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  • Question

    Is there legal regulations/guidance that talks to "resurrecting" expired options. If we have bilateral contract agreement between the Government and the contractor, can the contract be modified to change the exercise date so we can still award it.


    Answer

    1. The additional FAR references quoted below in pertinent part are applicable to this response.

    FAR 2.101 -- Definitions
    “Contract” means a mutually binding legal relationship obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them. … [C]ontracts include … bilateral contract modifications.

    FAR 4.601 -- Definitions
    “Contract action” means any oral or written action that results in the purchase, rent, or lease of supplies or equipment, services, or construction using appropriated dollars over the micro-purchase threshold, or modifications to these actions regardless of dollar value.

    FAR 5.001 -- Definition
    “Contract action”, as used in this part, means an action resulting in a contract, as defined in Subpart 2.1, including actions for additional supplies or services outside the existing contract scope, but not including actions that are within the scope and under the terms of the existing contract, such as contract modifications issued pursuant to the Changes clause, or funding and other administrative changes

    FAR 6.302 -- Circumstances Permitting Other Than Full and Open Competition
    The following statutory authorities (including applications and limitations) permit contracting without providing for full and open competition. Requirements for justifications to support the use of these authorities are in 6.303.

    FAR 6.302-1 -- Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements

    (a) Authority. (2) When the supplies or services required by the agency are available from only one responsible source, or, for DOD, NASA, and the Coast Guard, from only one or a limited number of responsible sources, and no other type of supplies or services will satisfy agency requirements, full and open competition need not be provided for.
      (ii) Supplies may be deemed to be available only from the original source in the case of a follow-on contract for the continued development or production of a major system or highly specialized equipment, including major components thereof, when it is likely that award to any other source would result in -- (A) Substantial duplication of cost to the Government that is not expected to be recovered through competition, or (B) Unacceptable delays in fulfilling the agency’s requirements. (See 10 U.S.C. 2304(d)(1)(B) or 41 U.S.C. 253 (d)(1)(B).)

    FAR 6.303-1 -- Requirements
    (a) A Contracting Officer shall not commence negotiations for a sole source contract, commence negotiations for a contract resulting from an unsolicited proposal, or award any other contract without providing for full and open competition unless the Contracting Officer --
      (1) Justifies, if required in 6.302, the use of such actions in writing;
      (2) Certifies the accuracy and completeness of the justification; and
      (3) Obtains the approval required by 6.304.

    FAR 15.402 -- Pricing Policy
    Contracting officers shall— (a) Purchase supplies and services from responsible sources at fair and reasonable prices.

    FAR 15.403-2 -- Other Circumstances Where Certified Cost or Pricing Data are Not Required
    (a) The exercise of an option at the price established at contract award or initial negotiation does not require submission of certified cost or pricing data.

    FAR 15.403-3 -- Requiring Data Other Than Certified Cost or Pricing Data
    (a)(1) In those acquisitions that do not require certified cost or pricing data, the Contracting Officer shall
      (i) Obtain whatever data are available from Government or other secondary sources and use that data in determining a fair and reasonable price;
      (ii) Require submission of data other than certified cost or pricing data, as defined in 2.101, from the offeror to the extent necessary to determine a fair and reasonable price (10 U.S.C. 2306a(d)(1) and 41 U.S.C. 254b(d)(1)) if the Contracting Officer determines that adequate data from sources other than the offeror are not available;

    2. As indicated in the Background statement, pursuant to FAR 17.207(a), an option must be exercised by the Government within the time period specified in the contract. If not, then extending the option exercise date via a bilateral modification, even at no change in the price, schedule and other terms and conditions of the option, would be considered as outside the scope of the contract. Therefore, the execution of any such bilateral modification would constitute a new contract action as described in FAR 4.601 and FAR 5.001 that is actually being conducted on a sole source basis (i.e. using other than full and open competition).

    3. As specified in FAR 6.303-1(a), the Contracting Officer may not execute any contract action using other than full and open competition without the execution of a Justification and Approval (J&A) under one of the statutory authorities specified in FAR 6.302 permitting contracting without providing for full and open competition. Given that the overall contract is for the acquisition of long lead material and space vehicle production, a J&A processed under the authority of FAR 6.302-1(a)(2)(ii) would most likely be applicable is this case.

    4. Additionally, even though the contractor has proposed to extend the option exercise date at no change in the option price, because this is a new contract action, the Contracting Officer must determine if the existing option price is still fair and reasonable pursuant to FAR 15.402(a).  Per FAR 15.403-2(a), the Contracting Officer is not required to obtain certified cost or pricing data to make this determination because the option price was established at contract award and is not being changed. However, pursuant to FAR 15.403-3(a)(1), the Contracting Officer must still either use data that are available from within the Government or other secondary sources or obtain other than certified cost or pricing data from the contractor in order to determine that the current option price is still fair and reasonable.

    5. Based on the above, and in direct response to this inquiry, we believe that the contract can be modified to extend the exercise date of the option in question at no change to the price, schedule and other terms and conditions of option provided that a J&A is properly executed for this new contract action under the provisions of FAR 6.302 and FAR 6.303 as described above and provided that the Contracting Officer makes a formal determination that the current option price is still considered to be fair and reasonable using data described under FAR 15.403-3 as discussed above.


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