Exercise Option

[Bailey]

I have a requirements contract for items for a base and four option years. We issued orders against the contract in the base year and in Option year 1. We did not issue any orders in Option Year 2? We still believe that we have a requirement for the items. Would there be any ramifications or issues if we exercised Option Year 3 even though we never issued any orders against Option Year 2?

To add to this...

Would there be any issue if we exercised Option year 3 and later in the year procured the item that is on our contract from another government agency (DLA, etc.)? And only use our contract if DLA was not able to meet the requirement? In other words, another government agaency has a contract for this but may not have been able to meet our needs in the past when needed. So we have our contract in place if we need it. Would this cause an issue? Should we exercise our Option Year 3...or is this not allowable?

[joel hoffman]

"16.503 -- Requirements Contracts.

(a) Description. A requirements contract provides for filling ALL actual purchase requirements of designated Government activities for supplies or services during a specified contract period (from one contractor), with deliveries or performance to be scheduled by placing orders with the contractor.

(1) For the information of offerors and contractors, the contracting officer shall state a realistic estimated total quantity in the solicitation and resulting contract. This estimate is not a representation to an offeror or contractor that the estimated quantity will be required or ordered, or that conditions affecting requirements will be stable or normal. The contracting officer may obtain the estimate from records of previous requirements and consumption, or by other means, and should base the estimate on the most current information available.

(2) The contract shall state, if feasible, the maximum limit of the contractor’s obligation to deliver and the Government’s obligation to order. The contract may also specify maximum or minimum quantities that the Government may order under each individual order and the maximum that it may order during a specified period of time.

( b ) Application.

(1) A requirements contract may be appropriate for acquiring any supplies or services when the Government anticipates recurring requirements but cannot predetermine the precise quantities of supplies or services that designated Government activities will need during a definite period." (emphasis added)

Bailey, unless the contract specifically states that you can Use someone else (DLA) or use someone else (DLA) as the primary source for orders, doing so would appear to be a breach of the requirements contract.

What does the contract say about exercising option years and what period does option year 3 cover?

EDIT: Sorry, I may have mis-read your question. Should I assume that you are in option year 2? Unless the contract has a minimum order quantity for option year 2, I don't think there is a problem exercising the next option year - assuming that you exercised option year 2.

[C Culham]

Bailey - While Joel has provided you with a a FAR reference regarding your question about purchasing from DLA and in light of the fact that you have stated that you have an awarded contract your queston about DLA is better answered by the specifics of your contract. As a Requirements contract the contract should contain FAR Clause 52.216-21 and paragraph c of the clause states - "Except as this contract otherwise provides, the Government shall order from the Contractor all the supplies or services specified in the Schedule that are required to be purchased by the Government activity or activities specified in the Schedule." So if the terms and conditions of your contract do not provide for the "otherwise" allowed for in the clause you could not purchase from DLA.

[Bailey]

"16.503 -- Requirements Contracts.

(a) Description. A requirements contract provides for filling ALL actual purchase requirements of designated Government activities for supplies or services during a specified contract period (from one contractor), with deliveries or performance to be scheduled by placing orders with the contractor.

(1) For the information of offerors and contractors, the contracting officer shall state a realistic estimated total quantity in the solicitation and resulting contract. This estimate is not a representation to an offeror or contractor that the estimated quantity will be required or ordered, or that conditions affecting requirements will be stable or normal. The contracting officer may obtain the estimate from records of previous requirements and consumption, or by other means, and should base the estimate on the most current information available.

(2) The contract shall state, if feasible, the maximum limit of the contractor’s obligation to deliver and the Government’s obligation to order. The contract may also specify maximum or minimum quantities that the Government may order under each individual order and the maximum that it may order during a specified period of time.

( b ) Application.

(1) A requirements contract may be appropriate for acquiring any supplies or services when the Government anticipates recurring requirements but cannot predetermine the precise quantities of supplies or services that designated Government activities will need during a definite period." (emphasis added)

Bailey, unless the contract specifically states that you can Use someone else (DLA) or use someone else (DLA) as the primary source for orders, doing so would appear to be a breach of the requirements contract.

What does the contract say about exercising option years and what period does option year 3 cover?

EDIT: Sorry, I may have mis-read your question. Should I assume that you are in option year 2? Unless the contract has a minimum order quantity for option year 2, I don't think there is a problem exercising the next option year - assuming that you exercised option year 2.

OK. Looking at just the first part of my question. If we exercised option year 2 but did not have any orders againts it in year 2, would we be in any trouble or have any ramifications if we wanted to exercise option year 3? (Understand about the fact that we must use the contract we have in place if we have the needed for what is offered in the contract...we cannot go elsewhere...even to another installation or DLA.)

[joel hoffman]

OK. Looking at just the first part of my question. If we exercised option year 2 but did not have any orders againts it in year 2, would we be in any trouble or have any ramifications if we wanted to exercise option year 3? (Understand about the fact that we must use the contract we have in place if we have the needed for what is offered in the contract...we cannot go elsewhere...even to another installation or DLA.)

Assuming that you are still in year 2, assuming that you may still exercise the option for year 3 in accordance with the contract and assuming that there is no mandatory minimum quantity that you would have breached by not ordering during year 2, there should be no "repercussions" if you exercise the 3rd option year in accordance with the existing contract. Is that clearer? It all depends upon the terms of the contract and whether or not you comply with it.

[Retreadfed]

Bailey, I'm not clear on what your circumstances are. You mentioned that DLA has a contract in place for the same items that are covered by your requirements contract. If you wanted to use DLA, would you place orders against the DLA contract, would DLA issue orders against its contract, or would you issue a requisition to DLA for DLA to issue you items from stock in one of its depots or supply centers?