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  • Question

    Is there a statute that would allow the Government to extend the contract beyond the 5 year period if the contract does not contain any options?


    Answer

    1. The FAR references quoted below in pertinent part are applicable to this response.

    FAR 6.302 -- Circumstances Permitting Other Than Full and Open Competition
    The following statutory authorities (including applications and limitations) permit contracting without providing for full and open competition. Requirements for justifications to support the use of these authorities are in 6.303.

    FAR Subpart 16.5 -- Indefinite-Delivery Contracts
    FAR 16.501-2 -- General
    (a) There are three types of indefinite-delivery contracts: definite-quantity contracts, requirements contracts, and indefinite-quantity contracts. The appropriate type of indefinite-delivery contract may be used to acquire supplies and/or services when the exact times and/or exact quantities of future deliveries are not known at the time of contract award.

    FAR 16.503 -- Requirements Contracts
    (a) Description. A requirements contract provides for filling all actual purchase requirements of designated Government activities for supplies or services during a specified contract period (from one contractor), with deliveries or performance to be scheduled by placing orders with the contractor.

    FAR Subpart 17.1 -- Multi-Year Contracting
    FAR 17.101 -- Authority
    This subpart implements … 10 U.S.C. 2306b and provides policy and procedures for the use of multi-year contracting.

    FAR 17.103 -- Definitions
    As used in this subpart --
    “Multi-year contract” means a contract for the purchase of supplies or services for more than 1, but not more than 5, program years. A multi-year contract may provide that performance under the contract during the second and subsequent years of the contract is contingent upon the appropriation of funds … . [M]ulti-year contracts … buy more than 1 year’s requirement (of a product or service) without establishing and having to exercise an option for each program year after the first.

    FAR 17.104 -- General
    (a) Multi-year contracting is a special contracting method to acquire known requirements in quantities and total cost not over planned requirements for up to 5 years unless otherwise authorized by statute, even though the total funds ultimately to be obligated may not be available at the time of contract award. This method may be used in sealed bidding or contracting by negotiation.

    FAR 17.109 -- Contract clauses
    (a) The contracting officer shall insert the clause at 52.217-2, Cancellation Under Multi-year Contracts, in solicitations and contracts when a multi-year contract is contemplated.

    FAR 52.216-18 – Ordering
    (a) Any supplies and services to be furnished under this contract shall be ordered by issuance of delivery orders or task orders by the individuals or activities designated in the Schedule. Such orders may be issued from __________ through ____________ [insert dates].

    FAR 52.216-21 -- Requirements
    (a) This is a requirements contract for the supplies or services specified and effective for the period stated, in the Schedule. The quantities of supplies or services specified in the Schedule are estimates only and are not purchased by this contract.

    (b) Delivery or performance shall be made only as authorized by orders issued in accordance with the Ordering clause. … [T]he Contractor shall furnish to the Government all supplies or services specified in the Schedule and called for by orders issued in accordance with the Ordering clause.

    2. The following references are also applicable to this response.
    A. Congressional Research Service, “Multiyear Procurement (MYP) and Block Buy Contracting in Defense Acquisition: Background and Issues for Congress” dated June 25, 2014.
    https://www.hsdl.org/?view&did=755441

    B. https://www.govtrack.us/congress/bills/104/s1710/text
    The following bill was introduced in a previous session of Congress and was passed by the Senate on May 17, 1996 but was never passed by the House. The text of the bill below is as of May 20, 1996 (Referred to House Committee).

    AN ACT
    To authorize multiyear contracting for the C-17 aircraft program, and for other purposes.

    SECTION 1. MULTIYEAR CONTRACTING AUTHORITY FOR THE C-17 AIRCRAFT PROGRAM.
    (a) MULTIYEAR CONTRACTS AUTHORIZED- The Secretary of the Air Force may, pursuant to section 2306b of title 10, United States Code (except as provided in subsection (b)(1)), enter into one or more multiyear contracts for the procurement of not more than a total of 80 C-17 aircraft.

    (b) CONTRACT PERIOD- (1) Notwithstanding section 2306b(k) of title 10, United States Code, the period covered by a contract entered into on a multiyear basis under the authority of subsection (a) may exceed five years, but may not exceed seven years.

    3. As indicated in FAR 17.101, FAR subpart 17.1 implements 10 U.S.C. 2603b regarding the statutory authority to use multi-year contracting. Paragraph (k) of this statute establishes the general 5-year maximum performance period for such contracts. As indicated in reference 2A above, congressional approval for multi-year contracts is made through specific DoD authorization acts (i.e., statutes). The specific authorization act (i.e., statute) approving a given multi-year program would specify whether the 5-year maximum period set forth in 10 U.S.C. 2603b(k) may be exceeded. Even though the bill was not ultimately passed into law, reference 2B illustrates how an authorization act could expand the 5-year limitation set forth in 10 U.S.C. 2603b(k) for a particular multi-year program contracting authority.

    4. Therefore, in direct response to the question: “Is there a statute that would allow the Government to extend the contract beyond the 5 year period if the contract does not contain any options”, the specific authorization act providing congressional approval for the use of multi-year acquisition approach for the program would stipulate if the contract could exceed the normal 5-year statutory limitation. That being said, we note that this inquiry also characterizes the contract in question as “a straight 5 year requirements contract.” Therefore, this inquiry seems to be ambiguous as to whether this contract is really a “multi-year contract” as described in FAR subpart 17.1 or is actually a “requirements contract” as described in FAR 16.501-2(a) and FAR 16.503(a), and as implemented by contract clauses FAR 52.216-18 and FAR 52.216-21.

    5. As stated in FAR 17.103 and FAR 17.104(a), a multi-year contract represents a firm agreement on the part of the Government to actually buy more than one year’s requirement, and includes all known requirements in terms of quantity and cost covering all program years established by the specific multi-year authorization act for that program, even though the total funds ultimately to be obligated for these known requirements may not be available (i.e., appropriated) at the time of contract award. Furthermore, pursuant to FAR 17.109(a), if the contract in question really is a multi-year contract, then it will also include the clause at FAR 52.217-2. Therefore, if this contract is in fact a multi-year contract, then absent further congressional approval in any associated authorization act(s), the performance period of this contract may be extended only through the operation of contract clauses such as for example: “Stop Work Order” (FAR 52-242-15), “Government Delay of Work” (FAR 52.242-17), “Changes” (FAR 52.243-1), or for excusable delays under the “Default” clause (FAR 52.249-8) or to permit continued performance by the contractor in lieu of default in accordance with FAR 49.402-4(a).

    6. In contrast to a multi-year contract where the contracted requirements in terms of quantities and total costs for all program years are known, pursuant to FAR 16.501-2(a) and FAR 16.503(a), a requirements contract is used when exact the times and/or exact quantities of future deliveries, and hence total contract costs, are not known at the time of contract award. Therefore, a requirements contract provides for filling all actual purchase requirements that may be required during a specified contract period (i.e., the ordering period) from one contractor. Contract clause FAR 52.216-21 expressly states that the quantities of supplies or services specified in the Schedule are estimates only and are not purchased by the contract, but only by the placement of individual orders during the ordering period. Because there is nothing in the FAR that constrains this ordering period from crossing fiscal years, the ordering period can cover more than one fiscal year, with the individual orders be funded with the applicable FY appropriations.

    7. Based on the above, even though a requirements contract may also cross fiscal years also without the use of options, it is not considered to be a multi-year contract. Furthermore, because the scope of the requirements contract is also defined by the ordering period, any extension of contract performance beyond the specified ordering period would be considered as “outside the scope” of the contract. Consequently, if the contract in question is actually a requirements contract, than any contract extension must be supported by a J&A pursuant to FAR 6.302, probably either under FAR 6.302-1 (Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements) or under FAR 6.302-2 (Unusual and Compelling Urgency) in this case.


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