17.207
Exercise of options
FAR 17.207 requires contracting officers to thoroughly justify, document, and notify contractors when exercising options, ensuring the action is in the Government’s best interest and compliant with all regulatory requirements.
Overview
FAR 17.207 outlines the procedures and requirements for contracting officers when exercising options in government contracts. The section ensures that options are exercised only when it is in the Government’s best interest, funds are available, and all regulatory and contractual conditions are met. It details the steps for notification, price evaluation (especially when economic price adjustments are involved), and the necessary determinations and documentation. The regulation also emphasizes market analysis, contractor performance, and compliance with competition requirements.
Key Rules
- Written Notice Requirement
- Contracting officers must provide written notice to the contractor within the contractually specified timeframe when exercising an option.
- Economic Price Adjustment
- If the contract allows for economic price adjustment and the contractor requests a price revision, the effect on option prices must be determined before exercising the option.
- Preconditions for Exercising Options
- Options can only be exercised if funds are available, the requirement is valid, the option is the most advantageous method, the option was properly synopsized, the contractor is not excluded, and past performance is satisfactory.
- Market Analysis
- The contracting officer must determine that the option price is the best available through market analysis or comparison with new solicitations.
- Consideration of Other Factors
- Determinations should consider continuity of operations and potential impacts on small businesses.
- Written Determination and Documentation
- A written determination must be made and filed, confirming compliance with the contract, this section, and competition requirements.
- Citing Authority
- The contract modification or notification must cite the option clause as authority.
Responsibilities
- Contracting Officers: Must ensure all regulatory and contractual conditions are met, conduct market analysis, document determinations, and provide timely written notice.
- Contractors: Should be aware of performance expectations and economic price adjustment provisions.
- Agencies: Must oversee compliance and ensure proper documentation and competition requirements are met.
Practical Implications
- This section ensures options are exercised only when justified and beneficial to the Government, protecting against automatic or unjustified extensions. It requires careful documentation, market analysis, and performance review, helping prevent waste and ensuring fair competition. Common pitfalls include failing to document determinations, missing notification deadlines, or not properly analyzing market conditions.