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Does the 5-year POP Limitation Include Extensions Pursuant to 52.217-8?


MileHighAcq

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In other words, do you have to consider the potential 6-month extension pursuant to 52.217-8 part of your contract length to which the 5-year limitation at FAR 17.204(e) applies, and therefore set your contract length to no more than 4 years and 6 months if you include clause 52.217-8? Would you need a FAR deviation to do a traditional base plus 4 contract (one year base plus 4 oner-year option terms) if you include clause 52.217-8? 

I haven't had the time to search existing threads in great detail, so I apologize in advance if this subject has already been covered (seems hard to believe that it hasn't). 

The language of FAR 17.204(e) refers specifically to "option periods" ("the total of the basic and option periods shall not exceed 5 years"). I wouldn't consider an extension pursuant to 52.217-8 to be an "option period", so I would say you can have a base plus 4 contract, and exercise an extension pursuant to 52.217-8 and not violate FAR 17.204(e).

Thoughts? 

I read through Vern's excellent piece on The Five-Year Limit on Government Contracts:  Reality or Myth?, but did not see 52.217-8 extensions specifically addressed, nor has a cursory search revealed much case law on the matter.

 

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2 minutes ago, Retreadfed said:

Why not?  What else would you call it?

a contingency. we don't know if we will need it, if we will use it, for how long we will use it, or at what price. we have certain parameters for time, price, and length, but nothing specific.

it just doesn't make sense to me that the founding fathers of the FAR expected all recurring, severable service contracts to be for a period of 4 years and 6 months and then added a contingency clause in case of poor planning or other unforeseen contingencies.

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5 hours ago, Retreadfed said:

Aren't all options contingencies since the government has no obligation to exercise an option?  

No 

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On 10/20/2023 at 9:22 PM, C Culham said:

This decision speaks directly to your question.  

 

https://casetext.com/case/arko-executive-services-inc-v-us

Good cite with clear explanation and reasoning, thanks Carl.

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The case cited by C Culham answers your question. 

So, no, the five-year limitation on the base-plus-options from FAR 17.204(e) does not include the “option to extend services” (52.217-8) as stated in FAR 17.208(f). 

That said, it must be priced and evaluated as part of the original award in order to be later exercised.  As GAO has explained in U.S. Information Technologies Corporation, B-419265, November 17, 2020:

"Where an agency does not evaluate an option to extend services under FAR clause 52.217-8 as part of the award, the agency cannot later exercise such an option because it would represent, in effect, a new procurement that must satisfy the requirements for full and open competition under FAR part 6. Major Contracting Servs., Inc., B-401472, Sept. 14, 2009, 2009 Comp. Gen. Proc. Dec. P176 at 6."

As a historical note, a 2016 GAO study explained, “The clause and associated provisions were established in 1989 so as to provide a way for the government to continue to receive services on recurring requirements when the award of subsequent contracts might be delayed, such as when there is a bid protest.”  (GAO-16-262R Army’s Use of Contract Extensions.)

 

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On 10/20/2023 at 8:22 PM, C Culham said:

This decision speaks directly to your question.  

 

https://casetext.com/case/arko-executive-services-inc-v-us

On 10/24/2023 at 11:16 AM, Oyster said:

The case cited by C Culham answers your question. 

So, no, the five-year limitation on the base-plus-options from FAR 17.204(e) does not include the “option to extend services” (52.217-8) as stated in FAR 17.208(f). 

That said, it must be priced and evaluated as part of the original award in order to be later exercised.  As GAO has explained in U.S. Information Technologies Corporation, B-419265, November 17, 2020:

"Where an agency does not evaluate an option to extend services under FAR clause 52.217-8 as part of the award, the agency cannot later exercise such an option because it would represent, in effect, a new procurement that must satisfy the requirements for full and open competition under FAR part 6. Major Contracting Servs., Inc., B-401472, Sept. 14, 2009, 2009 Comp. Gen. Proc. Dec. P176 at 6."

As a historical note, a 2016 GAO study explained, “The clause and associated provisions were established in 1989 so as to provide a way for the government to continue to receive services on recurring requirements when the award of subsequent contracts might be delayed, such as when there is a bid protest.”  (GAO-16-262R Army’s Use of Contract Extensions.)

 

Thanks! This is spot on, though I'm not sure I understand the legal reasoning. The court ruling is clear "We hold that the limitation of the contract duration to five years by FAR 52.217-(c) does not preclude extensions beyond five years pursuant to FAR 52.217-8." This makes sense to me at a logical level, and is on the same track that I was thinking, which is that the option periods identified in clause 52.217-9 are different than what is contemplated in clause 52.217-8, but it makes me wonder why the FAR doesn't just say what the court says and eliminate the issue. 

I find this section a little confusing in the court's opinion:

"Interpreting FAR 52.217-8 as not limited by the five-year period recited in FAR 52.217-9(c) does not conflict with FAR 17.204(a) and (e). The contract still specifies limits on the "duration of the contract, including any extension," as required by FAR 17.204(e); the maximum duration including extensions is the five years comprising the initial performance period and four renewal options, plus up to six months of extended services under FAR 52.217-8 and up to 90 days of phase-in, phase-out services under FAR 52.237-3. FAR 17.204(e) simply limits the duration of the initial period of performance and renewal options, just as FAR 52.217-9(c) does in the contract."

The court seems to be focused on the contract specifying the limits on the duration of the contract, which it does when the -8 and -9 clauses are included, but the court doesn't seem to address the 5-year limitation part of the FAR citation 17.204(e) - "the total of the basic and option periods shall not exceed 5 years in the case of services, and the total of the basic and option quantities shall not exceed the requirement for 5 years in the case of supplies." How can a contract comply with the 5-year limitation when the court itself says essentially 5 years (base and renewal option periods) plus __ and plus ___?? How can the contract comply with the 5-year limitation when the base and option periods are already 5 years, and then you add two pluses in there? It makes sense from a practical standpoint that 52.217-8 and 52.237-3 are not included in the 5-year limitation, but I fails to see how the court gets there from a theoretical standpoint. If the FAR would just say what the court said - i.e., that the limitation of the contract duration to five years by FAR 52.217-(c) does not preclude extensions beyond five years pursuant to FAR 52.217-8", that would be great. And having the court opinion is good enough for practical purposes, I'm just trying to understand the logic of the court's interpretation. There isn't anything specific in the FAR (at least as far as I can see) that sets the 52.217-8 option apart from 52.217-9 options that would suggest that they should be treated differently.

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1 hour ago, MileHighAcq said:

The court seems to be focused on the contract specifying the limits on the duration of the contract, which it does when the -8 and -9 clauses are included, but the court doesn't seem to address the 5-year limitation part of the FAR citation 17.204(e)

Remember what the court is ruling on - a contract dispute.  In resolving that dispute, the court, of necessity, must examine the terms of the contract.  Here, the relevant terms are FAR 52.217-8 and -9.  FAR 17.204(e) is not part of the contract.  More importantly, that section does not apply to contractors, but only provides guidance to contracting officers.  In this regard, note that the time period stated in 52.217-9 only applies to options exercised under that clause.  Thus, options exercised under 52.217-8 are not subject to any time period specified in -9.  As for your concern about the court's + + reasoning, look at FAR 17.204(a).  You get to the "overall duration of the term of the contract" by adding the time limit stated in 52.217-9 + the six month period specified in -8.

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37 minutes ago, Retreadfed said:

Remember what the court is ruling on - a contract dispute.  In resolving that dispute, the court, of necessity, must examine the terms of the contract.  Here, the relevant terms are FAR 52.217-8 and -9.  FAR 17.204(e) is not part of the contract.  More importantly, that section does not apply to contractors, but only provides guidance to contracting officers.  In this regard, note that the time period stated in 52.217-9 only applies to options exercised under that clause.  Thus, options exercised under 52.217-8 are not subject to any time period specified in -9.  As for your concern about the court's + + reasoning, look at FAR 17.204(a).  You get to the "overall duration of the term of the contract" by adding the time limit stated in 52.217-9 + the six month period specified in -8.

which is why I would prefer that this be clarified in the regulation itself. yes, FAR 17.204(a) or (e) doesn't apply to contractors, but I'm looking at it from the perspective of a government acquisition professional and how they should be setting up their contract. and if the FAR imposes a 5-year limit on the duration of a contract, COs should be able to easily tell if certain types of extension are exempt from that - especially because both clauses use the term "option" - but apparently one IS subject to the 5-year limitation while the other IS NOT. the court addressed FAR 17.204(a) in their reasoning about the contract stating the overall duration of the contract, but I don't see where it addressed FAR 17.204(e) regarding the 5-year limitation. Instead, it makes a statement that "FAR 17.204(e) simply limits the duration of the initial period of performance and renewal options" but without providing the logic for why FAR 17.204(e) only applies to "renewal" options - a phrase the court appears to have made up. In practice, COs have always treated -8 and -9 options differently, but I don't see anything in FAR 17.2 that treats one differently than the other. 

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On 10/24/2023 at 1:16 PM, Oyster said:

"Where an agency does not evaluate an option to extend services under FAR clause 52.217-8 as part of the award, the agency cannot later exercise such an option because it would represent, in effect, a new procurement that must satisfy the requirements for full and open competition under FAR part 6. Major Contracting Servs., Inc., B-401472, Sept. 14, 2009, 2009 Comp. Gen. Proc. Dec. P176 at 6."

 

I agree with Vern Edwards that the GAO (not 'the courts') decision regarding the -8 clause is ridiculous and should be ignored.  (In regard to Latvian Connection, GAO stated in effect "we don't know if we have the authority to ban a contractor from protesting, but we're going to do it anyway".  GAO is by no means a court of law.) I wouldn't be surprised if that decision was written by a summer intern or someone of equal understanding.  It's an extension of the end date at the rates in effect at the time the extension option is exercised; that's it.  No offeror could possibly be disadvantaged by the exercise of 52.217-8. (Unbalanced pricing is already a criterion that can justify not making an award, which is the only possible discriminator in the "-8 evaluation" scenario).

DHS policy literally says to "evaluate by adding" which no sane person would ever defend as a logical process in any other context. It doesn't even require you to compare it to or justify anything.  Considering that the -8 can be exercised at the end of any contract year, why is adding the last option year pricing to your so-called "evaluation" valid anyway? 

 

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