17.107
Options
When including options in multi-year contracts, ensure compliance with Subpart 17.2 and avoid charging for costs already covered in the base contract.
Overview
FAR 17.107 addresses the use of options in multi-year contracts, emphasizing that including options can provide benefits such as flexibility and cost savings. However, it requires contracting officers to adhere to the detailed procedures and requirements outlined in FAR Subpart 17.2 when incorporating options. Additionally, the regulation prohibits the inclusion of charges for plant and equipment that have already been amortized, as well as other nonrecurring costs that were accounted for in the basic contract, ensuring that pricing for options remains fair and avoids double-charging the government.
Key Rules
- Follow Subpart 17.2 for Options
- Contracting officers must comply with all requirements in FAR Subpart 17.2 when including options in multi-year contracts.
- No Double-Charging for Amortized or Nonrecurring Costs
- Options must not include charges for plant and equipment already amortized or for nonrecurring costs already included in the base contract.
Responsibilities
- Contracting Officers: Ensure all option provisions comply with Subpart 17.2 and avoid prohibited charges in option pricing.
- Contractors: Price options accurately, excluding amortized and previously charged nonrecurring costs.
- Agencies: Oversee compliance with option requirements and pricing integrity.
Practical Implications
- This section exists to prevent overcharging and ensure transparency in option pricing for multi-year contracts.
- It impacts daily contracting by requiring careful review of cost structures and adherence to established option procedures.
- Common pitfalls include inadvertently including amortized or nonrecurring costs in option prices, leading to compliance issues or disputes.