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  • Question

    When does a contract expire/die/end where as it can no longer be modified to extend the delivery shown in Section F of the Contract?


    Answer

    In accordance with FAR 16.306(d), a cost-plus-fixed-fee contract may take one of two basic forms -- completion (requires the contractor to complete and deliver the specified end product within the estimated cost, if possible, as a condition for payment of the entire fixed fee) or term (obligates the contractor to devote a specified level of effort for a stated time period).  From your background information that yours contract had an actual completion date, therefore making it a term contract verses completion. 

    In
    FAR 16.306(d)(2) it further states: 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.  This paragraph continues on to say, Renewal for further periods of performance is a new acquisition that involves new cost and fee arrangements.

    Furthermore there are two other considerations in doing this extension: 1) does this violate CICA if you extend this contract beyond its current term completion date, and 2) if you performed a “no cost” time extension, would this be a valid legal modification because it lacks consideration. 


    On the issue of CICA looking at the 1985 GAO case of
    Washington National Arena Limited Partnership, B-219136, Oct. 22, 1985.  “Where a contract for visitor reservation services has expired, the contractual relationship which existed is terminated and the issuance of an amendment 4 months after the expiration date to retroactively extend and modify the contract as if it had not expired amounts to a contract award without competition, contrary to the requirements of the Competition in Contracting Act. A protest challenging the amendment is sustained, therefore, and GAO recommends that a competitive procurement for the requirement be conducted.”
     
    If you did a “no cost extension” prior to the expiration of the contract delivery the validity of the modification would be in question.

    “A performance or return promise that is the inducement to a contract because it is sought by the promisor in exchange for his promise and is given by the promise in exchange for that promise. Restatement (Second) Contracts § 71 (1981).  A binding contract requires an offer, acceptance of that offer, and consideration.  Consideration generally requires two elements: (1) something must be given that the law regards as of sufficient legal value for the purpose—either a benefit to the seller or a detriment to the buyer, and (2) that benefit or detriment of legal value must be dealt with by the parties as the agreed-upon price or exchange for the promise—there must be a “bargained-for exchange.”  The requirement for consideration does not require that what is relied upon for consideration be equivalent in value to the promise; the consideration need only have “some value.”  Murray on Contracts 55 (3d ed. 1990).  See Cibinic & Nash, Formation of Government Contracts 247-57 (3d ed. 1998).”[1] 
     
    A bilateral contract modification that lacks consideration will not be binding.  As such, before modifying a contract a Contracting Officer must consider how the modification will affect both parties.  If the Government is giving up a right, is it getting something in return?  Conversely, if the Government is asking for more from the contractor, what is it giving up? 


    [1] The Government Contracts Reference Book, Third Edition, Ralph C. Nash, Jr., Steve L. Schooner, Karen R. O’Brien-DeBakey, Vernon J. Edwards, © 2007 CCH, p.122



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