Sign In
  • Question

    I am in a services contracting office that made a decision to exercise two Option-Year periods concurrently. The contract's base-year period ends June 21, 2019, and Option-Period 1 starts on June 22, 2019; However, the program office has made the [questionable/potentially illegal] decision to also exercise Option-Period 2, which is not scheduled to commence until June 22, 2020, with an end-date of June 21, 2021. The intent is to exercise Option-Periods 1 and 2 by rolling the CLIN ceiling values of Option-Periods 1 and 2 into their respective base-period CLIN ceiling values. The contracting office cited the following advantages to the methodology of rolling the option-year CLINs into their respective base-period CLINs: 1) Programs can use unexpended funds on the base CLINs immediately, 2) Reduction in the number of CLINs for contract close-out, and 3) Reduction in contract administration overhead. The concern at hand is not whether or not it is okay to exercise the contract's Option-Period 1, as the base-year is coming to an end, but is it legal to exercise Option-Period 2 concurrently with Option-Period 1. Are there statutory regulations (FAR 17 or 37) to support exercising two option-year periods concurrently for service contracts. Please advise. Thank you much.


    Answer

    FAR subpart 17.2 prescribes general policies for the use of options, stating in FAR 17.200  "Except as provided in agency regulations, this subpart does not apply to contracts for (a) services involving the construction, alteration, or repair (including dredging, excavating, and painting) of buildings, bridges, roads, or other kinds of real property; (b) architect-engineer services; and (c) research and development services. However, it does not preclude the use of options in those contracts. The Question Background nor the actual question posed addressed whether or not your services requirement falls under one of the exceptions identified. It is suggested that you do, however, check with your agency for any specific guidance that may be applicable.

    In conducting research,  it was found that this exact scenario/question is in a detailed threaded discussion on the wifcon.com website and it seems that your contract is for Advisory and Assistance Services (A&AS) under FAR subpart 37.2.  The question asked is “are there statutory regulations (FAR part 17 or FAR part 37) to support exercising two option-year periods concurrently for service contracts? In researching the regulations for this situation, there was nothing found in FAR part 17 or FAR part 37 nor the DFARS that addressed exercising two option-year periods concurrently for service contracts.

    However in researching GAO and other legal sources, the recurring theme is “the Government must exercise options in a timely manner and in exact compliance with the option terms”. The strict compliance requirement is imposed, according to Formation of Government Contracts, because options give the party with the right to exercise unique power over the other party. It has been consistently held that for the Government’s exercise of an option to be effective, the decision to exercise must be positive, unambiguous, and in exact compliance with the terms of the option. If options are sequential, failure to exercise the option properly for one year will preclude the Government from exercising future year options is another recurring theme in legal cases.

    Upon reading the wifcon threaded discussion regarding your situation, there appears to be quite a few opinions on it with no concrete conclusion as to the appropriate course of action that should have been or should be taken. And the only concrete response that can be given based on the question posed is NO there is nothing in FAR parts 17/37 nor the DFARS that gives statutory/regulatory guidance to support exercising two option-year periods concurrently. It is suggested that you contact your Local Legal office for advice regarding this matter as there are numerous cases to support both recurring themes, but there has been no success in finding a case that specifically addresses exercising two option-year periods concurrently.

    Open full Question Details