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Dash 8 Clause (FAR 52.217-8) and Major Contracting Services GAO decision


govt2310

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As many of us know, GAO stated in Major Contracting Services, B-401472, that agencies must EITHER evaluate for exercise of the Dash 8 Clause (FAR 52.217-8) at award OR do a sole-source justification/evaluate price when the time comes and they decide to exercise it.

If an agency wants to do the former, meaning, the agency wants to try to evaluate for exercise of the Dash 8 Clause at award, how would the agency do that? Is the CO supposed to add the price of the Dash 8 Clause to the price of the Option Years and the Base Period to get the "Total Price"? Look at FAR 52.217-5, Evaluation of Options clause. It states:

FAR 52.215-5, Evaluation of Options

Evaluation of Options (July 1990)

Except when it is determined in accordance with FAR 17.206( B ) not to be in the Government’s best interests, the Government will evaluate offers for award purposes by adding the total price for all options to the total price for the basic requirement. Evaluation of options will not obligate the Government to exercise the option(s).

Here is the link the Major Contracting Services decision:

B401472 Major Contracting Services

http://www.gao.gov/d...dpro/401472.htm

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If an agency wants to do the former, meaning, the agency wants to try to evaluate for exercise of the Dash 8 Clause at award, how would the agency do that? Is the CO supposed to add the price of the Dash 8 Clause to the price of the Option Years and the Base Period to get the "Total Price"? Look at FAR 52.217-8. It states:

Yes. Sum the evaluated prices or costs for the base period and for the -9 and -8 options.

State your intent to do this in the solicitation.

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Yes. Sum the evaluated prices or costs for the base period and for the -9 and -8 options.

Given that the -8 option could be exercised at the end of the base period or any one of the -9 option periods, do you think govt2310 would have to get pricing for each of the potential -8 option periods?

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Given that the -8 option could be exercised at the end of the base period or any one of the -9 option periods, do you think govt2310 would have to get pricing for each of the potential -8 option periods?

No. I would state in the solicitation how the evaluated prices will be developed for the base and option periods. For the - 8 option, I would state that it will be 50% of the final - 9 option period's evaluated price. If the final - 9 option is less than 12 months, then the equation will change.

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No. I would state in the solicitation how the evaluated prices will be developed for the base and option periods. For the - 8 option, I would state that it will be 50% of the final - 9 option period's evaluated price. If the final - 9 option is less than 12 months, then the equation will change.

I understand your evaluation scheme. How would you structure your line items, though? Would you have separate line items for each of the potential -8 option periods or just one line item for the -8 option that could be exercised at the end of any period? If the latter, how would offerors know how to price the option?

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I understand your evaluation scheme. How would you structure your line items, though? Would you have separate line items for each of the potential -8 option periods or just one line item for the -8 option that could be exercised at the end of any period? If the latter, how would offerors know how to price the option?

I have never asked the contractors to price a -8 option. The line item structure and pricing for the - 8 clause is the line item structure and pricing for period in effect when the - 8 option is exercised.

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Guest Jason Lent

The largest fallacy with the "add 50%" method is that, in that case, you're only evaluating the use of 6 months (given a 12 month POP, imagine an instance where the POP is 7 months plus the options allowed under 52.217-8, and explaining how you're multiplying THAT POP by 0.857142....). Since you only evaluated the "whole six months" (in normal practice with 12-month POPs), you haven't evaluated the price for 3 months or 1 month or any other quantity other than six.

I've always been very critical of the "evaluate the whole price of everything so you're evaluating a price 1.5x the size of the actual proposal" method. Below is language I drafted up to make more sense (given a FFP service where each CLIN is for 12 months of service):

In accordance with FAR 52.217-8, the Government may require continued performance of services within the limits and rates specified in the contract. The rates shall be determined to be the unit price of each applicable CLIN as stated in Section B of the award of the CLIN which corresponds with the most recently entered period of performance. Evaluation of proposed CLIN prices constitutes evaluation of the rates used for options exercised under this clause.

Since you're probably purchasing the service on a monthly basis, and the contractor is proposing a monthly rate, why don't we just look at the rate rather than the "Total Evaluated Price" nonsense? (Total Evaluated Price or TEP being the total proposed price for the basic and 52.217-9 options, plus half that total). Every time we brief a non-contracting SSA, we need to take 5 minutes and plain how the TEP isn't what the contract will be awarded for but rather how it was evaluated; you can imagine the shock experienced by senior leadership that their $1m project has a TEP of $1.5m ("you mean to tell me the lowest guy is 50% higher than what we have money for?")

This hasn't been moved into action because clearing/review authorities have maintained the TEP way to be "the" way, but does anyone see anything wrong with my suggestion?

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Guest Jason Lent

No. I would state in the solicitation how the evaluated prices will be developed for the base and option periods. For the - 8 option, I would state that it will be 50% of the final - 9 option period's evaluated price. If the final - 9 option is less than 12 months, then the equation will change.

That presents an advantage to the guy who loads prices in the basic/non-final option period.

Basic: $100,000

Option 1: $100,000

Option 2: $100,000

Option 3: $100,000

Total proposal: $400,000

Total with 50% of Option 3: $450,000

Versus:

Basic: $100,000

Option 1: $100,000

Option 2: $150,000

Option 3: $50,000

Total proposal: $400,000

Total with 50% of Option 3: $425,000

Besides, what if you don't end up exercising 52.217-8 at the end of Option 3 but need to do it at the end of Option 2 for whatever reason? What would discredit the cries about how you're exercising an option you didn't evaluate?

EDIT: Grammar.

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Guest Vern Edwards

There is no wrong way, as long as whatever way you use is reasonable and fair to all offerors. Whatever method you adopt will be speculative. Keep it simple.

Don't ask the contractor to propose a price, because that would be inconsistent with the terms of the clause. Instead, calculate the average price of the basic and option years and add half of it to the sum of the prices of the basic and option years.

0001 $1,000,000 Base period

0002 $1,100,000 Option 1 period

0003 $1,200,000 Option 2 period

0004 $1,300,000 Option 3 period

0005 $1.400,000 Option 4 period

Total $6,000,000

Average $6,000,000/5 = $1,200,000/2 = $600,000

Total for evaluation purposes $6,000,000 + $600.000 = 6,600,000

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There is no wrong way, as long as whatever way you use is reasonable and fair to all offerors. Whatever method you adopt will be speculative. Keep it simple.

Don't ask the contractor to propose a price, because that would be inconsistent with the terms of the clause. Instead, calculate the average price of the basic and option years and add half of it to the sum of the prices of the basic and option years.

0001 $1,000,000 Base period

0002 $1,100,000 Option 1 period

0003 $1,200,000 Option 2 period

0004 $1,300,000 Option 3 period

0005 $1.400,000 Option 4 period

Total $6,000,000

Average $6,000,000/5 = $1,200,000/2 = $600,000

Total for evaluation purposes $6,000,000 + $600.000 = 6,600,000

Is this approach either more legal or more predictive of the actual likely cost/ price than the multiplication of the final 12 month option price by .5?

Why give it a complexity is doesn't need?

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Guest Vern Edwards

Well, I don't think what I proposed is especially complex. It's really rather simple 6th grade arithmetic.

My thinking was that since you can't be sure when you'll exercise that option -- after the first year, after the third, who knows -- an average of all years might provide a more complete and balanced measure. But, if you're going to get upset, we'll do it your way.

Frankly, I think the GAO's decision was stupid, and the agency should have refused to follow their recommendation.

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Whether or not this would pass muster in court, I don't know, but my command has Contracting Officers add the language below to the award decision document. It basically states that we consider the -8 evaluated, without actually doing any evaluation:

The solicitation and subsequent award for this acquisition contains the clause at FAR 52.217-8, Option to Extend Services. This option to extend the contract term was evaluated as part of the initial evaluation, so that any resultant exercise of this option is within scope of the pending contract. The option provision may be exercised more than once, but the total extension of performance hereunder shall not exceed six (6) months. I determine that I have evaluated FAR 52.217-8 and if conditions warrant the exercise of this option, the price(s) for the continued performance under this clause shall be at the same price(s) as the prior performance period. Based on my evaluation, I hereby determine that the price for this option, if exercised, is fair and reasonable and in the best interest of the Government.

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That's a great question! I can't defend the language. If I had to guess, I would say it was crafted solely to address the fair/reasonable aspect of pricing with a potential 52.217-8 extension, but that admittedly does not necessarily address the issue at the heart of the GAO case.

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But, if you're going to get upset, we'll do it your way.

Upset? I only get upset when someone misspells Bologna or takes a bite from a soccer player's shoulder.

I wouldn't make the analysis of the - 8 pricing too complex. With all but one - 8 option with which I have dealt, it is exercised after all the -9 options are exercised, and it is exercised for all line items. Thus, the price of the - 8 option becomes, at most, 50% of the price of the final - 9 option. So, for eval purposes, I multiply the final - 9 option price by .5.

If there is a likelihood that the - 8 will be exercised at a different time and / or for less than the full list of line items, change accordingly the - 9 option period and the line items to which you apply it.

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Guest Vern Edwards

I say that the -8 option is more speculative than the -9 option. Unlike the -9 option, the -8 option is supposed to be used only in response to a contingent event that is beyond the control of the contracting office, such as a protest. See FAR 37.111. There has been at least one case in which the -8 option was (unjustly) used because the CO failed to exercise the -9 option and the contractor would not waive the deadline. See Griffin Services, Inc., ASBCA 52280, 02-2 BCA ¶ 31943.

That is why the GAO's decision in Major Contracting Services, Inc., GAO B-401472, 2009 CPD ¶ 170, recons denied, 2009 CPD ¶ 250, was so wrong-headed. The GAO, relying on FAR 17.207(f), said:

The option to extend the contract here under FAR clause 52.217–8 was not evaluated 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 para. 366 at 4; see Techno–Scis., Inc., B–257686, B–257686.2, Oct. 31, 1994, 94–2 CPD para. 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. FAR sect. 17.207(f); see Antmarin Inc.; Georgios P. Tzanakos; Domar S.r.l., B–296317, July 26, 2005, 2005 CPD para. 149 at 8 n. 8. 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. Laidlaw Envtl. Servs. (GS), Inc.; International Tech. Corp.-Claim for Costs, supra.

But the very nature of the option, the supposed circumstances of its use, and the way that it is "priced", makes meaningful price evaluation difficult if not impossible. Thus, such evaluation is pointless and silly. Instead of requesting reconsideration, the agency in that case should simply have told the GAO to get lost.

The FAR councils should amend FAR to make it clear that FAR 17.207(f) does not apply to the -8 option and that the -8 option is to be used only when circumstances "beyond the control of contracting offices" prevent a timely new contract award. If the circumstances that delay the award and require extension of the contract are not beyond the control of the contracting office, then the CO should have to prepare and obtain approval of an appropriate justification for other than full and open competition. Alternatively, the FAR councils should require that the option be priced and listed as a CLIN.

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I agree with Vern that the GAO got it wrong in Major Contracting Services. While we are waiting and hoping that the FAR Council will take action to amend the FAR, though, most agencies are likely to just do whatever they have to in order to avoid GAO protests. Very few will have the chutzpah to tell GAO to get lost.

So how can we work with the present conditions we have? I searched FBO for example solicitation language. Here are ones that I found. Thoughts?

EXAMPLES FROM FBO

U.S. Army Solicitation for Document Destruction Services

Solicitation Number: W912D0-14-T-0001

https://www.fbo.gov/index?s=opportunity&mode=form&tab=core&id=96f5a147e4d1afc238359a2372647b84

"Options. The Government will evaluate offers for award purposes by adding the total price for all options to the total price for the basic requirement. The Government may determine that an offer is unacceptable if the option prices are mathematically and materially unbalanced. Evaluation of options shall not obligate the Government to exercise the option(s). As part of price evaluation, the government will evaluate its option to extend services (see FAR Clause 52.217-8) by adding one-half of the offeror's final option period prices to the offeror's total price. Thus, the offeror's total price for the purpose of evaluation will include the base period, 1st option, 2nd option, 3rd option, 4th option, and 1/2 of the 4th option. As indicated in FAR 52.217-8 the government will have the option provision to extend the performance of the contract up to an additional 6 months when the contractor is provided written notice. Providing pricing for the optional six-month extension period is not required."

AND

Federal Election Commission

IT Gap Analysis and Inventory Survey Services

Solicitation Number: FE-14-R-003

https://www.fbo.gov/?s=opportunity&mode=form&id=477656340ce3f5353578d74cb8b6a9ca&tab=core&_cview=0

"Evaluation of Option to Extend Services under 52.217-8. For the purposes of the award of this Contract, the Government intends to evaluate the option to extend services, provided under FAR 52.217-8, as follows: The evaluation will consider the possibility that the option can be exercised at any time, and can be exercised in increments of one to six months, but for no more than a total of six months during the life of the contract. The evaluation will assume that the prices for any option exercised under FAR 52.217-8 will be at the same rates as those in effect under the contract. The evaluation will therefore assume that the addition of the price or prices of any possible extension or extensions under FAR 52.217-8 to the total price for the basic requirement and the total price for the priced options has the same effect on the total price of all proposals relative to each other, and will not affect the ranking of proposals based on price, unless, after reviewing the proposals, the Government determines that there is a basis for finding otherwise. This evaluation will not obligate the Government to exercise any option under FAR 52.217-8."

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Don't ask the contractor to propose a price, because that would be inconsistent with the terms of the clause.

I don't see why. The clause 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. The Contracting Officer may exercise the option by written notice to the Contractor within ______ [insert the period of time within which the Contracting Officer may exercise the option].

How would having a priced line item for the period(s) covered by the -8 clause be inconsistent with the terms of the clause?

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Guest Jason Lent

Upset? I only get upset when someone misspells Bologna or takes a bite from a soccer player's shoulder.

I wouldn't make the analysis of the - 8 pricing too complex. With all but one - 8 option with which I have dealt, it is exercised after all the -9 options are exercised, and it is exercised for all line items. Thus, the price of the - 8 option becomes, at most, 50% of the price of the final - 9 option. So, for eval purposes, I multiply the final - 9 option price by .5.

If there is a likelihood that the - 8 will be exercised at a different time and / or for less than the full list of line items, change accordingly the - 9 option period and the line items to which you apply it.

But you're explicitly not evaluating the price of the option of 52.217-8 after the Basic, for example.

How do you address the concern how just adding 50% to the last option rewards price loading in the other-than-last option?

The below table describes how exercising 52.217-8 early is a poor choice given how I'd propose on this if I knew how to get my foot in the door with a $25K "savings".

mby0xPi.jpg

EDIT: I'd love to have an easy "insert table" button.

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Guest Vern Edwards

I don't see why. The clause states:

How would having a priced line item for the period(s) covered by the -8 clause be inconsistent with the terms of the clause?

You're right. It would not be inconsistent.

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But you're explicitly not evaluating the price of the option of 52.217-8 after the Basic, for example.

How do you address the concern how just adding 50% to the last option rewards price loading in the other-than-last option?

If there is a likelihood that the - 8 will be exercised at a different time and / or for less than the full list of line items, change accordingly the - 9 option period and the line items to which you apply it.

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Guest Jason Lent

If there is a likelihood that the - 8 will be exercised at a different time and / or for less than the full list of line items, change accordingly the - 9 option period and the line items to which you apply it.

As others have mentioned ITT, the whole point is that 52.217-8 is there for the unknown unknowns.

I can think of a few situations where you'd be exercising 52.217-8 "early".

1. My time in Afghanistan (albeit not as common as most people here would encounter) had bases that were "surely closing down, no kidding, within the next couple months" and thereby eliminate the need for the whole year of service.

2. Something to do with the contractor's capabilities happens, in the middle of the contract's POP, where exercising the whole year is not a valid choice, nor is ending the performance on 30 September (for example) valid because the Government requires service, however stifled.

3. Your agency comes out with some new strategic sourcing initiative and decrees that all services for X need to be awarded under this new program.

If one of these situations come up, or of some other one does, I don't see how you're not walking dead-on into a situation where you didn't actually evaluate the option (or the rates, for that matter) that you're exercising "ahead of schedule".

EDIT: Clearer thinking (I'll let you be the judge of that).

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Looks like you can create one in Word and drop it in if necessary:

Header 1

Header 2

Header 3

Data

Data

Data

Data

Data

Data

Data

Data

Data

Data

Data

Data

Though a button would be nice.

EDIT: I stand corrected! It strips the table away. Let's view this as a blessing- maybe we need fewer tables. :rolleyes:

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  • 4 weeks later...

Good question from a student:

When applying dollar thresholds in the FAR in accordance with FAR 1.108( c ), do you include the value of the FAR 52.217-8 option?

I think the answer is yes, based on the use of "all options" at FAR 1.108( c ):

Dollar thresholds. Unless otherwise specified, a specific dollar threshold for the purpose of applicability is the final anticipated dollar value of the action, including the dollar value of all options. If the action establishes a maximum quantity of supplies or services to be acquired or establishes a ceiling price or establishes the final price to be based on future events, the final anticipated dollar value must be the highest final priced alternative to the Government, including the dollar value of all options.

However, I doubt anyone is doing this.

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