Tuesday, June 9, 2015
This blog post is about the rights of both, the contractor and USAID, in dealing with the Government’s right to exercise options under any particular contract.
What is an option?
Per FAR 2.101, an option is 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.”
Just because USAID requests, evaluates and includes an option in a contract, it does not mean USAID is required to exercise such option (s). All it means is that USAID can at its sole discretion purchase additional quantities of supplies or services or to extend the contract performance period.
Options offer USAID flexibility to require continued contract performance when a contractor is performing well and the services/good continue to be needed. Although the decision to exercise is a unilateral decision, before being able to exercise an option, USAID’s CO is required to determine that the exercise of the option is “the most advantageous method of fulfilling the [USAID]’s need, price and other factors…considered.”
For example, if USAID believes it can obtain better pricing or other terms more favorable than those applicable under the option, it can elect not to exercise the option and instead conduct a new procurement. On the other hand, it can elect not to procure the items or services at all.
There are also very important restrictions that affect the contractors under this USAID’s right to exercise its option to continue with the contract. As discussed further below, an option must be exercised strictly in accordance with its terms, as evaluated during the proposal and award stage, and, as included in the contract, including price, terms etc.
Any change to the terms or conditions of the option upon exercise by USAID renders the attempted exercise a counteroffer that may then be accepted or rejected by the contractor.
We will deal with services contracts as part of this blog post.
There are two standard clauses for services contracts which allow the Government: FAR 52.217-8, Option to Extend Services (NOV 1999) and FAR 52.217-9, Option to Extend the Term of the Contract. I
In addition, there is FAR 52.237-3, Continuity of Services (JAN 1991), which requires a contractor to provide phase-in training and best efforts to “effect an orderly and efficient transition to a successor. We will not be discussing this particular clause as it is rare and specific to the types of essential services, like security etc.
FAR Subpart 17.2 describes two standard service contract options: (1) the so-called -8 option, named after its standard clause, FAR 52.217-8, which provides for short term extensions of up to six months, originally intended for use when award of a new contract is delayed, and (2) the so-called -9 option, named after its clause, FAR 52.217-9, which is the common additional option periods clause, often known to USAID contractors as “Option Years”. Thus, if a contract is awarded with one base year and four one-year options, the CO would need to exercise each of the four one-year option periods by following the requirements in FAR 52.217-9.
Notice of Intent to Exercise Options
FAR 52.217-8 and 52.217-9 include blanks for the CO to fill in with the required notice period to exercise the option, and, in the case of FAR 52.217-9, the time by which the CO must give preliminary notice to the contractor of its intent to exercise the option.
Which Option to Choose?