My question is if we have the third party continuing services per 49.402-4(b) can we also exercise the option to the third party?
FAR 49.204-4(b) may not be applicable for two reasons. First, your contract was with the original vendor. That vendor appears to be out of the picture; the court's decision pertains only to the large business' contractual relationship with the delinquent vendor. The large business does not have a contractual relationship with the Government. Second, FAR 49.204-4(b) generally does not apply to commercial contracts because FAR Part 49 generally does not apply to commercial contracts. It seems from your question and the associated background information that the contract with the reseller vendor will need to be terminated (if not done already) and a new contract sought to fulfill the remaining Government's requirement for the service. That being said, I strongly urge you to consult with your activity's legal counsel for an authoritative response, as there obviously are important legal issues involved with your situation.
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