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  • Question

    If you address, price and other factors in the 17.207 D&F, is that sufficient or do you still need to provide formal IGCE (actual numbers) & Market Research (actual companies) documentation when fulfilling the requirements of FAR 17.207?


    Answer

    The following response highlights the key elements of FAR 17.207(d), with AAP comments.  Per FAR 17.207(d), the Contracting Officer shall make the determination that the option is in the Government's best interest based on one of the following:

    1. "A new solicitation fails to produce a better price or more advantageous offer than offered by the option.  If it is anticipated that the best price available is the option price, or that this is the more advantageous offer, the contracting officer should not use this method of testing the market. "  If this defense is to be used, the contracting officer would first have to conduct some market research to assess what current market prices would be. 

     
    2.  "An informal analysis of prices or an examination of the market indicates that the option price is better than prices available in the market or that the option is the more advantageous offer."  This defense applies to your specific question.  There is not a specific requirement to include an Independent Government Cost Estimate as part of the contracting officer's determination.  However, this defense indicates some market research should be done in order for the contracting officer to determine if the current market could present a better offer than the current option, or could allow the Gov't to expand its use of Small Business capabilities (perhaps a new, emerging Small Business has developed a new capability?).  For more specific information on how to conduct market research, refer to: 
     
      a.
    FAR 10.002(b)(1):  the extent of market research will vary, depending on requirement complexity, urgency, recent experience;
      b. FAR 10.002(b)(2):  lists a range of techniques for capturing market research data;
      c.  FAR 10.002(e):  document market research findings.  This element also relates to your scenario.  The market research findings should be adequate to support the contracting officer's determination that exercising the option is the most advantageous method for buying the requirement, considering price and other factors.  Without such information.
     
    3.  "The time between the award of the contract containing the option and the exercise of the option is so short that it indicates the option price is the lowest price obtainable or the more advantageous offer. The contracting officer 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 or services."  This defense does not appear to apply in your scenario, but generally applies when the option is exercised immediately following the award of the basic contract.
     
    4.  In addition, this response also evaluates a few of the defenses given in the "Question Background:" 
     
    a. "By the time the decision is made to exercise the option year, usually 2-3 months prior to the end of the current option year, it is too late to compete, award and staff a new contract before the current contract ends."  Use this defense with extreme caution.  Because acquisition timelines can be lengthy, it's possible this defense could withstand scrutiny one time...but not two years in a row.  If market research indicates there is a better price now or coming soon, exercising a current option may still make the most sense, price and other factors considered.  However, once the contracting officer senses significant potential for a better deal in the market, the planning should begin to resolicit before the next option is exercised. 

     
    b. "I go on to say that market research was conducted prior to the initial acquisition which resulted in the government awarding a multi-year contract in the first place."  This defense may withstand scrutiny if the timeframe between basic contract award and option exercise is short; however, the strength of this defense dissipates over time because market conditions change over time.  Sometimes a contracting officer will use FAR 10.002(b)(1) to conclude, "I conducted market research 18 months ago, and based my current decision on that research."  The weakness in this defense is, the contracting officer must stay aware of current market conditions, to ensure previous market research findings and conclusions are "still current, accurate, and relevant."  Even if the contracting officer conducts a brief, informal analysis, it is best to include current market research findings as the basis of a current option exercise decision. 

     
    c.  "I also state that price was evaluated before contract award for all option periods and was determined to be fair and reasonable."  See comments in paragraph 4b above.


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