Can the option year pricing on a firm fixed price indefinite quantity or requirements contract with a sole source supplier be re-negotiated if the analysis prior to exercise of the option will not support the option price in the contract? For some reason I have thought that options were not subject to negotiation but I haven't found anything that specifically states that they are not.

By Vern Edwards on Friday, December 28, 2001 - 09:58 am:

Generally, you cannot renegotiate an option price prior to exercising the option unless you prepare a J&A for a sole source procurement. That's because the General Accounting Office considers such a negotiation to be a new procurement that requires either a new competition or a sole source justification. See: Outdoor Venture Corporation, B-279777, July 17, 1998; Magnavox Elec. Sys., Co., B-231795, 88-2 CPD ¶ 431; and, Varian Associates, B-208281, 83-1 CPD ¶ 78.

Also see FAR 17.207(f).

The GAO decisions were pointed out by Linda Koone of the Navy in a lengthy discussion of the topic earlier in 2001 or sometime in 2000.