I have three questions.
1) Is there an actual reg, or FAR Part that backs up the quotes from the CDCs in the above mentioned scenario?
2) Does the contract remain active up to the delivery date, or until the product is shipped, accepted, and paid for?
3) If the answer to the previous question is the former of the two, than what would one do if the item wasn't delivered in time? Can a mod still be done?
Your question centers around the Government's rights when a purchase order is put into place and delivery does not occur. There are several moving parts of this issue in my response that will illustrate both the power that we as contracting officials have and some of the responsibilities that come along with that power. As in your scenario, these apply to purchase orders below the SAT and for commercial items.
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First, we must understand if our placement of a purchase order was accepted by the contractor or not. Per the FAR, there are two ways to ensure acceptance if an order: 1) Have the contractor sign a copy of the purchase order and return to the contracting officer as proof or acceptance of the order (FAR 13.302-3); 2) When the contractor commences work on a unilateral purchase order and gets to a point in performance where substantial performance has occurred, he has signified acceptance(FAR 13.004).
Acceptance of the order is pivotal in addressing the next step of the contracting officer's options when the order does not arrive as expected. If the contractor has signed the purchase order as their 'acceptance' of the purchase order, the contractor is then obligated to deliver the item specified at the time and place required for delivery and at the contract price. If the contractor does not, then the contractor is in default and the purchase order may be terminated. FAR 13.302-4, directs us to FAR 12.403- Termination. Your purchase order for commercial items may also contain FAR clause 52.212-4, Contract Terms and Conditions- Commercial Items and paragraph (m) handles termination for cause of the purchase order: "The Government may terminate this contract, or any part hereof, for cause in the event of any default by the Contractor, or if the Contractor fails to comply with any contract terms and conditions."
Now on to the unilateral purchase order. Before we invoke a termination clause, we first have to ensure if the contract was accepted or not. This can be routine in the computer age. When I have in the past emailed an award to a contractor, I asked them to confirm receipt of award. This ensures that the contractor received the award, and usually they would accept the award and start working. With a unilateral purchase order, starting of work to a point where substantial performance has occurred is acceptance of the award and that acceptance is key to the contracting officer's next course of action if delivery does not occur. Per FAR 13.302-4 Terminations, the contracting officer is to provide to the contractor a written cancellation of the order. If the contractor had not accepted the order or had not incurred any expenses yet in performance of the order, the contractor simple accepts the cancellation and no further action is required- other than retaining this in our contract file.
If the contractor had started working, or claims expenses when provided with the notice of cancellation, the contracting officer will have some work left to accomplish. If, as you originally asked in your scenario, contract delivery is past due, the contracting officer is within their rights to terminate for cause, just as outlined above. If for whatever reason, the Government decides to cancel the order BEFORE any know issues AND BEFORE the delivery date specified in the contract, the contracting officer would have to terminate the contract for convenience, which affords the contractor the opportunity to submit a claim for reimbursement of costs associated with performance of the contract. This claim would be based on the percentage of contract completion when the contractor received the written notification to stop work.
To specifically answer your question about when does the contract remain active: until the contracting officer has taken the proper steps to terminate/cancel or modify the contract to allow for a late delivery. All of these are viable options. If the contracting officer allows a time extension to receive the items late, the Government is entitled to some form of compensation- to be determined by the contracting officer. One item the contracting officer can take into consideration are those events which allow for an excusable delay- also outlined in FAR 52.212-4(f).
Finally, there is one more significant item in you scenario- a period of time involved AFTER scheduled delivery. There is nothing in the FAR/DFARS which would basically grant the contractor ANY 'grace period' of the terms and conditions of any contracting action. When a contractor agrees (either in writing or in starting performance of a contract) to the terms and conditions in a contract, they are bound by those until a written modification, executed by a contracting officer, changes those terms and conditions. In my experience, the sooner an issue was addressed, the better. Many times the day after a delivery was missing, I contacted the contractor and found that they were unaware of a missed delivery and it was somewhere in shipment- sometimes just delivered to the incorrect building on base. I am not sure of why the scenario you questioned suggests to wait six days to try and track down missing supplies- but the FAR/DFARS do not provide any such relief, the delivery date in the contract is what should spur contracting officials into action!