Is $5,000 the generally accepted cost of executing a modification? Is this strictly the cost for the contracting activity or does it include review by the requiring activity and DCMA?
The FAR does not specify a specific dollar amount with respect to the Government's cost to execute (and administer) a contract modification. In the FAR, there is a price related factor related to making multiple awards. In order to determine what's most advantageous to the Government (e.g. a single or multiple award using FAR 16.5 procedures), an upward price adjustment of $500 (for evaluation purposes) must be made to each contract being considered to determine the lowest aggregate cost to the Government. The $500 represents the administrative cost to the Government for issuing and administering each contract awarded under the multiple award solicitation. The applicable FAR provisions are FAR 52.214-22 and FAR 52.215-1(F)(6).
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You already pointed out that FAR 49.101(c) states that contracts less than $5,000 should be allowed to run their course rather than terminate for convenience. Without knowing all the facts and the reason for your question, I'm erring on side of caution and therefore would recommend developing your own estimate rather than relying on an unsupported dollar value found in the FAR which probably has nothing to do with the purpose or nature of the modification being considered. The range of $500 to $5000 might be a starting point to develop an estimate. However, putting together an estimate shouldn't be too difficult; perhaps simply identifying the hourly rates for Government personnel and estimating the administrative hours associated with each of those personnel to administer the modification would work. I would have more confidence in using an estimate based on the specific circumstances of the modification than I would a dollar amount found in the FAR unless the FAR requires a specific dollar amount to be used such as in the case of the price related factor for multiple awards.