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    Does the FAR allow for unpriced options?


    Answer

    Without knowing more details, I would loke to suggest CMC 105, Undefinitized Contract Actions (UCA) Administration, which provides a deep dive into the question at hand. Also keep an eye out for an article in Defense Acquisition Magazine regarding UCAs that gives a general overview of the terminology and general use.

    Please also see discussion at following link: http://www.wifcon.com/arc/a105.htm The discussion provides food for thought and insight into an old the debate.

    In my personal opinion, I see no purpose in exercising an unpriced option. In an option scenario, you are operating in a sole source environment and putting the govenrment at a huge risk (some may disagree with me). But, when I negotiate the base contract, I have two options - negotitate the base and options or just the base. Prior to exercising the option, though, I have to determine the price to be fair and reasonable. How do I do that without data? There are ways to get through from the base to the option, such as bridge contracts, etc. But exercising an unpriced option seems a bit extreme. However, the FAR does not exempt it as a method of doing business. But as a pricing arrangement - does not seem too logical.

    I would also ask what authority you are going to cite when you prepare the modification to exercise the option?

     

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