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@Retreadfed I don't think so. FAR says to include the clause in "all" contracts. I think that means what it says, regardless of the date of award.

I'm open to being wrong about that, but in light of statute and regulation I need some authoritative reference. As has already been pointed out, FAR 1.108(d) says, "Unless otherwise specified..."

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15 hours ago, joel hoffman said:

Retreadfed, the original post regards an option. The statutory prohibitions implemented in 4.2102(a) apply to awarding extensions or options for additional services/supplies and/or time. If a contractor won’t agree to those terms and no exception applies, I read it as-  the government can’t extend the contract or order additional services/supplies.

As for 1.108(d), perhaps you overlooked “Unless otherwise specified-” :

      “ (d)  Application of FAR changes to solicitations and contracts. Unless otherwise specified-

Joel, the original post concerned the contractor's refusal to provide certain representations and to accept a clause being added to its contract.  These are different issues from whether the government can exercise the option.  To me, the government cannot exercise the option if the conditions in 4.2102 are present without a waiver regardless of whether the contractor makes the representations in 52.204-24 and -26, or if 52.204-25 is in the contract.

What point are you trying to make concerning "Unless otherwise specified"?

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2 minutes ago, Retreadfed said:

 it seems to me that the contractor may be entitled to receive "appropriate consideration."

They certainly could make such a request.  They could also argue that adding the clause creates some type of adhesion scenario.  I'll leave that up to the lawyers to decide.  At my agency, the guidance we received was clear.  Existing contracts that did not have 52.204-25 in them were to be modified to include the clause, and the representations for 52.204-24(d)(1) & (2) were to be obtained, or no options could be exercised (i.e., relationship ends without the clause), regardless of whether the contractor was the only source.  

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Here is the text from a DPC memo (emphasis added)...

Quote

 

Contracting officers shall, in accordance with FAR 1.108(d), modify—

  • Existing indefinite delivery contracts to include the FAR clause for orders issued on or after August 13, 2020, prior to placing any such orders; and
  • Existing contracts, task orders, and delivery orders to include the FAR clause if executing a modification to extend the period of performance, including exercising an option, on or after August 13, 2020.

 

Retreadfed,

Note that the DPC memo makes specific reference to FAR 1.108(d).  I'm not seeing a problem.

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5 minutes ago, Vern Edwards said:

As has already been pointed out, FAR 1.108(d) says, "Unless otherwise specified..."

"Unless otherwise specified-     

           (3) Contracting officers may, at their discretion, include the changes in any existing contract with appropriate consideration."  What does unless otherwise specified apply to here?  In the context of 52.204-25 does it mean that contracting officers do not have discretion to add the clause but they must add it?  If that is what it means, does it follow that the clause must be added without consideration?  Nothing in the clause prescription at 4.2105 indicates that consideration is not required if the clause is added to a contract that was awarded before the clause became effective.  Therefore, I do not know of anything that specifies that consideration would not be required if the clause is added to a contract post award.

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5 minutes ago, ji20874 said:

Note that the DPC memo makes specific reference to FAR 1.108(d).  I'm not seeing a problem.

We don't know if 2FARgone works for DoD so that this memo would apply in his/her case.  (S)he made an initial post then seems to have disappeared which is too bad because there are a lot of things we do not know about his/her situation.

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17 minutes ago, Retreadfed said:

"Unless otherwise specified-     

           (3) Contracting officers may, at their discretion, include the changes in any existing contract with appropriate consideration."  What does unless otherwise specified apply to here?  In the context of 52.204-25 does it mean that contracting officers do not have discretion to add the clause but they must add it?  If that is what it means, does it follow that the clause must be added without consideration?  Nothing in the clause prescription at 4.2105 indicates that consideration is not required if the clause is added to a contract that was awarded before the clause became effective.  Therefore, I do not know of anything that specifies that consideration would not be required if the clause is added to a contract post award.

Absent a waiver, they don’t have the discretion to not include it. That was my point. There may be grounds for a waiver. 

I don’t know what would constitute reasonable consideration. Certainly, if the contractor’s cost would increase in order to comply, then that should be “taken into consideration”. If the parties can’t agree on “consideration” or other impacts, then it may not be in one or both of their interests to continue the contractual relationship. 

Edited by joel hoffman
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Let's sort out the issue of consideration. If the parties to an executory contract are going to modify it in a way that is not already provided for by a contract clause, such as the Changes clause, then consideration is required by the common law of contracts. See Keeter Trading Co., Inc. v. U.S., 85 Fed. Cl. 613 (2009):

Quote

There must be some form of quid pro quo or, in government procurement parlance, there must be consideration. Numerous decisions of this court's predecessor, the United States Court of Claims, have echoed the above principle—that a contract modification must be supported by consideration. A lack of consideration will render the contract modification void, or without force or effect. See Vulcanite Portland Cement Co. v. United States, 74 Ct.Cl. 692, 705 (1931) (“It is equally well settled that where the provisions of a contract are changed by a subsequent agreement between the same parties such agreement has no force and effect unless there is*630 some consideration moving to the party adversely affected by such changes.”). The performance of a pre-existing legal duty is not consideration, American Red Ball Int'l, Inc. v. United States, 79 Fed.Cl. 474, 478 (2007) (citing Allen v. United States, 100 F.3d 133, 134 (Fed.Cir.1996)) (other citation omitted), and in the absence of express authority to do so, a government official may not pay gratuities for the performance of contractual duties which the contractor is obligated to perform. See Burke & James v. United States,63 Ct.Cl. 36, 57 (1927). 

The parties would have to agree on what would constitute adequate consideration.

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3 hours ago, Retreadfed said:

"Unless otherwise specified-     

           (3) Contracting officers may, at their discretion, include the changes in any existing contract with appropriate consideration."  What does unless otherwise specified apply to here?  In the context of 52.204-25 does it mean that contracting officers do not have discretion to add the clause but they must add it?  If that is what it means, does it follow that the clause must be added without consideration?  Nothing in the clause prescription at 4.2105 indicates that consideration is not required if the clause is added to a contract that was awarded before the clause became effective.  Therefore, I do not know of anything that specifies that consideration would not be required if the clause is added to a contract post award.

The FAR does not impose a duty on the part of contractors to accept the clause. It imposes a duty on contracting officers to either (1) persuade contractors to accept the clause or (2) refrain from exercising an option to extend.

The common law of contracts imposes the requirement for consideration.

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3 hours ago, Vern Edwards said:

The FAR does not impose a duty on the part of contractors to accept the clause. It imposes a duty on contracting officers to either (1) persuade contractors to accept the clause or (2) refrain from exercising an option to extend.

The common law of contracts imposes the requirement for consideration.

Good answer! 

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To add to what @Retreadfed said, Sec. 889 requirement for incorporation of terms into an existing fully definitized extension/renewal option that pre-date 889, may be considered interference with the contract. See, https://nationalaglawcenter.org/wp-content/uploads/assets/crs/R42635.pdf.      

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1 hour ago, Neil Roberts said:

To add to what @Retreadfed said, Sec. 889 requirement for incorporation of terms into an existing fully definitized extension/renewal option that pre-date 889, may be considered interference with the contract. See, https://nationalaglawcenter.org/wp-content/uploads/assets/crs/R42635.pdf.      

Malarkey.

The CRS report is irrelevant. There is no "taking" issue. It is well established that a contractor has no right to the exercise of an option. See, e.g., Puget Sound Environmental Corp., ASBCA 58828, 16-1 BCA ¶ 56465:

Quote

In an option contract, the government has bargained for the right to exercise or not exercise the option at its discretion and a contractor cannot compel the government to exercise the option. Government Systems Advisors, Inc. v. United States, 847 F.2d 811,813 (Fed. Cir. 1988). The Board has recognized a limited exception to this rule if the contractor can prove bad faith, an abuse of discretion or that the contracting officer acted in an arbitrary or capricious manner. IMS Engineers-Architects, P.C, ASBCANo. 53471, 06-1 BCA ¶ 33,231 at 164,674, recon. denied, 07-1 BCA ¶ 33,467, aff'dIMS Engineers-Architects, P.C. v. Geren, 274 F. App'x 898 (Fed. Cir. 2008). Similarly, the government has the right to terminate at will under the termination for convenience clause and, absent bad faith or a clear abuse of discretion, the contracting officer's decision is final. John Reiner & Co. v. United States, 325 F.2d 438, 442 (Ct. C1. 1963).

Does anyone think that Congress acted in bad faith when it enacted the law or that the FAR Councils act in bad faith when they promulgated the implementing regulations?

This is government contracting. Deal with it.

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36 minutes ago, Vern Edwards said:

Malarkey.

The CRS report is irrelevant. There is no "taking" issue. It is well established that a contractor has no right to the exercise of an option. See, e.g., Puget Sound Environmental Corp., ASBCA 58828, 16-1 BCA ¶ 56465:

Does anyone think that Congress acted in bad faith when it enacted the law or that the FAR Councils act in bad faith when they promulgated the implementing regulations?

This is government contracting. Deal with it.

My thoughts and contentions are the FAR Council was over reaching when it inserted the word "option" as an example of an extension or renewal. I did not find that word in Section 889. In my mind, I think of an extension or renewal meant by the legislation as a negotiated bilateral agreement between the Government and Contractor where there was no option already included in the contract. And, I think that Congress should have or did know that including options would raise the potential of contract interference. 

I do not agree with your assertion that the content of the Legislative Research Service reference site is "Malarky" and/or "irrelevant" if that is what you were saying. Maybe you already knew all about this topic. 

     

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1 hour ago, Vern Edwards said:

Malarkey.

The CRS report is irrelevant. There is no "taking" issue. It is well established that a contractor has no right to the exercise of an option. See, e.g., Puget Sound Environmental Corp., ASBCA 58828, 16-1 BCA ¶ 56465:

Does anyone think that Congress acted in bad faith when it enacted the law or that the FAR Councils act in bad faith when they promulgated the implementing regulations?

This is government contracting. Deal with it.

Agreed. This is implementation of Public Policy as expressed in Statute in what is (was?) the “Neo Cold War Era” (my term). 

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Temporarily deleted

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1 hour ago, Neil Roberts said:

My thoughts and contentions are the FAR Council was over reaching when it inserted the word "option" as an example of an extension or renewal. I did not find that word in Section 889. In my mind, I think of an extension or renewal meant by the legislation as a negotiated bilateral agreement between the Government and Contractor where there was no option already included in the contract. And, I think that Congress should have or did know that including options would raise the potential of contract interference. 

I do not agree with your assertion that the content of the Legislative Research Service reference site is "Malarky" and/or "irrelevant" if that is what you were saying. Maybe you already knew all about this topic. 

     

Malarky continued. A prohibition is a PROHIBITION. See for instance :

https://www.gsa.gov/cdnstatic/Section 889 Provisions and Clause Implementation Tables (Updated).pdf

Pay particular attention to existing contracts . 

Exercising an option is a unilateral right of the government. If the law says don’t procure certain prohibited services or supplies and don’t procure them from XXX absent a waiver, then the government can’t procure them from existing  contract vehicles when it is time to extend the ordering periods. The contractor can’t require the government to award it the option.

 

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@Neil Roberts 

10 hours ago, Neil Roberts said:

I do not agree with your assertion that the content of the Legislative Research Service reference site is "Malarky" and/or "irrelevant" if that is what you were saying. Maybe you already knew all about this topic. 

I didn't mean that the CRS report is malarkey. I meant that the following assertion is malarkey:

13 hours ago, Neil Roberts said:

Sec. 889 requirement for incorporation of terms into an existing fully definitized extension/renewal option that pre-date 889, may be considered interference with the contract.

I sincerely apologize for "malarkey." I should just have said that I disagree. Here's why:

The law conditions the creation of new contractual relations and the voluntary extension of current contractual relations upon assent to certain terms. The relevant passage says: 

Quote

(a) PROHIBITION ON USE OR PROCUREMENT.—(1) The head of an executive agency may not—

(A) procure or obtain or extend or renew a contract to procure or obtain any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system; or

(B) enter into a contract (or extend or renew a contract) with an entity that uses any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system.

FAR 4.2104 states: 

Quote

(c) Contracting Officers. Unless an exception at paragraph (b) of this section applies or the covered telecommunications equipment or service is covered by a waiver described in 4.2104, Contracting Officers shall not—

           (1) Procure or obtain, or extend or renew a contract (e.g., exercise an option) to procure or obtain, any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system; or

           (2) Enter into a contract, or extend or renew a contract, with an entity that uses any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system.

According to the FAR councils, the law and the regulation are designed to protect citizen privacy and national security.

What I understand the statute and regulation to do is prohibit new and extended voluntary relations. New contracts and the exercise of options are voluntary undertakings. With respect to options, any party to a contract is free to seek changes to the terms of an option and to decline to exercise the option if the other party will not agree.

A contractor has no contractual right to expect a contract extension that is not contractually required, and neither the statute nor the regulation prohibits a CO from agreeing to an extension to which a contractor is entitled, such as an equitable time adjustment after a contract change or a time extension as compensation for a government breach, such as late GFP. 

Neither the statute nor the implementing regulation requires existing contractors to accept the new clause. They don't require the termination of a contract in case of refusal. Acceptance is entirely voluntary. Moreover, the statute provides for waivers.

I cannot see how the law or the regulation interferes with existing contractual rights. I don't see any breach of contract. I don't see any bad faith or unfair dealing. Do you, Neil?

But you might change my mind by making an argument instead of just dropping a 20-page maybe-this-maybe-that report in here and alluding to a vague possibility without explanation. If you think the CRS report points the way to particular possibilities in this matter with respect to contract interference, why don't you tell us about it? I'm eager to read what you have to say.

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1 hour ago, Vern Edwards said:

Neither the statute nor the implementing regulation requires existing contractors to accept the new clause. They don't require the termination of a contract in case of refusal. Acceptance is entirely voluntary. Moreover, the statute provides for waivers. I cannot see how the law or the regulation interferes with existing contractual rights. I don't see any breach of contract. I don't see any bad faith or unfair dealing. Do you?

Vern, Not sure what you mean regarding exercising an option on an existing contract. 
 

4.2102- Prohibitions

“(a)...  (2) On or after August 13, 2020, agencies are prohibited from entering into a contract, or extending or renewing a contract, with an entity that uses any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system, unless an exception at paragraph (b) of this section applies or the covered telecommunications equipment or services are covered by a waiver described in 4.2104. This prohibition applies to the use of covered telecommunications equipment or services, regardless of whether that use is in performance of work under a Federal contract..”

“(c)...Contracting Officers shall not—

 (1) Procure or obtain, or extend or renew a contract (e.g., exercise an option) to procure or obtain, any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system; or

            (2) Enter into a contract, or extend or renew a contract, with an entity that uses any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system.”

4.2103 Procedures requires the contractor to certify 

“4.2105   Solicitation provisions and contract clause.

(a) The contracting officer shall insert the provision at 52.204-24, Representation Regarding Certain Telecommunications and Video Surveillance Services or Equipment—

...(2) Under indefinite delivery contracts, in all notices of intent to place an order, or solicitations for an order (e.g.,subpart 8.4 and 16.505).

(b) The contracting officer shall insert the clause at 52.204-25, Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment, in all  [...] contracts.”

I found the following July 13, 2020 Covington Alert:
 

https://www.cov.com/en/news-and-insights/insights/2020/07/us-government-releases-awaited-section-889-rule-on-prohibition-on-use-of-covered-telecommunications-equipment-by-federal-contractors

See specifically: 

“II. Compliance Requirements
a. Application of the Rule
Contracting officers must include the updated clause when exercising options under any existing U.S. Government contract. Such an addition could present legal issues because the prohibition would not have existed in the contract at the time of contract execution, and the contractor may not have factored the impact of compliance into their prices for performance of those option periods. Absent a clause in the contract allowing the Government or prime contractor to unilaterally add new terms and conditions, such an addition to an existing contract/subcontract would ordinarily require a bilateral modification and consideration. In fact, the interim rule recognizes the need for consideration when it noted that modifications to existing U.S. Government IDIQ contracts must be done in accordance with FAR 1.108(d).
Nonetheless, the prohibition is a statutory mandate, so Government contractors may find themselves at an impasse if the parties cannot agree to the addition of the clause. Similarly, for General Service Administration and Veterans Affairs schedules and similar contracts, a failure to agree to the new clause could lead to the Government dropping a company’s products from the schedules with limited notice. Such an impasse could potentially be resolved by a waiver for additional time to comply, which we discuss in more detail later in this alert...”


Sorry, but I can’t use a boxed quote on my iPhone. Must use quotations. Not to say that it can’t be done- I just don’t know how. 

If the ID/IQ contractor won’t agree to the bilateral addition of the clause and the provision for an option to extend the contract, the KO can’t issue it.

Edited by joel hoffman
Added last paragraph
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1 hour ago, Vern Edwards said:

With respect to options, any party to a contract is free to seek changes to the terms of an option and to decline to exercise the option if the other party will not agree.

In following this thread I wonder about this statement.  I agree any party (government or the contractor) can seek changes to the terms of an option but I do not think the other party (contractor) can decline  to exercise of an option if the other party (government) will not agree.   Example - Contractor seeks a change to the option, the government does not agree, yet the contractor must accept the option without the change must they not?

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@C Culham 

17 minutes ago, C Culham said:

I agree any party (government or the contractor) can seek changes to the terms of an option but I do not think the other party (contractor) can decline  to exercise of an option if the other party (government) will not agree.   Example - Contractor seeks a change to the option, the government does not agree, yet the contractor must accept the option without the change must they not?

Yes. When I used the phrase "exercise the option" I was referring to the action of the party who has the right of exercise. In a government contract, that's usually the government, not the contractor. So if the government asks for a change to the terms of the contract as a condition of exercising its option, and if the contractor refuses, the government can still exercise the option as it is, and the contractor cannot decline.

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@joel hoffman 

49 minutes ago, joel hoffman said:

Vern, Not sure what you mean regarding exercising an option on an existing contract. 

Joel, I'm not sure what you want me to clarify. Please explain.

If you're talking about IDIQ contracts and the issuance of orders, once the government has bought the minimum the issuance of any further orders is voluntary. Orders are exercises of options to buy additional quantities. There are many reasons why the government might choose not to issue further orders to an IDIQ contractor: no requirement, poor past performance, suspension or debarment, some other disqualification, or some other reason. The contractor has no right to further orders.

To me the rules in FAR Subpart 4.21 seem very straightforward. I can understand why some contractors would not like them, but the government is not your ordinary customer and government contractors must be prepared for such things. None of this seems as shocking as an unexpected termination for convenience, but they are not at all uncommon. Nor is this the first time COs have been instructed to negotiate new clauses into existing contracts.

Why the strong reactions from some people? The issues seem to be mere practical matters. I stand by my earlier response to the OP:

1. change the contractor's mind, or

2. change your mind and seek a waiver, or

3. say goodbye to the contractor when the current contract ends.

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40 minutes ago, Vern Edwards said:

@C Culham 

Yes. When I used the phrase "exercise the option" I was referring to the action of the party who has the right of exercise. In a government contract, that's usually the government, not the contractor. So if the government asks for a change to the terms of the contract as a condition of exercising its option, and if the contractor refuses, the government can still exercise the option as it is, and the contractor cannot decline.

In this case though, the government cannot exercise the option if the contractor won’t agree to the addition of the clause and the prescription that has to be included in any request for a task order proposal. 

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41 minutes ago, Vern Edwards said:

@joel hoffman 

Joel, I'm not sure what you want me to clarify. Please explain.

If you're talking about IDIQ contracts and the issuance of orders, once the government has bought the minimum the issuance of any further orders is voluntary. Orders are exercises of options to buy additional quantities. There are many reasons why the government might choose not to issue further orders to an IDIQ contractor: no requirement, poor past performance, suspension or debarment, some other disqualification, or some other reason. The contractor has no right to further orders.

To me the rules in FAR Subpart 4.21 seem very straightforward. I can understand why some contractors would not like them, but the government is not your ordinary customer and government contractors must be prepared for such things. None of this seems as shocking as an unexpected termination for convenience, but they are not at all uncommon. Nor is this the first time COs have been instructed to negotiate new clauses into existing contracts.

Why the strong reactions from some people? The issues seem to be mere practical matters. I stand by my earlier response to the OP:

1. change the contractor's mind, or

2. change your mind and seek a waiver, or

3. say goodbye to the contractor when the current contract ends.

Ok, I agree

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55 minutes ago, Vern Edwards said:

@C Culham 

Yes. When I used the phrase "exercise the option" I was referring to the action of the party who has the right of exercise. In a government contract, that's usually the government, not the contractor. So if the government asks for a change to the terms of the contract as a condition of exercising its option, and if the contractor refuses, the government can still exercise the option as it is, and the contractor cannot decline.

Thanks for the clarification.

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