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    Whats required of the contract specialist after the letter's of the Gov intent has been issued? I've received the funding documents; Do request a proposal from the contractor and do price analysis and award? Will I be required to do Market research?


    Answer

    The following general guidance is provided recognizing that I do not have access to the contract:
     
    -FAR 17.207 does a good job of describing the process of exercising an option.  Paragraph (a) requires written notice to the contractor of the intent to exercise the option, which you state you have done.
     
    -Paragraph (b) deals with economic price adjustments.  Your background did not indicate that this would apply to your situation.
     
    - Paragraph (c) provides essentially a checklist for the contracting officer (CO) to follow to determine if the option should be exercised.
     
      -Are funds available?
      -Does the option still fulfill a valid Government need?
      -Is the exercise of the option the most advantageous method of fulfilling the Government’s need price and other factors considered.  Then it says to see paragraphs (d) and (e).  This is where the CO’s business judgment comes into play.  Paragraph (d) says that the CO “after considering price and other factors, shall make the determination on the basis of one of the following:”
      (1) You could make this determination by issuing a new solicitation for the Government’s need covered by the option to see if you can get a better price from other sources.  But, you will have to do this far enough in advance to make the decision of whether the option is the best choice before the option exercise date expires.
      (2)  And/or, you could conduct market analysis; “an informal analysis of prices or an examination of the market indicates that the option price is better than prices available in the market…”
      (3)  And/or, you could make the decision to exercise the option based on your decision that the best test of the market was the recent competition which resulted in the current contract and options, since this is the first option period and nothing significant has changed in the market.  “The CO shall take into consideration such factors as market stability and comparison of the time since award with the usual duration of contracts for such supplies.”
      (4)  Paragraph (e)(1&2) further states your determination “should take into account the Government’s need for continuity of operations and potential cost of disrupting operations; and may consider the effect on small business.”  In other words if the requirement is a service, there is a cost associated to the Government, other than the contract cost, which has to be considered when changing contractors, and the need to consider the impact on small business in the decision.
     
    - Paragraph (f) further requires that the CO make a written determination documenting the basis for the decision to exercise the option in consideration of the guidance discussed above as well as subsequent guidance in the paragraph. 
     
    -If after considering the above issues, the CO thinks a better price could be obtained by recompeting the work covered by the option, then the option should NOT be exercised and a new solicitation should be issued.
     
    -So, in reply to your question regarding the need to conduct market research the answer is yes!  You also asked “Do I request a proposal from the contractor and do price analysis and award?”  The answer is no, since the option price was evaluated when the contract was originally awarded.  When you decide to exercise the priced option in your contract, you need to document the rationale for your decision and then exercise the option, at the option price, before the option expires.

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