Overview
FAR 17.207 outlines the mandatory procedures and substantive determinations a Contracting Officer must complete and document before exercising a contract option. It ensures that the government only extends a contractual relationship when it is legally compliant, fiscally responsible, and the most advantageous path forward.
Key Rules
- Written Notice: The Contracting Officer (CO) must provide written notification to the contractor within the specific timeframe established in the contract.
- Mandatory Determinations: Before exercising an option, the CO must verify in writing that:
- Funds are available and a valid Government need still exists.
- The contractor is not debarred or excluded in the System for Award Management (SAM).
- The contractor’s performance on the current contract is acceptable (e.g., satisfactory ratings).
- The option is the most advantageous method of fulfillment, considering price and other factors like continuity of operations.
- Price Reasonableness: The CO must justify the price through market research, informal analysis, or by determining the time since the original award is short enough to ensure the price remains competitive.
- Competition Requirements: To satisfy FAR Part 6 (Full and Open Competition), the option must have been evaluated as part of the initial competition, and the price must be determinable from the original contract terms without renegotiation.
- Formal Documentation: The CO must place a written determination in the contract file and cite the specific option clause as the legal authority on the resulting contract modification.
Practical Implications
- Administrative Lead Time: COs must begin the "Option Exercise Determination" process months in advance of the expiration date to ensure there is sufficient time for market research and performance evaluations.
- Performance Leverage: Because acceptable performance is a prerequisite for exercising an option, this section serves as a significant quality control mechanism; contractors with poor performance ratings risk losing future periods of performance without the government needing to initiate a formal termination.