Was this action legal? As the title states, I'm trying to ascertain whether or not an option period can be exercised after the current period of performance has expired. I have not been able to locate information indicating otherwise. A recent search yielded a question posed on this site titled: Can the Government elect to exercise particular CLINs on a FFP task order?
The person who provided the answer, among other information, made two interesting statements:
- "... the government cannot then exercise an option period which commences after a lapse in performance."; and
- "Once there is a break in the performance period, the contract has terminated by operation of law and cannot be revived.".
The author of the Answer did not cite the law to which he referred. I would like to know if exercising an option period within the term or life of the contract - including the options - is legal, even though the current period of performance has ended. In other words, can the option be exercised after a lapse in performance caused by not exercising the option in a timely manner?
Most individuals I've posed this question to indicate that this would be a violation of some unspecified acquisition law or regulation, but no one has been able to cite a legal or regulatory reference. Please provide a response and cite the appropriate law(s) or regulations, if applicable.
The following response is based solely on the background provided as we do not have all of the facts pertaining to your contract or contractor. As we do not have access to the contract folder or program particulars that apply to this situation, we highly recommend you consult the Contracting Officer as well as the Legal Office.
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FAR 17.207, Exercise of options, clearly sets forth the requirements incumbent upon Contracting Officer prior to exercising an option. Presupposing that these requirements have been satisfied, resort should then be made to FAR 17.204 to examine the specifics relating to service contracts.
FAR 17.204 (d) states that “The period [within which the option may be exercised] may extend beyond the contract completion date for service contracts (emphasis added). This is necessary for situations when exercise of the option would result in the obligation of funds that are not available in the fiscal year in which the contract would otherwise be completed”.
The language simply allows the exercise of the option to be initially established to be beyond the completion date. The facts provided do not allude to this issue. But, it is important to note that there are unique aspects relating to service contracts. Look also at FAR 52.217-8 which gives the Government the authority to extend the performance under service contracts.
Let’s take a broader look at the fundamental elements of the question of exercising an option after the right to exercise the option and the base period of the contract have both expired. Although the contract had the option available to be exercised, the Contracting Officer was delayed in receiving the funds. Hence, because of such delay, the Government lost the unilateral right to exercise the option.
When the Contracting Officer did receive the funding, the Government was required to obtain the Contractor’s consent to exercise the option. Therefore, as indicated in the fact scenario, the option was exercised using a bilateral agreement. Exercising the option was within the scope of the contract and was exercisable by mutual agreement notwithstanding that the initially stated period of the base contract had past.