Is it ever possible to have "to be negotiated" line items in firm fixed price contracts? Suppose I have a solicitation out for military trucks for troop transportation using a government supplied drawing package. Assume in this solicitation that I have line items for trucks each year using an IDIQ methodology. Suppose also that we want to do some government in-house engineering to allow some of these trucks to also plow snow in the future, and that this involves some (now undefined) changes to the undercarriage and front structure, as well as outfitting with some equipment to manipulate the plow. Would it be possible to have some clins titled; truck, troop transport and plow...TBN? The cost of those clins after negotiation (hopefully) would be the normal troop transport truck plus a premium for the plow changes. I figure this would save money, since engineering is not ready yet, but putting out 'another' contract when they are, would be burdonsome and a configuration nightmare.

How would this be different from an unpriced option?

I don't know C, please explain further. Remember, I am a "newbie" and not a CO.

D
 

Although you indicate that this is an IDIQ type arrangement, my assumption is that you would not issue delivery orders against these clins unless you later negotiated a fair and reasonable price. Since the work is not part of the contract at the time of award, but will be added later at the Government's discretion, it appears to meet the definition of an Option (see FAR 2.101).

FAR Part 17 discusses unpriced options in both fixed price and cost-type contracts. So to answer your question, it is allowed, but they are rarely used because of the difficulty in exercising the option. FAR 17.207 details what has to be done to exercise options, but the challenge with an unpriced option is that you will have to justify a sole source to that company under the requirements of FAR part 6 unless you can develop a pricing formula for these clins that will allow you to consider the cost of the unpriced clins during evaluation of the initial proposal.

Could one include the estimated quantity of trucks that will be outfitted with plows in the total estimated quantity, and then issue a change order for those limited quantities once the engineering is complete? Could/should you disclose this plan in the solicitation?

Regarding "unpriced options" I know that they have been around for decades, and I have used them, but I have never understood how they can be considered as options. With a true option nothing is left to negotiate; the Government just has to say "we hereby exercise the option". I find nothing in the FAR that describes or authorizes an "unpriced option". How can an "unpriced option" be anything more than an unenforceable agreement to agree? Can someone enlighten me?

Posted on Tuesday, December 18, 2007 - 08:42 am:

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C, You said: "FAR Part 17 discusses unpriced options in both fixed price and cost-type contracts." Where in Part 17?

FAR 17.207(f) states that before exercising an option, the CO shall make a written determination that the exercise is in accordance with Part 6. It then goes on to state that to satisfy Part 6, the option must have been evaluted at the time of award exercisable in an amount specified or determinable from the terms of the basic contract. 17.207(f)(1-5) talks about various pricing approaches that would meet the test for both fixed price and cost type contracts.

If the option is unpriced you can still meet the requirements of this section and Part 6 provided you publish, if required by Part 5, and execute a sole source justification prior to exercising the option.

If an unpriced option was not allowed, the FAR should state it must be priced at the time of evaluation instead of it must comply with Part 6 before exercising.

"Suppose also that we want to do some government in-house engineering to allow some of these trucks to also plow snow in the future, and that this involves some (now undefined) changes to the undercarriage and front structure, as well as outfitting with some equipment to manipulate the plow."

Let me ask a dumb question: Why not issue a change order or negotiate a supplemental agreement when the time comes? Why bother with an undefined CLIN?

Thanks for all your input. What I am hearing is that, even 'if' an option could be manipulated to be TBD priced, there would still be a need to sole source it, so it would be easier and more prudent to do a change order. Remembering too that internal beauracracy would make sole source challenging.

So, I think you are saying that a bilateral change would be the way to go. In that regards, the CO would need to insure clause 52.243-8 is part of the contract (probably is by template).

Now, what is the supplemental agreement, just a letter of agreement as to work to be done and price to be paid for it? This would be done right before the change, I'm supposing.

We know we are likely to do this change in a couple years. Is there anything that should be put in the solicitation or resultant contract now, to let everyone know it is coming? Would any type of contract line item insertion now be appropriate? Or is it just a matter of boosting the cost of the appropriate CLINs for the quantity of plain trucks that will be changed.

Allow me to clarify the last question from the previous post:

Or is it just a matter of boosting the cost of the appropriate CLINs for the quantity of plain trucks that will be changed AFTER WE NEGOTIATE THE CHANGE.

Do not put anything in the solicitation saying that you plan to issue a change after award!

Putting such a notice in the solicitation could lead to all kinds of challenges and trouble! Two years is a long way off and you cannot know for certain that you will make such a change.

I hope you're not really buying trucks, because if you are you have already said too much about your procurement.

w,

Just out of curiosity, what is 52.243-8? Or was that just a typo?

Sorry, was a typo. Should be 52.243-7.

Point well taken V.

thanks all......