Overview
FAR 17.204 establishes the structural requirements and duration limits for contracts containing options, ensuring that the scope, timeframes, and methods for exercising options are clearly defined. It primarily limits the total contract length for most supplies and services to five years while providing flexibility for information technology and specific funding scenarios.
Key Rules
- Mandatory Limits: Contracts must explicitly state the maximum limits on additional quantities or the total duration of the contract term, including all potential extensions.
- Exercise Windows: The contract must define a specific period for exercising options, which must provide the contractor with sufficient lead time to maintain continuous production or service delivery.
- The Five-Year Rule: Unless an agency exception applies, the total duration (base plus options) for services or the total quantity for supplies cannot exceed five years of requirements. This limit does specifically not apply to information technology contracts.
- Service Contract Flexibility: For service contracts, the option exercise period may extend beyond the contract completion date to account for delays in fiscal year funding availability.
- Expression of Options:
- Quantities can be expressed as percentages of line items, increases to existing line items, or separate additional line items.
- Extensions can be expressed as specific amended completion dates or as increments of time (e.g., days, weeks, or months).
Practical Implications
- Planning and Compliance: Contracting Officers must ensure that procurement lead times account for the "five-year rule," as exceeding this limit typically requires formal agency approval or a new competitive solicitation.
- Operational Continuity: By requiring "adequate lead time" for option exercises, the regulation protects the government from self-inflicted performance gaps and protects contractors from unreasonable production surges.