Option Extension

[Janette]

Can the government exercise all options at the same time if they find they are very satisfied with the contractor? 

[joel hoffman]

Why would you do that, especially if the appropriate funding for each extension isn’t available at the time of a single act of extension across fiscal years?

There are numerous problems associated with attempting that scenario. It’s not exercising outyear options in strict accordance with the terms of the options, wage rate adjustment problems, obligating the government without the assurance of future funding, eliminating a contractual incentive for continued performance to ensure very high satisfaction, etc., etc.

[ji20874]

23 hours ago, Janette said:

Can the government exercise all options at the same time if they find they are very satisfied with the contractor? 

Yes, generally, unless some other constraint presents itself.  Such constraints might include the text of the contract itself, availability of funds, and so forth. 

But assuming no such constraints exist, if the contract calls for a dozen widgets to be delivered on the first day of the following month, with six options each for a dozen widgets to be delivered on the first day of each of the following six months, Yes, a contracting officer could exercise all six options at the same time in the same contract modification (rather than six separate contract modifications spaced a month apart).

[formerfed]

Another possible situation where it might not be bad is with an IDIQ contract.  If the contract is set up with a base with option years and performance occurs through issuance of task/delivery orders, then exercise of all options at once is a possibility.  

[REA'n Maker]

I think the practical answer is 'no':

 

Quote

 

17.207 Exercise of options.

(a) When exercising an option, the contracting officer shall provide written notice to the contractor within the time period specified in the contract.

(b) When the contract provides for economic price adjustment and the contractor requests a revision of the price, the contracting officer shall determine the effect of the adjustment on prices under the option before the option is exercised.

(c) The contracting officer may exercise options only after determining that-

(1) Funds are available;

(2) The requirement covered by the option fulfills an existing Government need;

(3) The exercise of the option is the most advantageous method of fulfilling the Government’s need, price and other factors (see paragraphs (d) and (e) of this section) considered;

(4) The option was synopsized in accordance with part  5 unless exempted by 5.202(a)(11) or other appropriate exemptions in 5.202;

(5) The contractor does not have an active exclusion record in the System for Award Management (see FAR 9.405-1);

(6) The contractor’s past performance evaluations on other contract actions have been considered; and

(7) The contractor’s performance on this contract has been acceptable, e.g., received satisfactory ratings.

(d) The contracting officer, after considering price and other factors, shall make the determination on the basis of one of the following:

(1) A new solicitation fails to produce a better price or a more advantageous offer than that offered by the option. If it is anticipated that the best price available is the option price or that this is the more advantageous offer, the contracting officer should not use this method of testing the market.

(2) An informal analysis of prices or an examination of the market indicates that the option price is better than prices available in the market or that the option is the more advantageous offer.

(3) The time between the award of the contract containing the option and the exercise of the option is so short that it indicates the option price is the lowest price obtainable or the more advantageous offer. The contracting officer shall take into consideration such factors as market stability and comparison of the time since award with the usual duration of contracts for such supplies or services.

 

 

[Jamaal Valentine]

On 12/11/2023 at 6:17 AM, Janette said:

Can the government exercise all options at the same time if they find they are very satisfied with the contractor? 

Yes. However, that answer may not be useful or applicable to the options you are contemplating. Nonetheless, the technical answer is - yes.

[joel hoffman]

3 hours ago, Jamaal Valentine said:

Yes. However, that answer may not be useful or applicable to the options you are contemplating. Nonetheless, the technical answer is - yes.

The technical answer to her specific question is - maybe. Depends upon the context of the specific circumstances. 

[Jamaal Valentine]

3 hours ago, joel hoffman said:

The technical answer to her specific question is - maybe. Depends upon the context of the specific circumstances. 

Here is the question in full —

On 12/11/2023 at 6:17 AM, Janette said:

Can the government exercise all options at the same time if they find they are very satisfied with the contractor? 

It’s a closed question - yes/no. There is no maybe about it. The answer is yes.

[joel hoffman]

12 hours ago, Jamaal Valentine said:

Here is the question in full —

It’s a closed question - yes/no. There is no maybe about it. The answer is yes.

Not, necessarily.There is little detail discernible from the original question other than being “very satisfied” with the contractor’s performance to date. That can’t be the sole basis to allow awarding future options.

If it is a C type service contract with yearly extensions, for instance.

If such extensions depend upon future one year funding, then funds must be available prior to award of future options.

In addition, for C Type service contracts with yearly extensions*:

Unless the original competition allowed for award of future options initially or simultaneously at a later time, before exercising each option simultaneously, the KO must also consider, for each option , FAR 17.207 (b), (c) (1), (2), and (3), (d) (1), (2) and (3) and (e). That would also be necessary for sequentially awarding options for contract extensions.

It might not be possible to determine or estimate market conditions and what available market pricing may be available for the future out-years at this point in time. There are valid reasons for the conditions imposed by 15.207, many of which concern competition and future market conditions.

I don’t think one can simply take a snapshot view of all options based upon current conditions for an expedited, simultaneous award of the future options for services.

The original contract competition was structured for and probably anticipated an orderly award of options over an extended period, with continued satisfactory performance and contractor status (consistent with 17.207 (c) (5),(6) and (7) and the other required considerations for subsequent extensions.

Thus, the effect upon FAR Part (6) competition might be a consideration or be impacted by early exercise of out-year options for services and possibly for supplies.

The government can’t simply restructure the original basis of the competition or simultaneously award future options, while circumventing the other conditions for awarding each option, based upon one reason - for the purpose(s) of convenience and/or for rewarding the contractor for “very satisfying” early performance (in reference to the asterisked scenario above).

Edited December 15, 2023 by joel hoffman
Corrections and clarifications. Sorry

[Jamaal Valentine]

@joel hoffman

Can is an auxiliary verb used to indicate possibility. Yes, it is possible. That’s all was trying to convey.

The question is about possibility. It doesn’t matter if you want to add ‘yes, and,’ ‘yes, if,’ or ‘yes, but’ to cover additional conditions that must be met. Given the question, as written, your only other responsive choice is to say ‘no,’ meaning it is not possible under any circumstance.

Now that I think about it, maybe the answer should be no. For example, no because the government must also satisfy X, Y, and Z. I can see multiple arguments.

Thanks for getting me to rethink my position.

[joel hoffman]

34 minutes ago, Jamaal Valentine said:

@joel hoffman

Can is an auxiliary verb used to indicate possibility. Yes, it is possible. The answer is yes. It doesn’t matter if you want to add ‘yes, and’ or ‘yes, but.’ Your only other responsive choice is to say ‘no,’ meaning it is not possible under any circumstance.

Sorry, Jamaal. She asked if the government (assuming it meant “our organization” , as the government)  can exercise all the options for extensions if (meaning as the reason and justification for) the government has found that it is “very satisfied with the [performance to date] of the contractor”.

No explanation of the type or purpose of the contract provided. 

The answer is not an unequivocal yes. The context and other factors are necessary to consider before such action can be taken. 

Ok - so - No,  if asking because the extension is based only upon current “very satisfied”, feel good impression of a contractor’s  performance.

The answer is No - if the KO can’t satisfy all other required conditions and constraints. 

A yes answer to exercise any extension option, let alone all extension options simultaneously requires further knowledge of the context of the extensions and consideration of any other constraints or requirements before exercising the option(s).

[ji20874]

On 12/11/2023 at 9:17 AM, Janette said:

Can the government exercise all options at the same time if they find they are very satisfied with the contractor? 

Yes, generally, unless some other constraint presents itself.  Such constraints might include the text of the contract itself, availability of funds, and so forth. 

Several posters here are imagining constraints and are answering No -- it seems they might be answering with No based on facts that are not in evidence.   But the OP has not identified any constraints that might lead a reasonable person to a No answer, so I am comfortable with Yes as a general answer.  There simply is no FAR-level requirement about exercising options in sequential order, with time spaces in between each option exercise.

[joel hoffman]

Ah but the requirements of FAR 17.207 (b), (c) (1), (2), and (3), (d) (1), (2) and (3) and (e) would also be applicable for sequentially awarding options for contract extensions.

The funding requirement wouldn’t be applicable to an ID/IQ extension unless there would be minimum order obligations during the extension periods. Hopefully not.

[ji20874]

7 hours ago, joel hoffman said:

Ah but the requirements of FAR 17.207 (b), (c) (1), (2), and (3), (d) (1), (2) and (3) and (e) would also be applicable for sequentially awarding options for contract extensions.

Ah but nothing in FAR 17.207 requires option exercises in sequential order, with time gaps in between each one.  Any or all of those requirements could be done at one time for all the options the OP wanted to simultaneously exercise.

[joel hoffman]

9 hours ago, ji20874 said:

Ah but nothing in FAR 17.207 requires option exercises in sequential order, with time gaps in between each one.  Any or all of those requirements could be done at one time for all the options the OP wanted to simultaneously exercise.

I’m not saying that FAR 17.207 requires award of options sequentially.

The OP would have to comply with the requirements of those paragraphs that I identified before exercising the options. Complying  with some of them may present a challenge to her proposal under the existing contract. There might be an industry challenge if they simultaneously award all of the contract extension options at once.

However, the OP apparently isn’t interested in providing any more information regarding the nature of the contract or a reason other than them being very satisfied with the contractor to date. She should now have enough information to decide what to do before awarding all the options at once.

[Jamaal Valentine]

On 12/16/2023 at 6:42 AM, joel hoffman said:

However, the OP apparently isn’t interested in providing any more information regarding the nature of the contract or a reason other than them being very satisfied with the contractor to date.

The original poster asked a closed-ended question. They asked if something was possible. The answer is yes [it’s possible]. For example, if you’re very satisfied with the contractor, you can exercise all options at the time of contract award under FAR 17.208(b); or you could exercise all options to increase quantities under FAR 52.217-6 and 52.217-7.

“In yes-no questions, an auxiliary verb typically appears in front of the subject—a formation called subject-auxiliary inversion (SAI).” Here, ‘can’ is the auxiliary verb indicating possibility.

 Answer this: is it possible for the government to exercise all options at the same time if they find they are very satisfied with the contractor? I believe your answer will be ‘yes, if….’ However, I suppose you can say no. I just think a negative response can be more misleading given the polar question.

[joel hoffman]

15 hours ago, Jamaal Valentine said:

Answer this: is it possible for the government to exercise all options at the same time if they find they are very satisfied with the contractor? I believe your answer will be ‘yes, if….’ However, I suppose you can say no. I just think a negative response can be more misleading given the polar question.

I already indicated yes, if. The answers have been general in nature because there is no more context than that it concerns “option extension” and because they are very satisfied with the contractor’s performance.

A flat “yes” to the extremely general initial post, with essentially no context, is very misleading. 

From the information provided in this thread, she can decide what is necessary in order to award the options, sequentially or simultaneously.

How about letting the sleeping dog lie? Janette appears to have left the thread after her initial one sentence post last Monday morning.

[Jamaal Valentine]

Since this isn’t the beginners forum, I believe the poster deserved a yes or no response to their close-ended question. After all, that’s what they requested.

And maybe they haven’t come back because they already received their answer regarding the possibility of exercising all options at the same time.

 Nonetheless, there is a lesson in all of this:

“When answering such a question, start with the governing rule or official guidance, if any...If the question is grounded in regulation or policy, start by citing any pertinent regulations and official policy and guidance, THEN add commentary of your own IF you've got something informative to say.”

[ji20874]

10 hours ago, joel hoffman said:

I already indicated yes…

That’s good.