No-Cost Extension (NCE) of Option contracts

Fixed-price, cost-reimbursement, or time-and-materials?

Services?

ji20874 said:

Fixed-price, cost-reimbursement, or time-and-materials?

Cost-reimbursement service contract

You'd asked for limitations as to extending non-severable services.

If appropriated funds are utilized, one limitation is that the period of performance cannot be extended 5 years beyond the last available date of the funds for new obligations, else you'd be in violation of the Anti-Deficiency Act.

For instance, for an O&M contract awarded on 1 Oct 2015, that means the no-cost extension may not be beyond 30 September 2021 with that same funding.

As for your contract, what is/will be the cause of delay in performance? Is there a cost underrun/overrun?

The contractor wants more time.  I assume there is no reason for an adjustment (equitable or otherwise) in performance time because of any clause in the contract — if there was, you would have said so already.  So, there is no Government delay, no excusable delay, no change under the Changes clause, and so forth...

The contracting officer may terminate the contract for the contractor’s default; or if he or she is still hopeful that the work by be completed reasonably soon, and the work still has value to the Government, he or she may forbear termination and unilaterally establish a new period of performance end date.  The contracting officer should consider reducing the fee because of the lowered value of the contractor’s services, and should make note of the schedule failing in CPARS.

There is no limit on the amount of time the contracting officer may grant.  This is a business decision.  If contract funds evaporate before they are paid, the contracting officer can replace them with other funds.

ji20874 said:

The contractor wants more time.  I assume there is no reason for an adjustment (equitable or otherwise) in performance time because of any clause in the contract — if there was, you would have said so already.  So, there is no Government delay, no excusable delay, no change under the Changes clause, and so forth...

The contracting officer may terminate the contract for the contractor’s default; or if he or she is still hopeful that the work by be completed reasonably soon, and the work still has value to the Government, he or she may forbear termination and unilaterally establish a new period of performance end date.  The contracting officer should consider reducing the fee because of the lowered value of the contractor’s services, and should make note of the schedule failing in CPARS.

There is no limit on the amount of time the contracting officer may grant.  This is a business decision.  If contract funds evaporate before they are paid, the contracting officer can replace them with other funds.

How can the government terminate the cost plus contractor for default? It is likely that all the contractor agreed to was a best effort to complete the work within schedule and within budget.

In other words, I will try to spend all your money and use all your time to do as much as reasonably possible. 

It didn’t guarantee to finish everything within budget and within the contract period. 

And what does “no cost extension” mean on a cost reimbursement service contract? “We will finish the work for zero reimbursement”?  I think that it may mean  that no additional fee will be payed to finish and that sufficient funds might remain to complete the work within the current funding limitations.

This may mean an extension with no change in contract costs - planned work just gets stretched out within existing funds.  If so, this occasionally happens and the government should get something in return for acceptance of the extension like a reduction in fee.

A TfD is possible but what does that get you?

joel hoffman said:

How can the government terminate the cost plus contractor for default? It is likely that all the contractor agreed to was a best effort to complete the work within schedule and within budget.

A cost-reimbursement contract can be established on a completion basis or a term basis.  I supposed it was likely on a completion basis.  The original poster didn't share very much.  

Sure, negotiating a period of performance extension for an exchange of consideration is a possibility.  That will make sense in some cases.

But a T4D is also a possibility if the contractor failed to complete the task it promised to complete or failed to apply a promised level of effort. A contractor should keep its promises, and a contracting officer should manage the contract to get the deal that both parties bargained for.  If it is a term contract, and the contractor failed to provide the promised level of effort during the established period, well, that's default.  But as I wrote, even if the contractor didn't keep its promises, the contracting officer could forbear a T4D as a business decision.

There isn’t enough information known to determine cause for the non-completion, the requirement or the type of obligation.

But I think that the question has been answered.

formerfed said:

This may mean an extension with no change in contract costs - planned work just gets stretched out within existing funds.  If so, this occasionally happens and the government should get something in return for acceptance of the extension like a reduction in fee.

A TfD is possible but what does that get you?

We don’t have enough information to assume that a T4D is warranted or would be legally sufficient on this particular cost reimbursement contract.

In general, for cost contracts: 

“16.301-2   Application.

(a) The contracting officer shall use cost-reimbursement contracts only when—

(1) Circumstances do not allow the agency to define its requirements sufficiently to allow for a fixed-price type contract (see 7.105); or

(2) Uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use any type of fixed-price contract.”

And from 16.306 (d) for a CPFF contract: 

“d) Completion and term forms. A cost-plus-fixed-fee contract may take one of two basic forms—completion or term.

(1) The completion form describes the scope of work by stating a definite goal or target and specifying an end product. This form of contract normally requires the contractor to complete and deliver the specified end product (e.g., a final report of research accomplishing the goal or target) within the estimated cost, if possible, as a condition for payment of the entire fixed fee. However, in the event the work cannot be completed within the estimated cost, the Government may require more effort without increase in fee, provided the Government increases the estimated cost.

(2) The term form describes the scope of work in general terms and obligates the contractor to devote a specified level of effort for a stated time period. Under this form, if the performance is considered satisfactory by the Government, the fixed fee is payable at the expiration of the agreed-upon period, upon contractor statement that the level of effort specified in the contract has been expended in performing the contract work. Renewal for further periods of performance is a new acquisition that involves new cost and fee arrangements.

(3) Because of the differences in obligation assumed by the contractor, the completion form is preferred over the term form whenever the work, or specific milestones for the work, can be defined well enough to permit development of estimates within which the contractor can be expected to complete the work.

(4) The term form shall not be used unless the contractor is obligated by the contract to provide a specific level of effort within a definite time period.”

However, Unless the questioner has more information to share, i think that the question may have been answered.

I just wanted to clarify that we don’t have enough information to say that a sustainable TFD is warranted or even possible here.

joel hoffman said:

We don’t have enough information to assume that a T4D is warranted or would be legally sufficient on this particular cost reimbursement contract.

Right, and no one in this thread has made that assumption.  But based on what has been shared, a T4D is possibly an appropriate action (whether it is a completion form or a term form cost-reimbursement contract).  More information, more facts, will help to narrow the range of possibilities.  It is too soon for us to disallow T4D as a possibility.

On 9/6/2019 at 11:58 PM, WC79 said:

I have a non-severable (12 month) option of a contract

Could you clarify whether you are considering exercising this option or has it has already been exercised? The posting appears to be ambiguous to me because if it has already been exercised, I don't quite understand what relevance there is to it having been an option.

ji20874 said:

Right, and no one in this thread has made that assumption.

formerfed said:

A TfD is possible but what does that get you?

Hmmm.

I said that I wanted to clarify that we don’t have enough information to say that a sustainable TFD is warranted or even possible here.

That wasn’t part of or pertinent to the original question.

ji20874 said:

But based on what has been shared, a T4D is possibly an appropriate action (whether it is a completion form or a term form cost-reimbursement contract).

Nothing has been shared yet by the OP  to support or even suggest that a T4D is possibly appropriate for the instant contract. 

The OP didn’t suggest a Termination.

Joel, you keep quoting me on TfD. I didn’t bring it up to begin with - ji29874 did.  I agree we know almost zero details so Im surp4is3d we’re talking about it. 

In all honesty, it’s a huge investment in administrative time and expense.  Contractors often appeal to the BCA.  One agency that tracks legal and procurement office labor costs to bill program offices said a small manner cost them $120,000.  With a cost reimbursement contract, nothing much is gained except less fee involved.  There’s no excess reprocurement charges.   The contractor gets a black mark but is that worse than an unsatisfactory CPARS.

I have a feeling the OP is simply asking about a extension with no change in existing contract costs.

formerfed said:

I have a feeling the OP is simply asking about a extension with no change in existing contract costs.

Formerfed, I agree with you, if  “no change in existing contract costs” means no change in maximum contract cost limitation.

We simply don’t know what “no cost” means in the context of the original post. A clarification by the OP would be nice to know.

The contractor may want to be reimbursed for costs during the extension as long as they don’t exceed the cost limitation and may or may not want to earn the full fee if not already paid.

All we can assume is that not all of the work that needs to be accomplished was completed within the period of performance (for reasons unknown) and the contractor wants more time to be able to complete it. 

That isn’t necessarily any grounds for a default termination. Possible that the exact extent or complexity of the work was not determinable at the outset or during performance. We don’t know.but that would be a logical reason why it is a cost reimbursement contract,  not FP. 

At any rate, the possibility of a TFD is not pertinent to the OP’s question.

One can’t generalize about a T4D on a cost reimbursement contract without a lot more information, which I don’t expect the OP to provide here.

On ‎9‎/‎7‎/‎2019 at 8:54 PM, ji20874 said:

The contractor wants more time.  I assume there is no reason for an adjustment (equitable or otherwise) in performance time because of any clause in the contract — if there was, you would have said so already.  So, there is no Government delay, no excusable delay, no change under the Changes clause, and so forth...

The contracting officer may terminate the contract for the contractor’s default; or if he or she is still hopeful that the work by be completed reasonably soon, and the work still has value to the Government, he or she may forbear termination and unilaterally establish a new period of performance end date.  The contracting officer should consider reducing the fee because of the lowered value of the contractor’s services, and should make note of the schedule failing in CPARS.

There is no limit on the amount of time the contracting officer may grant.  This is a business decision.  If contract funds evaporate before they are paid, the contracting officer can replace them with other funds.

This is a completion contract. The reasoning behind the request for extension is valid. I would like to know if there any limitations on the amount of time a no cost extension (no additional cost to the government) can granted for. Someone once mentioned that it can not be extended beyond 50% of the original period of performance. I can not find anything supporting that rational. 

This is an extension to a current option that's yet to end.

The contractors performing on the contract. There's been some excusable delays that led to the request. My question is solely around the amount of time a contract can be extended for. Just wondering if there was anything I may have missed.

An excusable delay is a bar for termination for default.  The Government can provide additional time only as necessary to recover from the excusable delay.  There is no codified limit on the time adjustment.

ji20874 said:

An excusable delay is a bar for termination for default.  The Government can provide additional time only as necessary to recover from the excusable delay.  There is no codified limit on the time adjustment.

Thank you. The government is does not intend on terminating the contract as we have a vested interested in the outcome. The contractor will need more time to complete.

Are you relying on the contract clause at FAR 52.249-14, Excusable Delays?

If so, and if the contractor proves that its failure to perform is attributable to an excusable delay and proves the time impact, that is the amount of time you grant in the revised period of performance. 

If not, what contract clause are you relying on?

Excuse my ignorance, but if there are funds remaining and the parties agree, can't the PoP simply be extended by mutual agreement?

Moreoever, I think there's a strong argument to be made that, unless the contract is a CPFF (Term), Level of Effort, or one that specifies use of specific GFY funding, the contractor can keep working (so long as there is funding available) REGARDLESS of what the PoP says. No modification necessary.

here_2_help said:

Excuse my ignorance, but if there are funds remaining and the parties agree, can't the PoP simply be extended by mutual agreement?

Moreoever, I think there's a strong argument to be made that, unless the contract is a CPFF (Term), Level of Effort, or one that specifies use of specific GFY funding, the contractor can keep working (so long as there is funding available) REGARDLESS of what the PoP says. No modification necessary.

That is the stance I'm currently taking. Extending the POP with mutual agreement. I want to make sure that there are no limitations on the amount of time needed.

WC79 said:

That is the stance I'm currently taking. Extending the POP with mutual agreement. I want to make sure that there are no limitations on the amount of time needed.

ji has already provided you with the answer to that question.  There is no set limit on the length of a schedule extension.  The standard used to determine the length of a schedule extension for an excusable delay is the impact the excusable delay had on the contractor's ability to complete the contract.  The extension may be the same as, shorter than or longer than the period of excusable delay depending on the facts of the case.  It is up to the contractor to show what the extension should be.

You say the contractor had excusable delays, but you do not seem to want to apply the general principle for computing the length of an extension.  If you do not follow the normal procedure, what standard are you using to determine the length of the extension?

WC79 said:

The contractors performing on the contract. There's been some excusable delays that led to the request. My question is solely around the amount of time a contract can be extended for. Just wondering if there was anything I may have missed.

If the contract included something like FAR 52.217-8 or -9 (Option to Extend Services/Term), it may apply and there are time limitation therein. Are you searching for some guidance outside the provisions in the contract?

There are no codified time limitations.  

If you aren’t relying on the Excusable Delays clause (it seems you are not, even though you introduced excusable delays as the reason), two questions come to mind—

     -What clause (or principle) are you relying on?

     -Are you going to obtain consideration from the contractor?

I hope you aren’t simply giving a gift to the contractor, with mutual agreement.

As far as I know, there is not a limit other than whatever period , after which the already obligated funds will no longer be available for payment. Your finance office will be able to tell you that. 

Do you need to extend the contract period longer than the excusable delays?

WC79 said:

That is the stance I'm currently taking. Extending the POP with mutual agreement. I want to make sure that there are no limitations on the amount of time needed.

My view is there is a limitation on the amount of time because the amount of permissible extension of the POP is "none" unless you are relying on a contract clause. Extending the period of performance without a contract basis may be outside your warrant, and in my mind, "covers up" the actual performance of the contractor, which many are entitled to know. Merely because a contractor is "running late" in performance under a cost reimbursement contract, does not provide a rational basis for slipping the POP schedule required by the Agency. I have not researched the extent to which I can point you to a FAR provision that specifically covers this situation and supports my position. But if I did find one, I suspect you would not be happy with what it says. I think I am saying what several other responses have already expressed in other words.

From FAR 16.306 (d):

“(d) Completion and term forms. A cost-plus-fixed-fee contract may take one of two basic forms - completion or term.

(1) The completion form describes the scope of work by stating a definite goal or target and specifying an end product. This form of contract normally requires the contractor to complete and deliver the specified end product (e.g., a final report of research accomplishing the goal or target) within the estimated cost, if possible, as a condition for payment of the entire fixed fee. However, in the event the work cannot be completed within the estimated cost, the Government may require more effort without increase in fee, provided the Government increases the estimated cost.”

Here there are excusable delays to the progress of work and the contractor (apparently) hasn’t expended all the costs. The government says it wants this contractor to complete the work. There is no indication that the contractor is responsible for the delays. The government says the delays are excusable.

The contractor apparently wants to complete all the work -  within the current cost limitation and fee. 

If the government can require more work when the contractor expends all funds prior to completing the work, then surely the government may extend the contract time.when the contractor has excusable reasons for not being able to complete all the required work within the period of performance.  

In addition, there is some reason why this is a cost reimbursement contract rather than fixed price - e.g. the actual amount of effort to complete the intended work or the exact complexity of the work couldn’t be accurately determined at the time of contracting. 

Here, the government wants the contractor to be able to complete the effort.

On ‎9‎/‎7‎/‎2019 at 8:54 PM, ji20874 said:

There is no limit on the amount of time the contracting officer may grant.  This is a business decision.  If contract funds evaporate before they are paid, the contracting officer can replace them with other funds.

The CO may be able to replace the funds.  Any contract mod to extend the POP should be based on this which may mean caveating the extension with "funds are not presently available beyond xx/xx/xx".

here_2_help said:

REGARDLESS of what the PoP says. No modification necessary.

The contract must be read as a whole.  Ignoring a stated POP would not be proper.  A mod would be necessary.

jwomack said:

The contract must be read as a whole.  Ignoring a stated POP would not be proper.  A mod would be necessary.

Well, I beg to differ with your interpretation. So does DCAA. See CAM 6-202.3

Quote

A completion or delivered product specified in a cost-type contract normally commits the contractor to complete and deliver the specified product within the estimated cost. In the event the work cannot be completed within the estimated cost, the Government may require more effort without an increase in fee [see FAR 16.306(d)(1)]. Also, under FAR 52.249-6(a), the contracting officer could terminate the contract prior to full expenditure of the estimated cost. However, unless the contract is terminated, or exceeds stated contract limitations, the contractor is normally obligated to continue to perform under the contract up to the estimated total contract cost. Therefore, questioning costs based only on the fact that they were incurred after the performance period would be inappropriate.

(Emphasis added.)

here_2_help said:

However, unless the contract is terminated, or exceeds stated contract limitations, the contractor is normally obligated to continue to perform under the contract up to the estimated total contract cost. Therefore, questioning costs based only on the fact that they were incurred after the performance period would be inappropriate.

DCAA's guidance is not binding on or applicable to actions taken by contracting officers.  Moreover, DCAA has cited to no FAR clause or decision to support the notion that a contractor is obligated to continue to perform after the due date in order to spend the government's money.  Further, this guidance overlooks a key element of cost reimbursement contracting.  That is, the contractor agrees to use its best efforts to complete the contract within the estimated contract cost and by the required delivery date.  If the contractor does not use its best efforts to timely complete the contract on time, the contract may be terminated for default.  However, the government may agree to a schedule extension instead of a default termination.  In that case, the government may insist on consideration in the form of reduced fee.  This schedule extension and fee reduction would need to be reflected in a contract mod.  On the other hand, if the failure to complete the contract on time is due to an excusable delay, FAR 52.249-14 then comes into play.  Subsection (c) of that clause states "If the Contracting Officer determines that any failure to perform results from one or more of the causes above, the delivery schedule shall be revised."  This revision is done through a contract mod.

Retreadfed said:

DCAA's guidance is not binding on or applicable to actions taken by contracting officers.  Moreover, DCAA has cited to no FAR clause or decision to support the notion that a contractor is obligated to continue to perform after the due date in order to spend the government's money.  Further, this guidance overlooks a key element of cost reimbursement contracting.  That is, the contractor agrees to use its best efforts to complete the contract within the estimated contract cost and by the required delivery date.  If the contractor does not use its best efforts to timely complete the contract on time, the contract may be terminated for default.  However, the government may agree to a schedule extension instead of a default termination.  In that case, the government may insist on consideration in the form of reduced fee.  This schedule extension and fee reduction would need to be reflected in a contract mod.  On the other hand, if the failure to complete the contract on time is due to an excusable delay, FAR 52.249-14 then comes into play.  Subsection (c) of that clause states "If the Contracting Officer determines that any failure to perform results from one or more of the causes above, the delivery schedule shall be revised."  This revision is done through a contract mod.

Let's agree to disagree. I believe a CO has authority (within limits) to use business judgment, especially when both contracting parties agree on the desired outcome. I believe that a simple PoP extension, with no increase in price, is well within the CO's authority. I believe that, in many cases, the PoP does not need to be formally extended; in those cases, the contractor can continue working and billing.

here_2_help said:

I believe that, in many cases, the PoP does not need to be formally extended

Such as when?  Can you give an example?

Retreadfed said:

Such as when?  Can you give an example?

Yes, I can. And I already did. Right in this thread.

On ‎9‎/‎9‎/‎2019 at 10:34 AM, here_2_help said:

if there are funds remaining and the parties agree, can't the PoP simply be extended by mutual agreement?

Is this what you were referring to?  If so, how would the mutual agreement be reflected if not in a contract mod?  Remember, government contracts are integrated agreements.  That means the entire contract is reflected in the four corners of the contract, including portions of the contract that are incorporated by reference with no oral terms or external writings being a part of the contract.

@here_2_help & @Retreadfed,

I think you are talking past each other. Should the contract be modified to reflect a new completion date? Yes. If the CO doesn't modify the contract and the contractor keeps working, will they keep getting paid? Probably, yes (as long as DCAA is reviewing the invoices).

On ‎9‎/‎10‎/‎2019 at 10:14 AM, here_2_help said:

or exceeds stated contract limitations

The POP is a stated contract limitation.

On ‎9‎/‎12‎/‎2019 at 5:05 AM, jwomack said:

The POP is a stated contract limitation.

Which can be waived by mutual consent. Or even by the lack of action by the customer.

A lot of this discussion is ignoring the original question.  The facts as represented are that the contractor has experienced some excusable delays in regard to performance of a cost reimbursement contract.  As a consequence, the contractor has asked for a schedule extension supposedly with no additional funds being added to the contract (although the Limitation of Cost clause would still be applicable to the contract so that there is a possibility that additional funds may be requested later).  This situation implicates FAR 52.249-14 which states in part "If the Contracting Officer determines that any failure to perform results from one or more of the causes above, the delivery schedule shall be revised."  This schedule revision can be done by mutual agreement or unilaterally by the contracting officer through the issuance of a final decision under the Disputes clause which would entitle the contractor to appeal that decision.  In any event, the clear meaning is that the schedule revision is to be reflected in a mod to the contract.  The original question was whether there was a limit on the length of the schedule extension.  I believe the general consensus is that there is no limit but that the agency should not grant the contractor whatever extension the contractor wants, but that the contractor should be required to demonstrate what impact the excusable delays had on the contractor's ability to complete the contract within the original performance period.

deleted

Yes, Retreadfed, but I got the impression from the poster's responses that the posted question is outside of FAR 52.249-14.

Neil Roberts said:

Yes, Retreadfed, but I got the impression from the poster's responses that the posted question is outside of FAR 52.249-14.

That seems to be his/her position.  However, we have not been provided with a rationale as to why the general rule on schedule extensions for excusable delays should not be followed or what other standard would be used to determine the length of the extension instead.

Looking back, I see we didn’t help wc79 much.  The question is there a limit on extensions.  Somehow it evolved in excusable delays and how should delays be calculated.  Lots of reasons exist for delays outside of FAR 52-249-14.  Common ones are resignation of key people, equipment malfunctioning,  inventory of supplies depleted, and capacity conflicts.  Sure those all should be part of contingency planning, but plans often fail. If the government wants to negotiate an extension that’s acceptable and receives consideration, what’s the issue?

Y’all seem to think that there is something wrong with s contractor’s performance in a completion contract if they didn’t finish the work within the period of performance. 

Well if it was that cut and dry, why was it a  cost reimbursement contract, instead of firm fixed price, FFP with unit prices or time and material? Generally, it would be because there were enough unknowns, contingencies or other factors beyond control to precisely estimate and/or price the quantity difficulty of the overall effort. It may even have to do with indeterminable regulatory permitting. 

The contractor on a cost reimbursement contract is expected to make a “best effort”, not guarantee completion within the “stated contract limitation”. 

There can also be excusable, compensable delays and excusable, non-compensable (concurrent contractor and non-contractor) delays that prevent completion within the contract limitations.