Can the base period be extended in 90 day increments for this reason? If so, how does this period effect the option period?
I must assume from the background information you provided that the Government has decided NOT to exercise the option on the contract. The exercise of options is covered in the Federal Acquisition Regulation (FAR) at FAR 17.207 wherein the Government must determine that the option “fulfills an existing Government need” and “is the most advantageous method of fulfilling the Government’s need, price and other factors … considered.” The Government has indicated that they are considering changes to the PWS (performance work statement).
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So, it would appear that the Government seeks to continue the contract with the current PWS until they have finalized their changes to the PWS. Then, they will determine if and how they will continue the contract thereafter. They may extend the base period in this manner provided that they have obtained the appropriate authority to do so; possibly a sole source justification and authority will be required. They will also have to re-price or reach an agreement to continue the current pricing structure of the base period.
Contract modifications of this type are allowable provided that the contract clauses of the basic IDIQ contract are in place to facilitate implementation of this strategy. The option, however, would become null and void if the Government fails to exercise it as written and on time. The Government would have to establish a new option if they so desire.