Can the USG accept and extend the negotiated fixed rate for a bilaterally agreed upon modified period within the effective Period of Performance? Or is the best course of action to extend the rates of the service via a -08 service extension for 6 months to then renegotiate in order to make sure things like inflation are taken into account to ensure the rate for the upcoming period is fair and reasonable?
The following response is given based on the solely on the question and the information provided in the question background. As we do not have all the facts particular to your situation, we recommend, as applicable, you consult your contracting officer, leadership and/or Legal Office for guidance.
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Based on the background information provided, it is unclear whether period 3 has begun yet and whether or not it was an option that has been exercised according to what is specified in the contract. There does not appear to be anything prohibiting the USG from accepting and extending the negotiated fixed rate for a bilaterally agreed upon modified period within the effective Period of Performance as long as those rates are deemed fair and reasonable. You should ensure the rate is fair and reasonable regardless of which approach you use. Based on the information provided, the approach of extending the rates of the service via a -08 service extension for 6 months does not appear to be the best course of action, especially given the timing.