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52.217-8 - Is an actual 6 month option line really required to be priced at time of award?


styrene

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Recently, the topic of utilizing / exercising 52.217-8 came up in my office.

I reviewed WIFCON for discussions and I have read the GAO decision for MCS, https://www.gao.gov/assets/b-401472.pdf, and see that the basis for it being sustained was that the agency failed to evaluate the 6-month option as part of the initial competition.

FAR 17.207(f) requires that a contracting officer, before exercising an option, make a written determination that the exercise of the option is in accordance with the terms of the option and the requirements of FAR sect. 17.207 and FAR Part 6, and further specifies that in order to meet the requirements of FAR Part 6 regarding 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.

FAR 52.217-8 states:  The Government may require continued performance of any services within the limits and at the rates specified in the contract. These rates may be adjusted only as a result of revisions to prevailing labor rates provided by the Secretary of Labor. The option provision may be exercised more than once, but the total extension of performance hereunder shall not exceed 6 months.

I believe that 52.217-8 is intended to be used when a new requirement for the services has not been awarded and that the current services need to be continued.  This is something that is not necessarily anticipated to be needed at time of initial contract award and if done IAW with FAR requirements allows for a relatively painless extension when needed.  To that end, I believe that the specific establishment and pricing of a -8 6-month line item as part of the initial contract award is not necessary if:

1.       The initial solicitation includes the -8 clause and states that the 6-month option will be evaluated by taking one-half the cost of the final year of performance and including that amount in the total evaluated price.

2.      The assumption I use, and I know that there are multiple interpretations, is when -8 states “within the limits and at the rates specified in the contract” it means the rates that are in effect at the time of exercising -8 clause.  At that point, the monthly cost could be reasonably determined by dividing the total cost for the final year by 12.  The -8 allows for increases the rates only if there a DOL wage determination that directly impacts the rates for the 6 months, so that could be reasonably determinable from the terms of the basic contract.

I read on WIFCON that the “FAR Councils had opened FAR Case 2010-003 in order to revise the requirements of FAR Subpart 17.2, “Options,” as they apply to extensions of services contracts solely for the purpose of bridging to prevent a break in service. The team charged with writing a proposed rule is under its second deadline extension. A number of solutions are possible, and we presume that sooner or later the Councils will settle on one or more of them.And that, “ a 2012 post in this Forum, a member reported that FAR Case 2010-003 was closed without action because the DAR Council and the CAA Council could not reach an agreement.”  This informs me that there are multiple ways to address the usage of -8.

Considering all of the above, is my interpretation and method of using 52.217-8 contradicting the FAR or the GAO decision?  I appreciate the feedback.  Thanks.

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The MCS case allows for the exercise of an unevaluated option:  "In such circumstances, the agency must justify the use of noncompetitive procurement procedures in accordance with FAR Subpart 6.3 before exercising the unevaluated option."  A J&A or similar document based on appropriate facts could have made a difference in the case.

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13 minutes ago, ji20874 said:

The MCS case allows for the exercise of an unevaluated option:  "In such circumstances, the agency must justify the use of noncompetitive procurement procedures in accordance with FAR Subpart 6.3 before exercising the unevaluated option."  A J&A or similar document based on appropriate facts could have made a difference in the case.

Yes.  A J&A would have avoided their particular issue.  However, the protest was upheld because the Government did not evaluate this option at the time of competition which created the "new scope". If they had, there would not be a case. The decision appears to be based on the Government not meeting the FAR requirements for exercising an option.

From the MCS  case:  The option to extend the contract here under FAR clause 52.217-8 was not eva as part of the initial competition, so that the exercise of this option amounts to a contract extension beyond the scope of the contract, and therefore effectively constitutes a new procurement. Laidlaw Envtl. Servs. (GS), Inc.; International Tech. Corp.--Claim for Costs, B-249452, B-250377.2, Nov. 23, 1992, 92-2 CPD ¶ 366 at 4; see Techno-Scis., Inc., B-257686, B-257686.2, Oct. 31, 1994, 94-2 CPD ¶ 164 at 8 n.3. Thus, the agency could not have met the FAR Part 6 standards for full and open competition by simply exercising the option under FAR clause 52.217-8. F

 

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15 hours ago, Vern Edwards said:

@styreneAre you just asking if a line item is necessary, or are you asking more than that?

@Vern Edwards Hi Vern- Pretty much asking if a line item is necessary to be established at time of award in order to use -8.  I presented the logic I employ to meet the requirements of an option exercise in a -8 scenario, and wanted to test the strength of that logic in an environment that could inform me if I was missing something. Thanks.

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@styreneI have written two articles about the -8 option pricing controversy, but they are available only to Westlaw subscribers. Contact me via the Wifcon Forum email, and I will send them to you.

But to be brief, I think that the best course of action would be to establish a contract line item. Whether strictly necessary or not, it would avoid confusion and controversy.

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