Services Ordering Solutions

1. Nothing in the FAR or in the Schedule contracts treats options on Schedule task orders any differently than options on other (non-Schedule) contract actions.  The clauses in the Schedule contracts address the options on the Schedule contract (I-FSS-163 “Option to Extend the Term of the Contract (Evergreen)”), but those terms have nothing to do with options on orders.  Ordering agencies are certainly free to add non-conflicting clauses (see today's blog post on that subject) that would apply to their orders (e.g., FAR 52.217-9 “Option to Extend the Term of the Contract”).

2. GSA recognizes that ordering agencies may have reasons to include options on their task orders.  GSA has established a web page entitled “Options on Orders” which states that task order options may be “exercised” [not merely awarded or included] as long as “the [order’s] options do not extend beyond the period of the Schedule contract, including option year periods.”  (Identical language appears on Page 22 of the Multiple Award Schedules Desk Reference.) That period of the Schedule contract inclusive of its option periods is therefore the entire prospective period of performance and not merely the current (five-year) period of performance.  The period of performance for Schedule contract purposes is Schedule option periods merely “included” rather than Schedule option periods “exercised.”  (It is important to distinguish here between the two types of “options” mentioned at the GSA Options on Orders web page: task order options that may be exercised and Schedule contract options that need not be exercised, merely “included” when talking about an inclusive period of performance.)

3. The Schedule contracts contain the clause FAR 52.216-22 Indefinite Quantity (Deviation). Paragraph (d) of that contract clause reads:

“(d)  Any order issued during the effective period of this contract and not completed within that period shall be completed by the Contractor within the time specified in the order. The contract shall govern the Contractor’s and Government’s rights and obligations with respect to that order to the same extent as if the order were completed during the contract’s effective period.”

Notice that the clause talks about when the order was “issued,” meaning awarded.  Exercising an option is not issuing an order and exercising an option therefore need not occur (in contrast to a new award) during the effective period of the contract.  As long as the order was issued when the contract was still effective, it continues to run for its own full period of performance, regardless of what happens to the Schedule contract.

4. If a task order includes options, then that task order “shall state the period with within which the option may be exercised.  The period may extend beyond the contract completion date for service contracts.”  FAR 17.204(b),(d).  Nothing in FAR SubPart 17.2 requires that an IDIQ contract be still in effect as a condition for exercising a task order’s option.  If fact, it is the order’s option that controls the order’s performance.  Why else would FAR SubPart 17.2 permit an order option to extend beyond the contract’s completion date unless that order option could then be exercised?  An option that cannot be exercised is certainly useless.

5. A Schedule contract can cease to exist in a number of ways.  It can be canceled by GSA or by the contractor with 30-days notice to either party in accordance with the contract clause “Cancellation,” GSAR 552.238-73.  It can be terminated by GSA for cause or for the Government’s convenience under the authority of FAR 52.212-4 (l) and (m). In addition, GSA may, as described in contract clause I-FSS-163, decline to exercise its unilateral right to continue performance under an option for another five years of performance.  None of these GSA contract post-award situations modifies any task orders, requires Ordering Officers to modify any task orders, restricts the exercise of Ordering Officer discretion in the modification of existing orders, or relieves contractors of their obligation to continue performing on any task orders - - even task orders where the performance is extended by order options.

6. Where contract actions are in the best interest of the government and are not specifically prohibited by law or regulation, contracting officers broadly construe their authority.  FAR 1.102(d) states: “In exercising initiative, Government members of the Acquisition Team may assume if a specific strategy, practice, policy or procedure is in the best interests of the Government and is not addressed in the FAR, nor prohibited by law (statute or case law), Executive order or other regulation, that the strategy, practice, policy or procedure is a permissible exercise of authority.”

7. Guided by this FAR philosophy, Schedules ordering authority is typically construed broadly in the absence of specific prohibitions.  In the absence of specific prohibitions in law, regulation, policy, or Schedules ordering procedures, GSA has traditionally deferred to the reasonable discretion of Ordering Officers where doubt or ambiguity exists.  Resolving close policy decisions in favor of the ordering activity’s reasonable discretion has served GSA and the Schedules program well.

8. There is a public policy interest in requiring contractors to continue performance on agency task orders in order to prevent interruption of services even where the Schedule contract, for whatever reason, no longer exists.  There are some who believe, contrary to the clear language of paragraph (d) of the Schedules contracts' Indefinite Quantity clause, that a contractor might even stop work, effectively ignoring the Ordering Officer’s exercise of a task order option where the Schedule contract had expired.  Such a view would certainly not be in the best interest of the Government as the Indefinite Quantity clause properly acts as a check on such an adverse impact of, for example, the Schedules’ liberal Cancellation clause.  It is hard to imaging how allowing a contractor to unilaterally walk away from its Schedule contract with 30 days notice and then to ignore task order performance extended by an option (“because the contract no longer exists”) somehow protects the government’s interest in uninterrupted performance as expressed in the contract’s Indefinite Quantity clause.

9. It has consistently been the positition of many GSA Contracting Officers (including this one) that a task order once awarded incorporates the terms and conditions of the underlying contract and becomes a stand alone contract of its own.  This means that if you award a task order with options, you can continue to exercise the options unilaterally and the contractor is obliged to perform or be in default.

10. If there was any ever any doubt on GSA’s intent and position regarding the permissible exercise of order options even where the Schedule contract no longer exists, that doubt was removed by the January 26, 2009 Federal Register announcement (74 Fed. Reg. 4632) on planned changes to GSA’s own FAR Supplement:

GSAR 552.238-99 Task Order Period of Performance

The term for each order placed under the basic contract shall be specified in the individual order.  Under no circumstances may an order be placed under the basic contract if the basic contract has expired, or has been terminated or canceled by the government.  No orders may exceed ten (10) years, inclusive of options, from the date that the order is placed; however, no orders may extend more than five (5) years after the expiration of the basic contract.  Priced order options, if included in the initial evaluation and issuance of the orders, may be exercised after the expiration date of the basic contract.  Notwithstanding anything to the contrary in this clause, a multiyear order placed under the basic contract must be consistent with FAR Subpart 17.1 and any applicable funding restrictions.

11. Summary:

    There is no statutory, regulatory, or contract clause authority for telling ordering agencies that continued order-option performance on their task orders is contingent on GSA's exercise of the Schedule contract option. Similarly, there is no authority for treating multi-year orders with options as contractually distinguished from optionless multi-year orders (when no such distinction in the FAR exists) since options are merely modifications to orders and not "new" procurements.

    Nothing prevents an ordering agency from including options extending beyond the current five-year period of Schedule contract performance and (here is the part where Schedule orders differ from Schedule BPAs) nothing prevents an ordering agency from exercising those previously awarded task order options even where the GSA Schedule contract no longer exists. Unfortunately, some people (including even still a few in GSA) suggest that ordering agencies need to structure their order’s period of performance and option periods to match each five-year period of contract performance in order to preclude working on a task order (even an option-extended order) beyond the expiration of the Schedule contract.  That particular agency behavior would be exactly what paragraph (d) of the Indefinite Quantity clause says is not required.  Contractor performance on the order, which would be inclusive of previously evaluated order options to continue performance, is not contingent on the existence of the Schedule contract.  Schedule orders are issued under the authority of the contract and FAR SubPart 8.4, but they are not (unlike BPAs) dependent for their very existence on the simultaneous existence of the Schedule contract throughout the order's own entire period of performance.  That is what the sense and purpose of the contract’s Indefinite Quantity clause is all about.  The contract clause becomes meaningless under a contrary interpretation.

There is nothing in the FAR or in the Schedule contracts restricting an ordering activity’s flexibility as to the timing of periods of performance or of task order option exercises.  The Indefinite Quantity contract clause acts as GSA’s assurance to ordering activities that there is nothing that GSA or the contractor could do (or decline to do) to the Schedule contract that can pull the rug out from under the ordering agency with respect to contractor performance in accordance with the order, including any options exercised on that order.  Without such an assurance, would ordering activities even use the Schedules since the continued existence of the Schedule contract is entirely outside their control?  That clear organizational message from GSA to ordering agencies has, unfortunately, been muddled in the past.  It’s got to the point where GSAM 538 will now need to unequivocally state the position that I have always maintained: “Priced order options, if included in the initial evaluation and issuance of the orders, may be exercised after the expiration date of the basic contract.”

Questions

A. Can a Task Order include options?

Yes. A task order options clause is an example of non-conflicting clause. See the GSA “Options on Orders” web page, with particular attention to the fourth bullet which specifically permits order options to be exercised (not merely included) as long as those order options “do not extend beyond the maximum period of the Schedule contract, including option year periods.”  Note that there is nothing specifically requiring the Schedule contract to exist for every day of task order performance. The proposed GSAR 538 rewrite appears to remove all doubt as to GSA's position.

B. Can any of those Task Order option periods, at the time of Task Order award, extend beyond the current (five-year) period of performance shown on GSA eLibrary?

Yes. Agencies are not required to make their Task Order option periods match the option periods of the Schedule contract or to make their Task Order option exercise contingent upon the exercise of the Schedule contract options.  That’s the practical impact of the Schedule contract’s Indefinite Quantity clause. Task order performance can continue to run based on the task order’s own period of performance rather than the Schedule contract’s period of performance, which would include options.  For example, an Ordering Officer checks GSA eLibrary and determines that eight months remain in the current Schedule contract’s period of performance.  Some ordering activities incorrectly believe they can only award a task order with an eight-month initial period of performance.  That belief is contrary to the Indefinite Quantity contract clause.  

C. Is there anything in the FAR, Schedule contract, or case law prohibiting an ordering agency from exercising a task order’s option if the Schedule contract has been terminated, canceled, or a Schedule contract option not exercised?

No. There is no such prohibition, limitation, or qualification of an ordering officer’s reasonable exercise of discretion.  That means that an order could include option exercise points (even outside the current five-year period) and there is nothing in the FAR or in the Schedule contract to preclude the exercise of those task order options. GSA’s planned changes to GSAR 552.538-16, as published in the Federal Register, make it very clear that options on task orders can be exercised, even in the absence of a current and effective Schedule contract: “Priced order options, if included in the initial evaluation and issuance of the order, may be exercised after the expiration date of the basic contract.”

D. If a GSA Schedule contract is canceled/terminated/option not exercised and an ordering agency then exercises their task order’s option, can a contractor properly stop all work at the start of the new order option period by claiming the Ordering Officer had no authority to exercise an order option when the Schedule contract no longer existed?

No. A contractor cannot properly stop work if the ordering agency has exercised the task order option. That is exactly the type of situation paragraph (d) of the Indefinite Quantity clause is designed to prevent.  The intent of the clause is to protect ordering agencies from having services interrupted as a result of anything the contractor (and remember that contractor’s permissive unilateral contract cancellation right) or the GSA CO might do or fail to do.  The Indefinite Quantity clause specifically obliges contractors to continue performance in accordance with the order’s period of performance (which might include later-exercised options) rather than the Schedule contract’s new period of performance.

E. Are these answers different if talking about the exercise of options on Schedule BPAs (as opposed to order options) if the Schedule contract no longer exists?

Yes. BPAs, unlike Schedule orders, are not contracts themselves.  The BPA award (or BPA option exercise) is not a contract action and therefore needs to have a Schedule contract for its continued existence.  Courts and GAO have consistently distinguished orders (themselves contracts, including some consideration) from BPAs (not contracts, lacking mutuality of consideration).  See the discussion elsewhere on this blogsite today regarding the difference between BPAs and contract actions (which includes Schedule orders).

The sense of the FAR makes it clear that the existence of Schedule BPAs is tied to the existence of their governing Schedule contract.  Why else would one of the four actions for the annual BPA review required by FAR 8.405-3(d) be to “determine whether the schedule contract, upon which the BPA was established, is still in effect?”

Dave Clemens, 6/26/2009
[Remember what the Blog Policy says: “The views expressed on Services Ordering Solutions are those of the individual bloggers.  These views and posted comments do not necessarily reflect the views of GSA or the Government.”]
Orignially posted on March 6, 2009 at:
http://www.schedulesolutions.net