By what authority does the contracting officer have to elect not to exercise the option even though the requiring activity is adamant they still want to exercise the option.
This is more of a "management" issue than a contracting issue, though of course they are related here. The contracting activity is there to support the needs of the requiring activity while complying with applicable regulations. As no conclusions have yet been drawn on whether the contractor is involved in improper practices, the contracting officer should advise the requiring activity on the risks involved with exercising the option. FAR 9.104-1(d) requires contractors to "Have a satisfactory record of integrity and business ethics" but it appears the contractor's record has not yet been shown to be "unsatisfactory." The contracting officer can share his/her concerns with the program manager, document the file accordingly, and exercise the option (or not) based on the requiring activity's needs.
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