Is it appropriate to have a no dollar FFP option CLIN? Is there then no consideration? What about a NSP CLIN instead? How can I motivate the contractor to complete the task as required if they won't be paid for the task?
No, in our opinion it is not appropriate to have a no-dollar FFP option CLIN, as you call it. One of the issues, as you indicated, is consideration. Consideration is one of the essential elements of a contract and must be included for the agreement to be legally binding. In your case, it doesn’t seem that the contractor is receiving any benefit for working an additional four months covered by the option. A Not-Separately-Priced (NSP) CLIN is appropriate where the price is included in another CLIN, but in your case this doesn’t apply either.
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Since you have performed cost realism based on the contractor’s numbers, you have already determined what a fair and reasonable price should be. Therefore, it would seem inconsistent to determine that zero is a fair and reasonable price even with the contractor’s price discount.
In addition, please refer to The Contract Pricing Reference Guide Volume 1, Chapter 1, Section I.2.1 - Pay a Fair And Reasonable Price, which contains much information regarding a fair and reasonable price including Below-Cost Prices.
This answer is based on the limited information provided, as we do not have all the facts pertaining to your situation. As always, we highly recommend you consult the contracting officer as well as your legal office.