What has your research shown?

jwomack said:

What has your research shown?

I will be happy to share my research with you.  However, so as to avoid directing or influencing your answer, I would like to know what you, as well as others on the forum, think.  Unless you have a specific question that might suggest an answer, I would like to avoid general questions as responses to my question.  I am not sure we will get very far with that.  The question seems simple enough, does it not?

Guardian said:

What constitutes an option period under the authority of FAR 52.217-9?

The question is a tad vague, wouldn't you say?

constitute

[ kon-sti-toot, -tyoot ]

verb (used with object), con·sti·tut·ed, con·sti·tut·ing.

to compose; form:mortar constituted of lime and sand.

to appoint to an office or function; make or create:He was constituted treasurer.

to establish (laws, an institution, etc.).

to give legal form to (an assembly, court, etc.).

to create or be tantamount to:Imports constitute a challenge to local goods.

Archaic. to set or place.

“Option” means a unilateral right in a contract by which, for a specified time, the Government may elect to purchase additional supplies or services called for by the contract, or may elect to extend the term of the contract.

REA'n Maker said:

The question is a tad vague, wouldn't you say?

constitute

[ kon-sti-toot, -tyoot ]

verb (used with object), con·sti·tut·ed, con·sti·tut·ing.

to compose; form:mortar constituted of lime and sand.

to appoint to an office or function; make or create:He was constituted treasurer.

to establish (laws, an institution, etc.).

to give legal form to (an assembly, court, etc.).

to create or be tantamount to:Imports constitute a challenge to local goods.

Archaic. to set or place.

“Option” means a unilateral right in a contract by which, for a specified time, the Government may elect to purchase additional supplies or services called for by the contract, or may elect to extend the term of the contract.

Allow me to rephrase. What is [emphasis added] an option period under 52.217-9?

You did not answer my entire question.  Please read the second, conditional, phrase--

    What constitutes an option period under the authority of FAR 52.217-9?

Anyone?  Bueller?

Guardian said:

What constitutes an option period under the authority of FAR 52.217-9?

Relevant GAO and legal precedent would be appreciated.

Why not a regulation?  17.204 (c) and (g) provide the side boards.

C Culham said:

Why not a regulation?  17.204 (c) and (g) provide the side boards.

I think we're getting warmer.  What about the paragraph between those two, (f)--

(f) Contracts may express options for increased quantities of supplies or services in terms of --

(1) Percentage of specific line items,

(2) Increase in specific line items; or

(3) Additional numbered line items identified as the option.

What happens if we don't have a bona fide need or adequate funding FOR ALL of the line items labeled "Option" within a given POP?

And how about what 17.207(f) says? --

(f) Before exercising an option, the contracting officer shall make a written determination for the contract file that exercise is in accordance with the terms of the option, the requirements of this section, and Part 6. To satisfy requirements of Part 6 regarding full and open competition, the option must have been evaluated as part of the initial competition and be exercisable at an amount specified in or reasonably determinable from the terms of the basic contract, e.g. --

(1) A specific dollar amount;

(2) An amount to be determined by applying provisions (or a formula) provided in the basic contract, but not including renegotiation of the price for work in a fixed-price type contract;

(3) In the case of a cost-type contract, if --

(4) A specific price that is subject to an economic price adjustment provision; or

(5) A specific price that is subject to change as the result of changes to prevailing labor rates provided by the Secretary of Labor.

• (i) The option contains a fixed or maximum fee; or

  (ii) The fixed or maximum fee amount is determinable by applying a formula contained in the basic contract (but see 16.102(c));

May we concentrate on the text I've singled out in bold print? --

[T]he option must...be exercisable at an amount specified in or reasonably determined from the terms of the basic contract, [for example] -- [a]n amount to be determined by applying provisions (or a formula) provided in the basic contract...."

What do you think that means exactly, aside from the obvious, e.g., shall not change unit prices?  GAO, legal precedent, anything to support a thought; how about just a thought?

Hasn't the GAO opened the door to changing OP POPs when it decided 52.217-8 could be used between OPs exercised pursuant to 52.217-9.  How much more flexibility might the CO have?

Guardian said:

The question seems simple enough, does it not?

Sounds like you want others to do your research, does it not?

jwomack said:

Sounds like you want others to do your research, does it not?

I wasn't asking for anyone to go out of their way to do research on this.  If they elect to, that is their decision.  Sometimes I learn the most in helping others.  There are people on this forum that have a firm command of the administrative and case law.  If someone has a case I could look at, it might help me moving forward.  I spent a couple hours looking through cases the other evening, but couldn't find anything directly applicable.

Guardian said:

I spent a couple hours looking through cases the other evening, but couldn't find anything directly applicable.

Applicable to what?  You have asked several questions here.  What exactly if the issue that you are trying to research?  In regard to your original question, the clause does not use the term "option period" so I am confused as to the relevance of that term to the clause.

Options come in different forms.  The clauses at FAR 52.217-6 through -9 cover common forms.  You may use whichever clause meets your needs, or you may tailor one of these clauses if needed, or you may write your own homemade clause.  I have done all three in my career.

The term "option period" is not used in the -9 clause.

ji20874 said:

Options come in different forms.  The clauses at FAR 52.217-6 through -9 cover common forms.  You may use whichever clause meets your needs, or you may tailor one of these clauses if needed, or you may write your own homemade clause.  I have done all three in my career.

The term "option period" is not used in the -9 clause.

That's helpful, but I don't know why you are bringing up -6 through -8, when the very title of my post is "...52.217-9."  I agree with you that there is a difference between an "option" and an "option period" and many contracting professionals wrongly use the term OP to refer to an option.  Whereas 52.217-9 doesn't use the term OP, the period or "term" (and it's extension) is the purpose of the clause, i.e., Option to Extend the Term of the Contract.  That said, I accept your terminology and will discard mine except inasmuch as I need it to reference how the CLIN descriptions were worded.

I asked several questions within this post, but the first one was "what is an option per FAR 52.217-9"?  I have read -9 several times over; it describes the conditions which the Government must meet to exercise an option, but does not say what an option is.  So then perhaps the answer to my question is, "52.217-9 does not define what an option is; the answer to that question must be sought outside the clause, but within the contract."

Here's a scenario that should clarify my question -- I inherited a contract that has ten line items (CLINs), each for a different set of services at a fixed quantity and fixed rate, in other words, FFP.  My program office does not have funding (a commitment) for one of those ten CLINS.  We sent a preliminary notice of intent to the contractor per 52.217-9, indicating our intent but not guarantee to exercise "option period two."  My question is this, do I have the unilateral authority under 52.217-9 to exercise (unilaterally) nine of those ten CLINS, each of which is marked "option period two," along with additional descriptions?  The contract never expressly states that, if exercised, they would necessarily be exercised together.

I could not find any GAO cases that addresses this exact question.

Guardian said:

What constitutes an option period under the authority of FAR 52.217-9?

Relevant GAO and legal precedent would be appreciated.

I don't understand the question. FAR 2.101 defines 'option'; FAR Subpart 17.2 prescribes policies and procedures for the use of options; and FAR 52.217-9 outlines the specific terms and conditions of a particular option to extend the term of a contract (see FAR 17.208(g)).

I recommend asking your supervisor and/or posting in the beginners forum.

Jamaal Valentine said:

I don't understand the question. FAR 2.101 defines 'option'; FAR Subpart 17.2 prescribes policies and procedures for the use of options; and FAR 52.217-9 outlines the specific terms and conditions of a particular option to extend the term of a contract (see FAR 17.208(g)).

I recommend asking your supervisor and/or posting in the beginners forum.

Jamaal,

Did you read through this entire thread?  Did you read my last question as spelled out in the scenario I described?  I cited what I believe to be the relevant paragraphs under 17.2 for discussion. 17.208(g) is the prescription.  Ok. 

How does the definition under 2.101 answer the question I asked above?

How is a beginner going to answer this question, when I can't get an acceptable answer from a qualified contracting officer?  

Forgive me for assuming, but I don't think you have a ready answer.

Guardian said:

My question is this, do I have the unilateral authority under 52.217-9 to exercise (unilaterally) nine of those ten CLINS, each of which is marked "option period two," along with additional descriptions?

In contracting many things are dependent on facts of the contract and realationship of those facts..  For your question questions such as 1)How does you price schedule read, 2) Exact wording of the 52.217-9 clause - all blanks filled in, and 3) Is an availability of funds clause in the contract.  Most likely other facts as the question is unfolded.

Beyond getting more facts here is a stab at the fix to your question.  You are extending the term of the contract and not exercising options of CLINS.  Maybe your fix is to exercise the option and remove the CLIN.  All in one mod or the removal in a subsequent mod.

Guardian said:

Did you read through this entire thread?

No, why would I; I was responding to your opening question. 

Guardian said:

Did you read my last question as spelled out in the scenario I described?

No. Is it better than the original? (I'm skeptical that it's improved or a single question, but I'll check.) 

Guardian said:

How is a beginner going to answer this question, when I can't get an acceptable answer from a qualified contracting officer?

The beginners forum is for members who need basic help. It provides gentler and sometimes more responsive commentary.

Guardian said:

Forgive me for assuming, but I don't think you have a ready answer.

If you want help you'll need to ask a good question and/or use courtesy.

Guardian said:

That's helpful, but I don't know why you are bringing up -6 through -8, when the very title of my post is "...52.217-9."

I brought them up because it seemed you didn't know what an option was under the -9 clause -- one way to tell what is different about the -9 option is to look at the other option forms.

Guardian said:

My question is this, do I have the unilateral authority under 52.217-9 to exercise (unilaterally) nine of those ten CLINS, each of which is marked "option period two," along with additional descriptions?  The contract never expressly states that, if exercised, they would necessarily be exercised together.

Thanks for the clarification.  I never would have realized this was your question from the original posting.

But your question still cannot be answered without knowing more facts.  Sometimes, the -9 clause is used to extend the term of the contract by exercising separately-priced CLINs.  It appears you are questioning whether your next option exercise (1) must include all 10 "option period two" CLINs; or (2) may include only 9 of those CLINs.

Question 1:  Did the contractor's proposal include any all-or-none text, or any other text based on para. (h) of the provision at FAR 52.212-1 or para. (f)(5) of the provision 52.215-1?  

Question 2:  Would a reasonable, prudent person, looking at your contract, feel that the agreement of the parties at the time of contract formation was that (1) Option Period 2 comprises all ten CLINs that must be exercised all-or-none, or (2) Option Period 2 has ten CLINs of which some or all may be exercised?

I hope this is helpful to you.  If you continue to post here, please try to be courteous.

Guardian said:

perhaps the answer to my question is, "52.217-9 does not define what an option is; the answer to that question must be sought outside the clause, but within the contract."

Yes.  An option is whatever it is defined to be elsewhere in the contract.

Guardian said:

The contract never expressly states that, if exercised, they would necessarily be exercised together.

I would assume these things to be severable then...unless a pre-award meeting of the minds implied differently.

@Guardian This may be painful, but remember you asked for it.

Guardian said:

...there is a difference between an "option" and an "option period" and many contracting professionals wrongly use the term OP to refer to an option.  Whereas 52.217-9 doesn't use the term OP, the period or "term" (and it's extension) is the purpose of the clause, i.e., Option to Extend the Term of the Contract.

What are the differences? (noting that “option” means a unilateral right in a contract by which, for a specified time, the Government may elect to purchase additional supplies or services called for by the contract, or may elect to extend the term of the contract.)

Are you simply distinguishing the option (unilateral right) from the period (term of the option)? FAR Subpart 17.2 references options, option quantities and periods.

Guardian said:

I asked several questions within this post, but the first one was "what is an option per FAR 52.217-9"?  I have read -9 several times over; it describes the conditions which the Government must meet to exercise an option, but does not say what an option is.  So then perhaps the answer to my question is, "52.217-9 does not define what an option is; the answer to that question must be sought outside the clause, but within the contract."

Let's start with the rules. FAR 4.1003 establishes requirements for separate line items. FAR 4.1005-1 outlines the data elements for line items; paragraphs ( c ) & ( d )--in particular--relate to options. Pair this information with the information, and common methods, at FAR 17.204.

How does your contract identify the options under 52.217-9? (FAR 17.204(f)(1), (2), or (3)...maybe (g) or something different)

FAR 17.204(f)(3) seems to apply because you provided that you have:

Guardian said:

a contract that ten line items (CLINs), each for a different set of services at a fixed quantity and fixed rate, in other words, FFP...each of which is marked "option period two," along with additional descriptions?

You should be getting closer to refining (or defining) what an option is pursuant to your contract clause. (a unilateral right to exercise the identified schedule CLINS in strict accordance with their terms...but what are their terms? Synthesizing your contract terms & conditions including the schedule CLINs and option clause (52.217-9) will tell you)

Guardian said:

My program office does not have funding (a commitment) for one of those ten CLINS.  We sent a preliminary notice of intent to the contractor per 52.217-9, indicating our intent but not guarantee to exercise "option period two."  My question is this, do I have the unilateral authority under 52.217-9 to exercise (unilaterally) nine of those ten CLINS, each of which is marked "option period two," along with additional descriptions?  The contract never expressly states that, if exercised, they would necessarily be exercised together.

Presumably your option clause states (1) a preliminary notification requirement; and (2) a period within which the option(s) may be exercised. If you've satisfied these and the options are separately identified why wouldn't the contract terms provide the government the unilateral right to exercise all, some, or none of the options in strict accord?

ji20874 said:

Thanks for the clarification.  I never would have realized this was your question from the original posting.

Yes, my convoluted arrangement of questions was purposeful and I for one think it led to an excellent discussion.  Yes, there was a method to the madness.  Maybe its for the best that others first assume I'm a newbie.  Thanks for being patient with me. 

In response to Guardian's statement, "The contract never expressly states that, if exercised, they would necessarily be exercised together. "

jwomack said:

Yes.  An option is whatever it is defined to be elsewhere in the contract.

I would assume these things to be severable then...unless a pre-award meeting of the minds implied differently.

Thanks jwomack, this too is what my research shows, that is, contracting officers have a certain amount of discretion in exercising options.

In response to Guardian's question and statement, respectively, "[D]o I have the unilateral authority under 52.217-9 to exercise (unilaterally) nine of those ten CLINS, each of which is marked "option period two," along with additional descriptions?  The contract never expressly states that, if exercised, they would necessarily be exercised together."

Jamaal Valentine said:

Presumably your option clause states (1) a preliminary notification requirement; and (2) a period within which the option(s) may be exercised. If you've satisfied these and the options are separately identified why wouldn't the contract terms provide the government the unilateral right to exercise all, some, or none of the options in strict accord?

Thanks, Jamaal.  This is really what I was looking for.  I tend to agree.  If you come across any GAO or legal cases that support this conclusion, it would be helpful if you could post the citations.

I appreciate everyone's contributions to this discussion and their help.

I think what Guardian is asking is can he/she exercise an option for an additional period of services but unilaterally change the scope to delete certain contract line items because there isn’t enough funding. 

In other words not exercise the option as written or priced. 

Unless the deleted line items are totally severable, I would suspect that there might be certain fixed costs that would not be recovered if those CLINs aren’t included in the scope for the next year. Thus, the contractor’s unchanged work could be impacted.

In that case, the contractor might have an out if they don’t agree with the price of the changed scope or they could claim impact costs or someone else might object to changing the scope of the option. 

I believe that there is plenty of caselaw covering instances of the government not exercising options as written. But I’m on my sailboat, St Somewhere with my wife on the Florida Coast this week and don’t have the inclination to perform research.

joel hoffman said:

I believe that there is plenty of caselaw covering instances of the government not exercising options as written. But I’m on my sailboat, St Somewhere with my wife on the Florida Coast this week and don’t have the inclination to perform research.

Ahh, a naysayer rears his head from the sea.  No one has been able to produce a case that provides an answer to this "beginner's question" thus far.  I have come across several cases, but none specifically addressing the exclusion of a CLIN.  Enjoy your adventure, Joel!

Guardian,

You are making a fundamental mistake.  Joel gave an excellent and correct answer.  The question of whether you can exercise nine of ten option CLINs will come from within the four corners of your contract -- if there is a dispute, the judge or other arbiter will read the contract and decide based on the contract and his or her understanding of the intent of the parties at the time of contract formation.  So you must not look to case law for an answer to your question.  The key is whether the ten option two CLINs are ten parts of a whole, or whether they are ten severable and separately-exercisable CLINs.

I don't like to cite case law unless the case is applicable to the facts.  I don't know your facts (you haven't answered my relevant questions), so I won't try to find cases.

No one here has read your contract.  Does your reading of the contract allow you to exercise nine of the ten option two CLINs?  Then do it.

ji20874 said:

Guardian,

You are making a fundamental mistake.  Joel gave an excellent and correct answer.  The question of whether you can exercise nine of ten option CLINs will come from within the four corners of your contract -- if there is a dispute, the judge or other arbiter will read the contract and decide based on the contract and his or her understanding of the intent of the parties at the time of contract formation.  So you must not look to case law for an answer to your question.  The key is whether the ten option two CLINs are ten parts of a whole, or whether they are ten severable and separately-exercisable CLINs.

I don't like to cite case law unless the case is applicable to the facts.  I don't know your facts (you haven't answered my relevant questions), so I won't try to find cases.

No one here has read your contract.  Does your reading of the contract allow you to exercise nine of the ten option two CLINs?  Then do it.

I agree that Joel gave an excellent answer.  Every court case involves different circumstances, whether they differ just a little or a lot.  My point was this--that I have not been able to find one single case that addresses an agency trying to exclude one or more CLINs that are associated with a particular "option period," i.e., period of performance.  Do I think I might locate a case with the exact same circumstances as mine?  Unlikely.  Might I find a case that poses the larger question I have asked?  Maybe.  The contract does not expressly state that this cannot be done.  The services have otherwise been consistent from year to year, for two consecutive years.  Not exercising this one CLIN would not scale the services back that much by any measure.  What else would you like to know?  As a CO, I think the safest bet is to have it signed by both parties and forego the authority of 52.217-9.  Might I be able to do it under the Option to Extend the Term of the Contract clause?  Sure.  Might the contractor dispute that decision?  Sure, if they see fit in doing so and feel they were unfairly treated under the perceived contract terms.  If I had a definite unwavering answer, I would not have brought it to WIFCon.  I don't bring easy questions here.  Do you not think I have attorneys, as do you?  Do you not think I have addressed this with them?  Did you not consider that I have perhaps gotten different responses?  I do not know what a reasonable, prudent person might think,  but I have some idea what I think :-).  I earnestly appreciate your advice, as well as Joel's and that of everybody else.  I think we can all agree that not everyone has the same opinion here, is leaning in the same direction, and yes you are totally correct, I have not provided you my contract to read.

Guardian said:

As a CO, I think the safest bet is to have it signed by both parties and forego the authority of 52.217-9.

Have what signed by both parties?

Guardian said:

As a CO, I think the safest bet is to have it signed by both parties and forego the authority of 52.217-9.

Safe?  Or are you giving up Government rights already established in the contract?  If you’re giving up rights, what are you receiving as consideration in return from the contractor?  What authority do you have to give away something that already belongs to the Government?

Retreadfed said:

Have what signed by both parties?

The contract modification extending the term of the contract, thereby obligating funds for nine of the ten CLINs associated with the upcoming one-year performance period.

Aren't you still exercising an option?

Guardian,

If you are as certain of your position as you say you are, you should exercise the nine CLINs unilaterally.  

Do you want the contractor to sign the modification to show that it concurs with the non-exercise of the tenth CLIN?  In essence, then, you would be re-negotiating the option to delete the tenth CLIN while leaving the others unchanged.

But if you are as certain in your position as you say you are, you don’t need the contractor’s signature to exercise only nine of the option two CLINs.

Retreadfed said:

Aren't you still exercising an option?

Base on the definition of an option under FAR 2.101 that Jamaal so appropriately drew our attention to, I would say no--

"'Option'" means a unilateral right [emphasis added] in a contract by which, for a specified time, the Government may elect to purchase additional supplies or services called for by the contract, or may elect to extend the term of the contract.

if we are now seeking the contractor's signature, I would contend it's no longer an "option" under the FAR's definition.

ji20874 said:

If you are as certain of your position as you say you are, you should exercise the nine CLINs unilaterally.

If you go back and re-read what I wrote, you will find that I am not that certain.  I am not sure why are saying this.  I have been consistent throughout this thread and simply never said that.

Guardian said:  "If I had a definite unwavering answer, I would not have brought it to WIFCon."

The whole point of me starting this thread was to get answers, not promote any one assertion.  I think I, as well as others, including yourself, have insinuated that this issue might present more than one solution, with no single one necessarily being the unquestionably right way to proceed.

ji20874 said:

Do you want the contractor to sign the modification to show that it concurs with the non-exercise of the tenth CLIN?

Yes. 

ji20874 said:

In essence, then, you would be re-negotiating the option to delete the tenth CLIN while leaving the others unchanged.

No, as I stated to Retread above, by issuing the mod bilaterally, I am no longer exercising an option, which per se is a unilateral action.  Why would you have to delete the unexercised CLIN?  It can remain in the contract.  By the contract's very terms, the Government never beared any obligation to exercise it.  If a CO wants to delete it perhaps because its existence somehow screws up its local accounting system, then sure, go ahead and delete it.

jwomack said:

Safe?  Or are you giving up Government rights already established in the contract?  If you’re giving up rights, what are you receiving as consideration in return from the contractor?  What authority do you have to give away something that already belongs to the Government?

Yes, safe.  If the contractor signs off on it, then there is no question of an impending dispute.  Sure, in a sense we are relinquishing our unilateral right to exercise that one option.  However, we are not thereby removing the clause 52.217-9 and our ability to exercise subsequent options under the unilateral authority provided for by that clause.  What is the agency getting in return?  How about peace of mind, knowing that a dispute over its not having exercised one of the CLINs isn't waiting around the corner?   What else would you want as a CO or do you think the Government might deserve?  What authority, you ask, do I have to "give away something that already belongs to the Government"?  Well, let's see--according to several of my attorney friends who I meet with weekly as part of my professional group, I have quite a bit of discretion to do this among other things under my certificate of appointment.  COs often have more than one way to proceed with a particular contract action.

Hey, everybody, see this thread from 2011. 

It may be that the parties could agree to bilaterally add the option year at a reduced scope, if it wouldn’t affect the original competition. 17.207 (f) is addressing the scope of the competition among other aspects. Your situation involves a change to or partial termination of the option year services, which were likely described as 10 specific CLINs with a total price for the option years. You don’t know if the CLIN to be deleted would impact the price of the remaining work.

Guardian said:

Sure, in a sense we are relinquishing our unilateral right to exercise that one option....What is the agency getting in return?  How about peace of mind, knowing that a dispute over its not having exercised one of the CLINs isn't waiting around the corner?

Gaining “peace of mind” due to ineptness, i.e., the inability to properly interpret how options work, does not equate to the Government receiving consideration.

Guardian said:

What authority, you ask, do I have to "give away something that already belongs to the Government"?  Well, let's see--according to several of my attorney friends who I meet with weekly as part of my professional group, I have quite a bit of discretion to do this among other things under my certificate of appointment.

You need new attorney friends and a better professional group if this is the advice they're giving you.

Guardian said:

Base on the definition of an option under FAR 2.101 that Jamaal so appropriately drew our attention to, I would say no

If you are not exercising an option, is the acquisition of the additional services you require a new procurement?

Retreadfed said:

If you are not exercising an option, is the acquisition of the additional services you require a new procurement?

If a reasonable, prudent person considers it out of scope .

Retreadfed said:

If you are not exercising an option, is the acquisition of the additional services you require a new procurement?

Guardian said:

If a reasonable, prudent person considers it out of scope .

PepeTheFrog said:

*deleted the whole thing, PepeTheFrog responded to the wrong question because this thread and OP is incoherent*

Apparently nobody read Vern Edwards comment in the thread I referenced above. He basically explained how you can bilaterally descope  the option and how it should (not) affect the scope of the competition.  That is what 17.207(f) is concerned about.

Guardian said:

If a reasonable, prudent person considers it out of scope

Do you?  Remember there are two concepts of "scope."  One relates to the scope of the original competition, which is the scope test that GAO would use.  The other is whether the change is the type that the parties to the contract could have anticipated.  This is the test used by the appeals boards to determine if a change is a cardinal change.

Retreadfed said:

Do you?  Remember there are two concepts of "scope."  One relates to the scope of the original competition, which is the scope test that GAO would use.  The other is whether the change is the type that the parties to the contract could have anticipated.  This is the test used by the appeals boards to determine if a change is a cardinal change.

Read Vern’s  post . That thread involves a situation similar to this scenario.

There would be absolutely nothing wrong in exercising the option then deleting a CLIN but that would be wasteful and involve needless extra steps. There is no cardinal change in reducing the scope by one CLIN out of ten. 

I do think that the contracting officer still must evaluate whether adding the work,  either by exercising the option as is or by bilaterally modifying the option,  would be in the government’s best interest or whether a new procurement would be a better value- per 17.207.

PepeTheFrog said:

*deleted the whole thing, PepeTheFrog responded to the wrong question because this thread and OP is incoherent*

I agree with you, Pepe. This thread wasn’t started under “Beginner’s “ Topic Area and led us all tortuously to what the actual scenario and resulting question was. 

The gist is this: ‘Can I unilaterally exercise the option to award one less CLIN because that effort hasn’t been funded for the next option period?’

Why Guardian beat around the bush so long to explain the scenario doesn’t make any sense to me.

joel hoffman said:

There would be absolutely nothing wrong in exercising the option then deleting a CLIN but that would be wasteful and involve needless extra steps. There is no cardinal change in reducing the scope by one CLIN out of ten. 

I do think that the contracting officer still must evaluate whether adding the work,  either by exercising the option as is or by bilaterally modifying the option,  would be in the government’s best interest or whether a new procurement would be a better value- per 17.207.

Joel,

How would I exercise all ten CLINs if I only have a funding commitment for nine (Anti-deficiency Act violation?) and no authority to incrementally fund?  Sounds like you prefer exercising nine out of ten CLINs per 52.217-9 over a bilateral mod because of potential scope issues.  How was your sailing trip by the way?

Guardian said:

Joel,

How would I exercise all ten CLINs if I only have a funding commitment for nine (Anti-deficiency Act violation?) and no authority to incrementally fund?  Sounds like you prefer exercising nine out of ten CLINs per 52.217-9 over a bilateral mod because of potential scope issues.  How was your sailing trip by the way?

Guardian, yep I agree with Vern’s excellent analysis and with bilateral reduction in scope and mod to add the nine CLINs for the next year’s effort.  This would be after complying with 15.207 (c) through (e). 

I mentioned the other alternative only because some hinted that reducing the scope at all might affect the original competition or be considered a cardinal change. If so, then  the government couldn’t add the option and exercise its contractual right to a partial termination for convenience, which makes no sense to me. Of course, the government may partially terminate the scope of work in a contract during performance after award.  The government could also issue a deductive Change during contract performance, as long as it doesn’t make a major change, reprice work for current market conditions, etc. See Verns advice and caveats in the referenced 2011 thread. 

If it can delete work through a partial termination or a Change Order, in accordance with the terms of the contract if the requirements change,  it should be able to make minor deductions bilaterally when adding the option year.

That would be appropriate as long as 1) it isn’t a cardinal change, 2) it is a minor deduction,  3) it doesn’t affect the original competition,  4) the government doesn’t do it because it failed to do the market research and documented determinations required by 15.207 (c)-(e) before adding the option year.

To clarify, I’m not applying the above logic to repricing scenarios, significant revisions to the scope of work, means or methods or adding outside the scope work via the exercise of the option.

I'm retiring from this thread. My head and heart hurts.

joel hoffman said:

Guardian, yep I agree with Vern’s excellent analysis and with bilateral reduction in scope and mod to add the nine CLINs for the next year’s effort.  This would be after complying with 15.207 (c) through (e). 

I mentioned the other alternative only because some hinted that reducing the scope at all might affect the original competition or be considered a cardinal change. If so, then  the government couldn’t add the option and exercise its contractual right to a partial termination for convenience, which makes no sense to me. Of course, the government may partially terminate the scope of work in a contract during performance after award.  The government could also issue a deductive Change during contract performance, as long as it doesn’t make a major change, reprice work for current market conditions, etc. See Verns advice and caveats in the referenced 2011 thread. 

If it can delete work through a partial termination or a Change Order, in accordance with the terms of the contract if the requirements change,  it should be able to make minor deductions bilaterally when adding the option year.

That would be appropriate as long as 1) it isn’t a cardinal change, 2) it is a minor deduction,  3) it doesn’t affect the original competition,  4) the government doesn’t do it because it failed to do the market research and documented determinations required by 15.207 (c)-(e) before adding the option year.

Excellent response, Joel and a great help!

joel hoffman said:

Why Guardian beat around the bush so long to explain the scenario doesn’t make any sense to me.

I started with a fundamental, seemingly elementary question, in hopes of getting answers to more specific questions.  Perhaps that first question wasn't worded as it should have been, but I asked several other good questions along the way that were flat out ignored.  I am not sure why.  I will assume the blame in that I tried to pack too much into one thread.  I too am retiring and going out to enjoy this nice weather.

Good luck, Guardian. This morning, I read through this thread again as well as the 2011 thread I referenced and Vern Edwards post therein. 

He began with :

“There is no absolute prohibition against the modification of an option prior to or at the the time of its exercise. There are two issues concerning the modification and exercise of options. I will call them the Validity Issue and the Scope of the Contract/Competition Issue.”

He then worked through the two issues and urged caution and prudence. 

I mentioned earlier that one area of ten services now being performed that you have no need or funding for and that you need to delete might not be completely severable and/or the contractor might not want to perform a smaller scope of work. 

 I don’t think that you can UNILATERALLY exercise a portion of the option, affect scope of the competition or expand the scope of the option period.

My advice is to communicate the problem and scenario with the contractor and find out what the impact is (unabsorbed fixed costs? ) and if the contractor can accept the reduction as priced but for the impact, if any. Then work through it bilaterally before extending the term of the contract.

If the contractor wants to reprice the remaining portion of the option, that would be improper and affect the scope of the competition. Then it looks like you would have to re-procure the next year’s services.

Is that clearer?

Jamaal Valentine said:

I'm retiring from this thread. My head and heart hurts.

Jamaal, I take it that your solution is to abandon further years of this contract and re-procure for next year.

There is no need and no funding for one of the portions of services. Even if there were funds but not the need, it would involve unnecessary extra work, be wasteful of resources and  costs to exercise the entire option then delete the work by change or partial termination for convenience. 

Work it out ahead of time, within the scope of the competition. Sorry your heart hurts.

@joel hoffman I honestly can't make heads or tails out of the details I would need to make a decision (exercise the 9 CLINs and be done). However, I thought Guardian got his/her answer a while ago and that's all that matters to me.

This thread started out confusing and gained momentum with all sorts of opinions and sidebars added in just for fun (often the case here and I'm guilty of it). For example, I don't know where you came up with there being 'no need'...

joel hoffman said:

There is no need and no funding for one of the portions of services.

I only recall the OP saying they didn't have funding.

It's okay though; Guardian seems satisficed.

joel hoffman said:

If the contractor wants to reprice the remaining portion of the option, that would be improper and affect the scope of the competition.

See, CTA, Inc., 00-2 BCA 30947 and see if that affects the above conclusion.

Retreadfed said:

See, CTA, Inc., 00-2 BCA 30947 and see if that affects the above conclusion.

How about a link please. Tried search for that on iPhone iPad and computer.  No luck.

http://www.asbca.mil/Decisions/2000/47062.pdf

Retreadfed said:

http://www.asbca.mil/Decisions/2000/47062.pdf

That case doesn't affect the above conclusions. The KO completely restructured the contract option for production, which the ASBCA said was beyond her authority under the Changes clause and was a Cardinal change, outside the scope of the contract. The Board made that clear but since the Contractor accepted by continuing performance, presumably because it wanted the work rather than having re-compete for it, etc., the Board did not address the legality of the action.

It was a very complex scenario,  an example of what Vern was cautioning against in his 2011 post and reinforces what I was talking about. 

I started copying relevant points in the Decision but it runs for pages. One can read for themselves.

In this case, the Contractor had to re-price the work due to the Cardinal Change to the contract option, which reduced the required quantity from 12 to 5 units.

On ‎6‎/‎7‎/‎2019 at 8:19 AM, joel hoffman said:

My advice is to communicate the problem and scenario with the contractor and find out what the impact is (unabsorbed fixed costs? ) and if the contractor can accept the reduction as priced but for the impact, if any. Then work through it bilaterally before extending the term of the contract.

If the contractor wants to reprice the remaining portion of the option, that would be improper and affect the scope of the competition.

Joel, maybe you can clarify this statement.  To me, adjusting the price of the contract to reflect the impact of the reduction in the effort to be performed results in a repricing of the work to be performed.  This was permitted in CTA.  Can you reconcile this statement with the last sentence quoted above, where you say repricing would be improper?

Retreadfed, I meant repricing of the remaining nine CLINs for current market conditions would be improper, as Vern described.  

Yes, if there are fixed costs that were originally  apportioned to ten CLINs, for instance, the mod could include the unabsorbed fixed costs that were in the deleted CLIN as a separate, new CLIN or it could spread the cost among the nine remaining CLINs. That’s not “repricing” - it only provides for an (equitable) adjustment of  those remaining CLINs.  

There is a technical difference between adjusting the CLIN price to reflect impact costs and “repricing”  , which means abandoning the old price and re-pricing it for current conditions.  The former would involve adding  each CLIN’s proportionate share of unabsorbed fixed cost, for example. The latter means a new bottom up price. 

Bottom up repricing doesn’t leave the contractor whole - good or bad. 

Simply adjusting the price for the impact of the change does leave it whole. 

As an example of the difference, pricing of an adjustment for unit priced overruns outside of the range described in a Variation in Estimated Quantities Clause is supposed to be done only to reflect the difference in unit cost to the contractor to perform the quantity within the range and outside the range (the 1975 “Victory Construction vs US” Claims Court Decision principle).  Note that this assumes that no additional quantities of the unit priced items have been added by change.  Any new or additional quantities added by changes to the work can be separately unit priced. 

In the late 1980’s, the Engineer Board of Contract Appeals embraced the concept of re-pricing overruns beyond 115% of the estimated quantities (the 1989 ENgBCA “Bean Dredging” decision method) but ASBCA disagreed,  as did the Court of Claims a few years later (1993 Foley Construction Co. vs US) , which set the matter straight, reverting to the Victory Construction Co. interpretation of the VEQ clause. The Eng Board had strayed from the Victory Construction principle in “Bean Dredging”. Indeed, the Corps and Eng Bd had tried to reprice the overrun in the earlier 1975 Victory Construction decision but were reversed by the Claims Court. 

Thus, we generally** don’t “reprice” overruns based upon actual cost. We  would only adjust the unit price to reflect the DIFFERENCE in the contractor’s cost to perform work within and outside the VEQ range, if any. 

 **See a 2018 article at http://www.long-intl.com/articles/Long_Intl_Construction_Claims_for_Variation_in_Quantity.pdf

The above article covers VEQ clause adjustments and the recent cases named above. 

Probably more information than necessary but I tend to use terms that I’m used to using.  Sorry.

joel hoffman said:

Probably more information than necessary but I tend to use terms that I’m used to using.  Sorry.

We all do.  While some terms in government contracting have defined meaning, not all do.  Thus, we all have to be careful and not assume that everyone understands the terms that we use.  This reminds me of the quote attributed to Winston Churchill that the Americans and British are two peoples separated by a common language.

Actually the term “repricing” is described  in various court cases and board decisions,  including “Victory Construction Co. vs US.*  ( https://casetext.com/case/victory-construction-co-inc-v-united-states  ) when they distinguish  between the two methods. If you think about it,  it has been Court and Board actions that defined or refined various terms or bases of price and time adjustments. 

“Price realism” is another term where the Decisions have carved out the idea that “price realism” focuses on underpricing, while “Fair and Reasonable” focuses on overpricing. Neither term is clearly defined thusly from a reading of the FAR.

Another one is “unabsorbed home office overhead”. The Courts have defined the parameters to establish unabsorbed HOOH. 

*Victory Construction Co Inc v. United States, 510 F.2d 1379 (Fed. Cir. 1975)