(2) The contractor would be required to incur undue risks: e.g., the price or availability of necessary materials or labor is not reasonably foreseeable;

(3) An indefinite quantity contract or requirements contract is appropriate except that options for continuing performance may be used in such contracts;

(4) Market prices for the supplies or services involved are likely to change substantially; or

(5) The option quantities represent known firm requirements for which procurement funds are available unless (i) the basic quantity is a learning or testing quantity and there is some uncertainty as to contractor or equipment performance and (ii) realistic competition for the option quantity is impracticable once the initial contract is awarded.

(c) When options are to be evaluated pursuant to § 15-1.5703(d), the total of the basic and option periods shall not exceed five years in the case of services, and the total of the basic and option quantities shall not exceed the requirements for five years in the case of supplies. This five year limitation shall not apply to Automatic Data Processing Equipment acquisitions; however, the basic option periods shall not exceed the approved systems life as defined in the Federal Property Management Regulations.

(a) When a contract is to contain an option clause, the solicitation must contain an appropriate option provision. If the contract is to be negotiated, the determination and findings shall set forth the approximate quantity to be awarded and the extent of the increase to be permitted by the option. The contract shall limit the additional quantities of supplies or services which may be procured, or the duration of the period for which performance of the contract may be extended, under the option and will fix the period within which the option may be exercised. This period shall be set so as to afford the contractor adequate notice of the requirement for performance under the option but with respect to service contracts the period for providing adequate notice

may extend beyond the contract completion date when exercise of the option would obligate funds not available in the fiscal year in which the contract would otherwise be completed. In fixing the period within which the option may be exercised consideration shall be given to (1) necessary lead time in order to assure continuous production and (2) the time required for additional funding and other necessary approval action. The period specified for exercising the option shall in all cases be kept to a minimum. When a solicitation contains an option which requires the offering of additional quantities of supplies at unit prices no higher than those for initial quantities, it shall provide that the option quantities shall not exceed 50 percent of the initial quantity. When unusual circumstances exist, however, the Chief, Contracts Operations Office or his designee may approve a greater percentage or quantity. The quantities and the period under option and the period during which the option may be exercised shall be justified and documented by the contracting officer in the contract file.

(b) Except as provided in paragraphs (c) and (d) of this section, solicitations containing option provisions shall state that evaluation will be on the basis of the quantity to be awarded exclusive of the option quantity.

(c) When it is anticipated that the Government may exercise the option at time of award, the solicitation shall include an Evaluation of Options provision substantially as follows:

EVALUATION OF OPTIONS

If the Government elects to exercise an option simultaneously with award, bids or proposals will be evaluated for purposes of award on the basis of the total price for the basic quantity and the option quantity exercised with award.

(d) In firm fixed price contracts, the option quantity may be considered in the evaluation for award if, before issuance of the solicitation, it has been determined at a level higher than the contracting officer that:

(1) There is a known requirement which exceeds the basic quantity to be awarded, but either (i) the basic quantity is a learning or testing quantity

and there is some uncertainty as to contractor or equipment performance, or (ii) due to the unavailability of funds, the option cannot be exercised at the time of award of the basic quantity provided that in this latter case there is reasonable certainty that funds will be available thereafter to permit exercise of the option; and

(2)(i) Realistic competition for the option quantity is impracticable once the initial contract is awarded and hence it is in the best interests of the Government to evaluate options in order to eliminate the possibility of a buy-in. This determination shall be based on factors such as, but not limited to, substantial start-up or phase-in costs, superior technical ability resulting from performance of the initial contract, and long preproduction lead time for a new producer.

(ii) In such cases, the solicitation shall contain an Evaluation of Options provision substantially as follows:

EVALUATION OF OPTIONS

Bids and proposals will be evaluated for purposes of award by adding the total price for all option quantities to the total price for the basic quantity. Evaluation of options will not obligate the Government to exercise the option or options.

Any bid or proposal which is materially unbalanced as to prices for basic and option quantities may be rejected as nonresponsive. An unbalanced bid or proposal is one which is based on prices significantly less than cost for some work and prices which are significantly overstated for other work.

(e) Solicitations which allow the offer of option quantities at unit prices which differ from the unit prices for the basic contract quantities shall also state that varying prices may be offered for the option quantities depending on the quantities actually ordered and the date or dates when ordered. However, if the solicitation contains an Evaluation of Options provision pursuant to paragraphs (c) and (d) of this section, it shall also specify the price at which the options will be evaluated (e.g., highest option price offered or option price for specified quantities or dates).

(f) Where exercise of the option would result in increased quantities of supplies, the option may be expressed in terms of (1) percentage of specific

contract line items, (2) a number of additional units of specific contract line items, or (3) additional numbered line items identified as the option quantity with the same nomenclature as line items initially included in the contract. Where exercise of the option would result in an increase in the performance of services by the contractor, the option may similarly be expressed in terms of percentages, increase in specific line items, or additional numbered line items, expressed in terms of the units of work initially used in the contract such as man hours, man years, square feet, pounds or tons handled. Where exercise of the option would result in an extension of duration of the contract, the option may be expressed in terms of an extended terminal date or of an additional time period, such as days, weeks, or months.

§ 15-1.5704 Exercise of options.

(a) The exercise of an option by the Government requires the contracting officer's written notification to the contractor within the time period specified in the contract.

(b) Where the contract provides for price escalation and the contractor requests revision of price pursuant to such provision, or the provision applies only to the option quantity, the effect of escalation on prices under the option must be ascertained before the option is exercised.

(c) Options should be exercised only if it is determined that—

(1) Funds are available;

(2) The requirement covered by the option fulfills an existing need of the Government; and

(3) The exercise of the option is most advantageous to the Government, price and other factors considered.

(d) Insofar as price is concerned, the determination under paragraph (c)(3) of this section shall be made on the basis of one of the following:

(1) A new solicitation fails to produce a better price than that offered by the option. When the contracting officer anticipates that the option price will be the best price available, he should not use this method of test

ing the market but should use one of the methods in paragraph (d)(2), (3), or (4) of this section.

(2) An informal investigation of prices, or other examination of the market indicates clearly that a better price than that offered by the option cannot be obtained.

(3) The time between the award of the contract containing the option and the exercise of the option is so short that it indicates the option price is the lowest price obtainable, considering such factors as market stability and a comparison of the time since award with the usual duration of contracts for such supplies and services.

(4) Established prices are readily ascertainable and clearly indicate that formal advertising or informal solicitation can obviously serve no useful purpose.

(e) Insofar as the "other factors" mentioned in paragraph (c)(3) of this section are concerned, the determination should, among other things, take into account the Government's need for continuity of operations and potential costs to the Government of disrupting operations, including the cost of relocating necessary Government furnished equipment (as, for example, in certain repair and overhaul contracts for complex equipment).

(f) When it has been determined that an option may properly be exercised in accordance with the principles set forth herein, such determination shall be set forth in writing and made a part of the contract file. Written notification to the contractor of the exercise of the option and any contract modification resulting therefrom shall cite the option article contained in the original contract as authority for the procurement of the option quantity; and no citation under 41 U.S.C. 252(c) is required.

§ 15-1.5705 Examples of option articles for fixed price type contracts.

(a) An article in the contract schedule substantially as follows may be used when it is desired to express the option quantity as a percentage of the basic contract quantity or as an additional quantity of a specific line item, without separate pricing of the option quantity.

OPTION FOR INCREASED QUANTITY

The Government may increase the quantity of supplies called for herein by any amount of units up to [specify a quantity or a percentage of the basic quantity] at the unit price specified in the contract. The exercise Contracting Officer may this

option by giving written notice of the Government's exercise of the option to the Contractor not later than [specify a date certain or a number of days before the last delivery date under the basic contract]. Delivery of the items added by the exercise of this option shall continue immediately after, and at the same rate as, delivery of like items called for under this contract [this sentence may be appropriately modified to reflect agreement of the parties on delivery terms].

(b) A schedule article substantially as follows may be used where the contract identifies the option quantity as a separately priced line item having the same nomenclature as a corresponding basic contract line item.

OPTION TO INCREASE QUANTITY-LINE ITEM

The Government may increase the quantity of supplies called for herein by requiring the delivery of the numbered line item identified in the Schedule as an option item, in the quantity and at the price set forth therein. The Contracting Officer may exercise this option by giving written notice of the Government's exercise of such option to the Contractor not later than [specify a date certain or a number of days before the last delivery date under the basic contract]. Delivery of the items added by the exercise of this option shall continue immediately after, and at the same rate as, delivery of like items called for under this contract [this sentence may be appropriately modified to reflect agreement of the parties on delivery terms].

(c) An article substantially as follows may be used to provide for continuing performance of the contract beyond its original term.

OPTION TO EXTEND THE TERM OF THE
CONTRACT

This contract may be extended for a period of [days, months, years] at the option of the Government, by the Contracting Officer giving written notice of the Government's exercise of such option to the Contractor not later than the last day of the term of the contract; provided, that such notice shall have no effect if given less than 60 days prior to the last day of the term of the contract unless the Contracting Officer has given preliminary written notice

of an intent to exercise such option at least sixty (60) days prior to the last day of the term of the contract (such preliminary notice shall not be construed as an exercise of the option, and will not bind the Government to exercise the option). If the Government exercises such option, the contract as extended shall be deemed to include this option provision; provided, however, that the total duration of this contract, including the exercise of any options under this clause, shall not exceed months.

[State terms for pricing of performance under the option e.g., by inclusion of same price as basic quantity, an escalation provision, definitive option price set forth elsewhere in this contract.]

§ 15-1.5706 Examples of option articles for cost reimbursement contracts.

(a) The following may be used as the article which defines an option, when the contract is a Cost Only Term Form, not involving the use of task orders. The article may be used, with appropriate modification, when the contract involves payment of fee.

OPTION TO EXTEND THE TERM OF THE
CONTRACT

1. At the option of the Government, this contract may be extended, by the Contracting Officer giving written notice of extension to the Contractor prior to the expiration date of this contract; provided, that the Contracting Officer shall have given preliminary notice of the Government's intention to extend not later than the last day of the term of this contract; provided, that such notice shall have no effect if given less than sixty (60) days prior to the last day of the term of this contract unless the Contracting Officer has given preliminary written notice of an intent to exercise such option at least sixty (60) days prior to the last day of the term of the contract (such preliminary notice shall not be construed as an exercise of the option, and will not bind the Government to exercise the option). If the Government exercises such option, the contract as extended shall be deemed to include this option provision; provided, however, that the total duration of this contract, including the exercise of any options under this clause, shall not exceed months. [State terms for pricing of performance under the option, e.g., by inclusion of the same price as for the basic period, definitive option price set forth elsewhere in this contract, escalation provision, etc.]

2. In the event that the contract is extended in accordance with paragraph 1 of this Article, the Contractor shall continue the effort described in ARTICLE I-SCOPE

OF WORK, during the ( ) month period immediately following that set forth in ARTICLE -PERIOD OF PERFORMANCE. The parties hereto agree that upon issuance of the order exercising this option, the following modifications will be made to the contract schedule, in effect as of the date that such issuance is made:

(i) The period of performance specified in ARTICLE -PERIOD OF PERFORMANCE will be increased by months.

(ii) The estimated cost specified in ARTICLE -ESTIMATED

COST will be increased by $

(b) The following may be used as the article which defines an option, where the contract is a CPFF Completion Form which contains a separate scope of work for the optional effort.

OPTION FOR INCREASED SCOPE OF WORK

1. At the option of the Government, the Scope of Work of this contract may be increased to include the work set forth in [Exhibit BJ attached hereto and hereby made a part hereof. This option shall be exercised by the issuance of an order by the Contracting Officer citing the authority of this article. This option may be exercised at any time within [—— months, days] from the effective date of this contract.

2. The parties hereto agree that upon issuance of the order exercising this option, the following modifications will be made to the contract schedule in effect as of the date such issuance is made:

(i) ARTICLE I-SCOPE OF WORK will be modified to incorporate [Exhibit B] attached hereto, into this contract.

(ii) The period of performance specified in ARTICLE -PERIOD OF PERFORMANCE will be increased by [months, days].

(iii) The Estimated Cost, Fixed Fee, and Total Cost Plus Fixed Fee specified in ARTICLE will be increased by $— and $- respectively.

$

(c) The following may be used as the article which defines an option, when the contract is a Cost Plus Fixed Fee (CPFF) Term Form involving the issuance of task orders.

OPTION TO EXTEND THE TERM OF THE
CONTRACT

1. At the option of the Government, this contract may be extended by the Contracting Officer giving written notice of extension to the Contractor prior to the expiration date of this contract; provided, that such notice shall have no effect if given less than sixty (60) days prior to the last day of

the term of the contract unless the Contracting Officer has given preliminary notice of the Government's intention to extend at least sixty (60) days before this contract is to expire. (Such a preliminary notice will not be deemed to commit the Government to renewals.)

man

2. If this option is exercised, the Contractor shall provide approximately hours of additional direct labor in pursuit of the effort described in ARTICLE I-SCOPE OF WORK, during the () month period immediately following that set forth in ARTICLE PERIOD OF PERFORMANCE. The parties hereto agree that upon issuance of the order exercising this option, the following modifications will be made to the contract schedule, in effect as of the date that such issuance is made: (i) The period of performance specified in ARTICLE PERIOD OF PERFORMANCE, will be increased by months.

(ii) ARTICLE

()

LEVEL OF EFFORT,

man

will be increased from "approximately manhours" to "approximately hours" and the last sentence of Paragraph A will be changed to read "not less than manhours." nor more than

(iii) The Estimated Cost, Fixed Fee, and Total Cost Plus Fixed Fee specified in ARTICLE will be increased by $respectively.

and $

(d) The period of performance for the option shown in Paragraph 2 of the suggested articles may be adjusted to conform to the requirement. Additional optional periods may be included beyond the first option period provided: However, that consideration is given to the prohibitions contained in § 15-1.5702(b) and, the restrictions concerning renewal of Basic Ordering Agreements and Level of Effort Task Order Type Contracts contained in EPA Order of that title.

PART 15-2-PROCUREMENT BY FORMAL ADVERTISING

Subpart 15-2.4—Opening of Bids and Award of Contract

Sec.

15-2.406 Mistakes in bids.

15-2.406-3 Other mistakes disclosed before award.

15-2.406-4 Disclosure of mistakes after award.

15-2.407-8 Protests against award.

AUTHORITY: Sec. 205(c), 63 Stat. 377, as amended; 40 U.S.C. 486(c).

§ 15-2.406-3 Other mistakes disclosed before award.

(a) The Director, Contracts Management Division will make the administrative determination in connection with mistakes in bid alleged before opening of bids and before award.

(b) Where the bidder furnishes evidence in support of an alleged mistake, the case shall be marked "Immediate Action-Mistake in Bid" and submitted in duplicate, in the most expeditious manner through procurement channels and the Chief, Policy and Review Branch, to the Director, Contracts Management Division, for evaluation and administrative determination. The file shall be assembled in an orderly manner including an index of enclosures.

(c) Where the evidence submitted by the bidder is incomplete or in need of clarification, the contracting officer shall document the file to indicate his efforts to obtain clear and convincing evidence to support the alleged mistake.

(d) Doubtful mistakes in bids shall not be submitted by contracting officers directly to the Comptroller General for advance decisions, but shall be submitted as outlined in paragraph (b) of this section. The Director, Contracts Management Division will effect coordination with the General Coun

sel.

[36 FR 20429, Oct. 22, 1971]

§ 15-2.406-4 Disclosure of mistakes after award.

(a) Authority to make determinations under § 1-2.406-4 of this title has been delegated to the Director, Contracts Management Division.

(b) Mistakes disclosed after award will be forwarded, in duplicate, through procurement channels and the Chief, Policy and Review Branch, to the Director, Contracts Management Division for determinations. [36 FR 20430, Oct. 22, 1971]