procedures. However, this information may not always be contained in a separate section?it could be contained in the same section that a policy or procedure is stated, but in a different paragraph. Below are some examples of these types of statements.

25.103 Exceptions.

When one of the following exceptions applies, the contracting officer may acquire a foreign end product without regard to the restrictions of the Buy American Act?

**********************

47.304-5 Exceptions.

(a) Unusual conditions or circumstances may require the use of terms other than f.o.b. origin or f.o.b. destination. Such conditions or circumstances include, but are not limited to??

**********************

39.204 Exceptions.

The requirements in 39.203 do not apply to EIT that??

Whenever you find a policy or procedure in the FAR, do not assume that it applies to your acquisition. You must always ask yourself 1) ?What does this policy or procedure apply to?? and 2) ?what are the exceptions to the rule?? Check the applicability of the section, then the subpart, then the part.

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I've dug around a little bit and can't find an answer to my question.

Is my reasoning incorrect? or is there a more appropriate way/acquisition strategy to include Options on Construction Contracts?

Options have been included in billions of dollars of construction projects for DoD for many years.

The Army Corps of Engineers uses options frequently on construction contracts, including fully designed and design-build contracts. We use them on Army and Air Force projects, civil works projects, construction for others. I'm pretty sure that the Navy uses them and I know that the Air Force must use them, too. The Air Force advocates extensive use of options on our projects with them. I imagine that we also use them on the Navy projects that the Corps is the agent for the Navy.

We typically include one of the Evaluation of Options Clauses in FAR 52.217 to describe how the government will evaluate the option prices.

We include CLINs for options listed in order of priority to the government. We describe the options in the Line Items, pretty much as you described.

Options are often used for government preferences for features better than the minimum required in the base contract statement of work, for something exceeding the minimum specified quality.

Options are also used when we aren't sure that we can obtain the full project scope within the budget. However, they aren't supposed to be used for "phishing" purposes - just to see what something may cost or just for nice to have desired features, unless there is a reasonable possibility that the government can afford them. Due to construction bidding climate and chronically under budgeted projects during the late 90's and early 2000's, the Army dictated that scope of the base bid be limited to 85% of the Programmed scope, with the remaining 15% designed and included as options for most Army MILCON projects.

We usually state a time period in which the government can unilaterally award the options, after award. The client may try to find more money after award to subsequently award as many options as possible. The only time that this wouldn't occur is in the rare instance where only options awarded with the contract award are being considered, such as really urgent, short project timeframes.

I will say this - the use of options is often abused and often confuses industry as to the government's true acquisition objectives...high quality? lowest prices? Most quantity for the dollar? Etc.

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Thanks for the quick reply, but does that mean that the use of Option Line Items for Construction Contracting is not even an alternative? FAR 17.200 continues to say "however it does not Preclude the use of Options in those contracts" I realize that is under FAR 17.200© but my interpretation is that (a)(B) & © are one continuous statement in this section as opposed to independent. Therefore, if I justify the use of options, I should follow the guidelines of FAR 17.2 correct? My issue is how to go about using Options, or another method, for Construction Contracting. Furthermore, this raises the question, if FAR 17.2 does not apply to construction contracts, but does not preclude the use of them, then I can use an option line item without a clause or without justifying the use of options? Thoughts?

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Options have been included in billions of dollars of construction projects for DoD for many years.

The Army Corps of Engineers uses options frequently on construction contracts, including fully designed and design-build contracts. We use them on Army and Air Force projects, civil works projects, construction for others. I'm pretty sure that the Navy uses them and I know that the Air Force must use them, too. The Air Force advocates extensive use of options on our projects with them. I imagine that we also use them on the Navy projects that the Corps is the agent for the Navy.

We typically include one of the Evaluation of Options Clauses in FAR 52.217 to describe how the government will evaluate the option prices.

We include CLINs for options listed in order of priority to the government. We describe the options in the Line Items, pretty much as you described.

Options are often used for government preferences for features better than the minimum required in the base contract statement of work, for something exceeding the minimum specified quality.

Options are also used when we aren't sure that we can obtain the full project scope within the budget. However, they aren't supposed to be used for "phishing" purposes - just to see what something may cost or just for nice to have desired features, unless there is a reasonable possibility that the government can afford them. Due to construction bidding climate and chronically under budgeted projects during the late 90's and early 2000's, the Army dictated that scope of the base bid be limited to 85% of the Programmed scope, with the remaining 15% designed and included as options for most Army MILCON projects.

We usually state a time period in which the government can unilaterally award the options, after award. The client may try to find more money after award to subsequently award as many options as possible. The only time that this wouldn't occur is in the rare instance where only options awarded with the contract award are being considered, such as really urgent, short project timeframes.

I will say this - the use of options is often abused and often confuses industry as to the government's true acquisition objectives...high quality? lowest prices? Most quantity for the dollar? Etc.

Thanks Joel, didn't see your reply when I posted, but now my question is, FAR 17.2 does not apply to construction, but does not PRECLUDE the use of options in construction. So one might use options for construction but not follow FAR 17 or use the applicable clauses, which is why simple narrative in the RFP stating how long the option is availabe to be exercised and how it will be evaluated is all that is required in a construction contract???

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Guest Vern Edwards
My issue is how to go about using Options, or another method, for Construction Contracting.

It's easy -- you write a CLIN for each option. You write an option clause providing all the stipulations with respect to the government's right to exercise the options. (You have to make up a clause, because the standard FAR option clauses were not written for construction work). Assuming that you are conducting a competition under FAR Part 15, you ask the offerors to propose a price for each option CLIN. You evaluate the option prices when conducting the competition. You make an award.

Voila! You're done. Piece of cake. Exercise the option(s) if you want to in accordance with the terms of the option clause.

Don't include options unless you are reasonably sure you will exercise them.

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...ut now my question is, FAR 17.2 does not apply to construction, but does not PRECLUDE the use of options in construction. So one might use options for construction but not follow FAR 17 or use the applicable clauses, which is why simple narrative in the RFP stating how long the option is availabe to be exercised and how it will be evaluated is all that is required in a construction contract???

Hutch, I'd check to see what your organization's policies are concerning the use of options. We generally apply the principles of FAR 17.2 to the extent practicable. We use the evaluation of options clauses with an additional contract condition that describes the amount of time if any in which the government may exercise the option(s).

You wondered above if options are always used. With today's economy, they are probably used less often than in the past, although I personally think that some people don't know how not to use them. Like I said, they can be abused.

Edit: I pretty well agree with Vern's above post, except that we do generally use an evaluation of options clause. Some Districts might tailor them rather than include a standard clause.

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Guest Vern Edwards
So one might use options for construction but not follow FAR 17 or use the applicable clauses, which is why simple narrative in the RFP stating how long the option is availabe to be exercised and how it will be evaluated is all that is required in a construction contract???

You don't have to follow FAR Part 17, but you will have to evaluate the option if you want to exercise it without conducting another competition. The GAO will insist upon that.

If you read the "applicable" (i.e., standard) contract option clauses you will see that it makes no sense to use any of them.

You don't use a "simple narrative," whatever that means. You write a contract clause: "The Government may exercise any or all of the options listed in the contract schedule by providing written notice to the contractor no later than [insert date]."

Since the job is construction you have to include stipulations about bonding, issuance of a notice to proceed, time within which work must commence after receipt of the NTP, time for completion, liquidated damages, etc. Since Joel says he has used options he ought to be able to provide you with sample clauses.

This is not hard.

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(Background Info: I don't work with IFB's. My comments below relate to competitive RFP's and task order competitions on Multiple Award Indefinite Delivery/Indefinite Quantity Contracts (MATOC's). My contract writing and bidding experience back in the 70's used bid items for "extra quantities" on unit-priced work that were fairly straight forward and which were systematically calculated to determine who had the lowest bid prices.)

I'll agree that the standard evaluation of options provisions don't perfectly fit construction. Unless there is some organizational policy requiring them, you don't need to.

The Corps doesn't use the Uniform Contract Format for construction contracting. We have 42 Districts and several centers who contract for construction. We primarily use the Construction Specifications Institute's (CSI) Masterformat. I can't vouch for every contracting office, however.

I've seen 52.217-4 -- Evaluation of Options Exercised at Time of Contract Award and 52.217-5 -- Evaluation of Options used in solicitations and task order competitions. That is what our contracting officers have been teaching in one of the Corps' classes that I'm involved with.

For task order competitions or for source selections, in lieu of using a provision, the evaluation of options language might alternatively be described in an Division 00 section containing the Evaluation Criteria and Basis of Award (a section comparable to the UCF's Section M). You must state how price will be evaluated in the solicitation or request for task order proposals. For trade-off or for the Lowest Priced Technically Acceptable Offer, there must be a way to determine the relative prices of the competing firms. Where yo do it depends upon your contract format.

For projects where there is a possibility of obtaining additional funding to award options not awarded with the contract, I have seen the 52.217-5 provision used or similar language in the Div 00 price evaluation criteria. The provision actually allows some latitude to consider other than the total of the base plus all options, if it isn't likely that enough funds will be made available by the using agency to award all options.

However, the contracting officers that I have dealt with generally don't want to stray from that formula for concern that it is less complicated and also that evaluating less than all options could be seen as manipulating the price evaluation to favor the selected firm. Being adverse to complicating the evaluation or to use methods prone to be protested, they are loath to stray away from formula evaluation schemes. They make the final decision, not me.

I certainly think that one could simply say that option prices will be evaluated, based upon the amount of funding expected to be available within the time frame reserved to award them or that the government will evaluate the most bang for the buck, etc. This is more appropriate when price is equally important as the non-price factors or when price is significantly more important than the non-price factors I have also seen wording when using the trade-off method to the effect that the government might skip options that it cannot afford and select others that are within the budget, otherwise still using the order of importance. When price is significantly less important than non-price, industry has told us that the extensive use of options seems contradictory and confusing to them.

Regardless, with the trade-off method, the government must justify in the comparison between offerors what additional benefits a higher comparative priced offer provides than a lower priced offer.

We state in the notes to the CLIN schedule that options are listed in their relative order of importance to the government.

When the government reserves the right to award options after initial contract award, we state in a Division 00 Section "Additional Contract Requirements" (Special Contract Requirements) how long after the award or after Notice to Proceed to award options. "The Government reserves the Right to exercise any or all of the options listed in the Contract Line Item Schedule no later than XX calendar days after (receipt of the Notice to Proceed) (contract award date). Vern's wording is fine too, assuming that one can reasonably predict a option award cut-off date during the task order competition or source selection.

If your organization has any policy on construction contracting options, I highly recommend that you check them out.

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Thanks Joel, I have just started a job with the COE and I'm a little new to construction contracting...So when I mentioned "Simple Narrative" I was referring to adding a paragraph for the Option Evaluation and Time to exercise after award to Either Div 00 22 11 (Eval Criteria) or 00 73 00 (Special Contract Requirements) which is essentially, yes a contract clause.

My next point is though, do you agree that we can use Options, but do not need a Justification for Inclusion of an Option or a D&F to exercise an option when executing construction contracts.

FAR 17.200 says the subpart does not apply to construction. Therefore 17.203 (use of options) 17.205 (documentation) and 17.207 (Exercise of Options) does not apply...

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Hutch_05

My next point is though, do you agree that we can use Options, but do not need a Justification for Inclusion of an Option or a D&F to exercise an option when executing construction contracts.

FAR 17.200 says the subpart does not apply to construction. Therefore 17.203 (use of options) 17.205 (documentation) and 17.207 (Exercise of Options) does not apply...

These items may ?not apply? to construction in accordance with FAR 17 but documentation as to why you are proceeding with a contracting method is always smart. If you provide this documentation during the process ? for the inclusion while you are developing your solicitation and at the time of option issuance when you exercise, for example ? you are at the very least supporting the rationale for what you are doing and more importantly, you are providing the words for the next person, be they another contract specialist researching a current requirement or a contract management reviewer performing a procurement management review, telling them what it was you actually did and why. Making it a part of the contract record in a timely manner allows you to remember why it is you did what you did...

Using the FAR as a guide (in situations where it says "does not apply" or where it is perhaps silent on an issue) together with common (ethical) business practice usually produces sound contracting results.

Kathleen

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Hutch, I will check with CT concerning your question in the morning. If you want me to email you, I'm in the USACE Global directory. Drop me a line and I will let you know. I have to check the acquisition letters and my. COE, KO friends. I really do have some B)

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My next point is though, do you agree that we can use Options, but do not need a Justification for Inclusion of an Option or a D&F to exercise an option when executing construction contracts.

FAR 17.200 says the subpart does not apply to construction. Therefore 17.203 (use of options) 17.205 (documentation) and 17.207 (Exercise of Options) does not apply...

hutch, no I dont agree with you that we dont need justification to include options in contracts or to exercise certain options.

As this is agency specific policy, there is no further need to tie up WIFCON. It would be cleaner if you just contact me through email and I can relay what I find to you or provide you some contacts.

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Guest Vern Edwards
As this is agency specific policy, there is no further need to tie up WIFCON.

Ah! Joel has heard a "breech bolt snick" and like a good fire team leader has urged the target to move to defilade. Well done.

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