Even though the date to exercise the last year option has expired. Can we still send the letter of intent to the contractor for the last option year or do we have to initiate a new contract?
You cannot exercise an expired option. If you still have a requirement to fulfill you need to proceed according to the FAR as if it were a new requirement.
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It is well established that options must be exercised in strict compliance with the terms of the contract. There are many cases reiterating this rule. Here’s one: “An attempt to exercise an option outside its terms does not constitute a valid exercise of the option.” Alliant Techsystems, Inc. v. United States, 178 F.3d 1260, 1275 (Fed. Cir. 1999).