The government puts out a solicitation it has the options in the solicitation. The government makes an award with options included in the awarded document. The contractor does not sign the award document only his submitted proposal. One year later the government wants to exercise the option. How do you get away with what the FAR clause 52.212-4(c) says when changing the terms or conditions. If you awarded for the base period of 1 year and now you are exercising an option you are changing the terms and conditions of the current contract period to another year. Since we all know it is the unilateral right of the CO to exercise an option or not based on 52.217-9. If this wasn't a commercial contract we wouldn't be having this question but the language in 52.212-4(c) is the problem.
While the Government wants to use "commercial" procedures to the maximum extent that it can, it does not want to give up ALL of its privileges as the largest buyer in the world. For example, the Government reserves the right to unilaterally terminate contracts for convenience, which is not common practice in the commercial sector. While you would probably need to discuss the legal aspects of this issue with a attorney specializing in contracts to get a definitive explanation, the "terms and conditions" is generally thought of as referring to actual PERFORMANCE of the contract, i.e., delivery, timeliness, and other responsibilities directly related to the deliverables. Whether or not a contract option can legally be exercised can be considered outside of the strict definition of "terms and conditions" of contract performance.
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