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HHS Reference Tool for Contract Funding, Formation and Appropriations Law Compliance

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Case Study - Extending the Performance Period for Severable Services

Scenarios:

The Substance Abuse and Mental Health Services Administration (SAMHSA) has a 5-year contract for severable services under which the contractor provides logistical support for review of grant applications. The contract’s base period and each option year, funded by annual appropriations, are 12 months long and equate to the calendar year.

  1. Just before the end of Option Year 1, the Contracting Officer’s Technical Representative (COTR) contacts the SAMHSA Contract Specialist to indicate that an additional 3 months is needed for the contractor to finish the activities, which currently run from January 1, 2010 through December 31, 2010. The COTR indicates that the delay is due to the Government not providing certain information to the contractor in a timely manner.
  2. Toward the end of Option Year 3, the COTR becomes aware that the contractor is under-running the budget and will have funds remaining at the end of the option period. The COTR requests a 2-month extension to allow the contractor to spend the remaining funds.
  3. On this same contract, at a later time, the COTR realizes that, given the schedule for award of a follow-on contract, there will be a hiatus in services unless the last option period is extended. Because there is funding remaining for the last option period, the COTR wants the contractor to be able to use those funds in the extended period.

Discussion:

To determine the appropriate course of action for each of these scenarios, it is necessary to understand the circumstances under which it may be appropriate to extend an option year and/or the overall period of performance under a contract for severable services.

  1. Under Scenarios A and B, because the contract is funded by an annual appropriation, the Contracting Officer (CO) must advise the COTR that the extension cannot be granted regardless of the reason for the request, e.g., excusable delay, Government delay, or desire to have the contractor spend remaining funds. When funded by an annual appropriation, a no-cost extension under a contract for severable services is permitted only if it is for the continuation of the same services and would not extend the performance period involved beyond 12 months. Under these scenarios, the option years in question would be 15 and 14 months, respectively. An extension beyond 12 months is not permitted because the appropriation is no longer available for obligation.
  2. Under Scenario C, even if the contract includes the clause FAR 52.217-8, Option to Extend Services (which would allow the Government, as a unilateral right, to require the contractor to continue to provide the same services for up to an additional 6 months), the CO must advise the COTR that the proposed extension is not appropriate. To exercise that option, the Government must add funds to the contract to allow the contractor to carry out the services in the extended period. That new funding must come from the then current appropriation as the services are a bona fide need of the extended period.

 

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