1. If the option is exercised on a contract modification 30 days prior (31-May-20) to expiration of the current period of performance (30-Jun-20) what is the effective date? From my previous experience I think the effective date would be 31-May-20 and that services would continue (if funded) under the option CLIN’s period of performance without any other action or clarification.
I have been told that the effective date of the option must be set as the first day of the new option’s period of performance (1-Jul-2020). If the modification exercising the option was “effective” 31-May-20 then we must modify the option CLIN’s period of performance to align with the exercise of the option and lose 30 days of performance. Previously I have never specified an “effective date” separate from the issued date of the modification for an option as it seemed unnecessary due to fact that the option CLIN’s period of performance is already specified. Also I do not understand why exercising an option prior to that option’s period of performance inherently changes or modifies that options period of performance. Is it improper to exercise an option (effective date) prior to the start date of that option’s period of performance?
2. I also have a question about interpretation of the clause fill in for 52.217-9. The research I have done indicates there are no defined rules for what a contracting officer can insert into the fill in parts of 52.217-9 so long as it is clear what is intended. That being said every contract I have seen only specifies a number of days, which I believe is inherently unclear particularly for requirement of “written notice”.
The clause states the following: “(a) The Government may extend the term of this contract by written notice to the Contractor within _____ [insert the period of time within which the Contracting Officer may exercise the option]”. In my case the fill in specifies “30 days”.
The standard interpretation I have always operated under is that the “written notice” requirement is a written document, typically a contract modification, which binds and obligates the Government. The purpose of this written notice is to give a contractor ample time to mobilize and prepare to perform the next option period under a binding guarantee that the Government will exercise the option. The language “within 30 days”, while admittedly unclear, has always meant to me the written notice must be sent no later than 30 days out from the end of the current period of performance. If written notice is sent less than 30 days before the expiration of the current period of performance the Government loses their unilateral rights.
I have been given a different interpretation of the “within 30 days” language. This interpretation is that the Government may not exercise the option before 30 days out from the end of the current period of performance. The exercise of the option must be “within” a 30 day window from the end of the current period of performance. While that is consistent with the dictionary definition of “within” I don’t think it makes sense from a business stand point and doesn’t fulfill what I interpret to be the intent of clause. What would be the purpose of limiting the Government to a certain window for execution? Given that inserting only a number of days is a common practice I think it would be helpful if there was a standard interpretation of the written notice time period. If there is one can you please point me in the right direction? If not can you provide an interpretation? I am concerned about the implications of having the same language with vastly different interpretations depending on which contracting officer is signing.
3. It is my understanding that issued date and effective date can be different days. A contracting officer may issue a modification today for a change that will become effective on a specific date in the future. Also if direction was given by the contracting officer then incorporated via modification later then the effective date would be in the past. In such a case what date would be in block 3 of the SF30? What if an effective date is specified for one change or perhaps multiple changes with different dates in the language in block 14 or its continuation? What if effective dates are contained within the CLIN description or in the case of an option Section F. Which would be the controlling effective date and what is the legal/contractual significance of the date in block 3 of the SF30? Is there a source of information that clearly lays out the importance of issued date vs effective date vs signed date?
This response is based on the information provided. We suggest you discuss with your contracting team, program manager and/or legal department as appropriate.
Question 1. What is the effective date? When exercising an option, generally work is already being performed (this is the case in your situation). There is already a contractual period of performance. The existing contract performance will continue until the contracted period ends. You exercise the option at some point before the period of performance ends as outlined in the clauses and other terms and conditions of your contract. When exercising the option, you establish the effective date again in accordance with the clauses and other terms and conditions of your contract. The effective should already be established in the option.
Exercising an option prior to that option’s period of performance does not inherently change or modify that option's period of performance. You should never wait to exercise an option on the start date of that option’s period of performance.
"FAR 52.217-9 Option to Extend the Term of the Contract.
(a) The Government may extend the term of this contract by written notice to the Contractor within _____ [insert the period of time within which the Contracting Officer may exercise the option]; provided that the Government gives the Contractor a preliminary written notice of its intent to extend at least _____ days [60days unless a different number of days is inserted] before the contract expires. The preliminary notice does not commit the Government to an extension."
In the clause language, we are to notify 60 days out (from option award) that the Government intends to exercise its option. This written notice would usually be a letter (e-mail would suffice, although we prefer the signed letter for the file).
"FAR 17.204 Contracts
(a) The contract shall specify limits on the purchase of additional supplies or services, or the overall duration of the term of the contract, including any extension.
(b) The contract shall state the period within which the option may be exercised.
(c) The period shall be set so as to provide the contractor adequate lead time to ensure continuous production."
The English language understanding of "within" is "inside". The FAR does not further define "within". It is correct to understand the clause language to mean that "within 30 days" (or whatever number of days (less than 60) is 30 days or less. But FAR 17.204(c) indicates the Government needs to give the contractor adequate time. Sooner is better and the 60 day notification is part of that preparation time.
The Government surrenders its unilateral right to exercise the option by failure to notify the contractor of the Government's intent to extend. That does not mean the contract option becomes null and void, but that, properly exercised, it should be exercised bilaterally.
The effective date of an option should already be established the contract. It should be immediately following the end of the present period of performance such that there will be no break in performance. The issue date and signature date should be the same or as near to the same as is practicable.
You should not have differing effective dates related to the same specific action/effort throughout a contract document. As to which would rule if the Government created a contract action with that error, the intent would be the first basis of resolution. Other documents such as the PWS, etc. may help determine what the intent was and which date is correct. In the case of an option, the intended date will already be established in the existing contract and would thus be the controlling date. Should the contractor choose to dispute, the burden of proof rests with the Government.