This is specifically for the question submitter and some of the Information they provided in the “Background”. It did not provide the reason the contract file was written up for regulatory violations. It could be because the inspector read the prescription for FAR 52.217-7 (found at FAR 17.208(e)) and thought that construction was services. Sometimes, but not in this instance! Or, structuring the contract with additional line items of construction activity did not match the DD Form 1391 Project Approval and funding issues.

That said, FAR 17.2 does not prohibit the use of options in construction contracts, in fact they are not uncommon at all and most Job Order and SABER contracts do have options. Those option years are normally included to make it easier to comply with Labor Standards for Contracts Involving Construction (Davis-Bacon, see FAR supbart 22.4) when issuing task orders against those contracts. Note: bold italics added for emphasis.

The clauses (FAR 52.217-5 and FAR 52.217-7) can be used if appropriate for your requirement. Please make sure you are within the statutory cost limitations as provided in FAR and DFARS. Nothing in the prescription of these clauses limits you to a particular procurement method. In other words, as long as you follow the prescription guidance, you can use those clauses for FAR part 14 (Sealed Bidding), FAR part 13 (Simplified Acquisition Procedures), FAR part 15 (Contracting by Negotiation.

Nothing that we could find in FAR part 36 (Construction and Architect-Engineer Contracts) or in the DFARS contradicts the answer above.

However, you must review your agency regulation supplement to ensure it does not have implementing or supplemental guidance for including options in construction contracts.