Partially exercising option quantities
Started by tnt2k1 · Feb 13, 2014 · 6 replies
- tOriginal post
tnt2k1
Feb 13, 2014 · 12y ago
Contract Requirements: We have a requirement where we need to have up to 425 students go through a two year training class over the span of 5 years (because that's the max # of years we can have on a service training contract, right?). We will structure the requirement where we will have up to 85 students per two-year class, and each subsequent class to begin a year later.
Issue: We don't know whether we will have all 85 students attend the subsequent classes after the first class.
We are structuring the contract in the following manner:
CLIN 0001: Qty 85 -- POP 1/2015 - 12/2016
CLIN 0002: Qty 85 -- POP 1/2016 - 12/2017 (OPTION)
CLIN 0003: Qty 85 -- POP 1/2017 - 12/2018 (OPTION)
CLIN 0004: Qty 85 -- POP 1/2018 - 12/2019 (OPTION)
CLIN 0005: Qty 85 -- POP 1/2018 - 12/2019 (OPTION) (the POP is intentional because having this class start a year after CLIN 0004 would make it a 6 year contract)
Since we do not know whether we will have max 85 students per class/CLIN, can we partially exercise each option CLIN? For example, for CLIN 0002, instead of having 85 students we only exercise it for 60 students?
Thank you for the help!
- G
Guest Seeker
Feb 13, 2014 · 12y ago
wifcon.com/discussion/index.php?/blog/2/entry-3039-exercising-options-there-is-more-to-it-than-just-the-far/
- j
joel hoffman
Feb 13, 2014 · 12y ago
I suggest reviewing the basics of options at the link provided above. You will see that you are required to award the options as initially established. However, you can structure option year pricing to provide for a variable number of students. I woould suggest that you structure the the option year pricing to provide for recovery of the vendor's fixed costs that are independent of the number of students in the "base" price for each year.
There are at least a couple of ways to do this. If you are relatively certain of the minimum number of students per year, you could use one or more incremental CLINs up to 85 students per year. The base CLIN for each year would be lump sum for the minimum assured student load, then use one or more CLINs for the remainder up to a maximum of 85 students.
Many training classes or seminars are priced at a cost per student with a certain minimum needed in order to hold the class. So, after the base CLIN, perhaps the second CLIN could be set up that way. If there is a break point where more than one classroom is needed or more instructors are needed, you should consider that.
One way could be to include a unit priced CLIN per student (beyond the number in the base CLIN) within a range up to the breakpoint where more fixed costs kick in. Then structure any other CLIN(s) up to 85 students, similarly.
My point is that there are ways to price options to allow for a variable number of students after the first year, without altering the option as initially competed.
- D
Don Mansfield
Feb 13, 2014 · 12y ago
Your option clause must allow you to do such a thing.
- j
joel hoffman
Feb 13, 2014 · 12y ago
Under my scenario, you would the entire option with some unit priced items. Obviously, the contract would have to explain that the number of students is not fixed and how the unit priced items are to be used.
- G
Guest Vern Edwards
Feb 14, 2014 · 12y ago
Make the option quantities estimated quantities with a unit price per student that is based on the estimated quantity, and include a clause which says that there will be a minimum of X students and that the maximum will be equal to the estimated number. Alternatively, set a minimum and a maximum number and set the estimated quantity somewhere in between.
That should be good enough if you are sure of the minimum number of students. If you are not sure, you can say that the government will pay for a minimum of X, no matter how many students actually attend.
- t
tnt2k1
Feb 24, 2014 · 12y ago
Thank you gentlemen! I appreciate the help!