ASBCA Provides Additional Guidance on Contract Extensions under FAR 52.217-8
May 6, 2013
By: Eric Whytsell
Last Fall, we reported on a case in which the ASBCA adopted the Federal Circuit’s interpretation of FAR 52-217-8 and FAR 52.217-9 and the difference between the two clauses. That article stressed the importance of knowing which clause is implicated by the contract extensions at issue and understanding the clauses’ separate purposes. The recent case of Glasgow Investigative Solutions, Inc., ASBCA No. 58111 (April 9, 2013) clarifying the use of FAR 52.217-8 by making clear that the Government need not wait until the end of all option years to invoke the clause to extend the contract.
The case involved an Army National Guard contract for armed security guard services at the National Guard Armory in Washington DC. The original contract contained six CLINs priced on a firm fixed-price, monthly basis, for a 3 month base period ending May 31, 2009 (CLIN 1), four option years (CLINs 2-5), and a 4 month option period running from June 1, 2009 through September 30, 2009 (CLIN 6). After initially exercising CLIN 6 to extend the contract through the end of September 2009 with funding for only 3 of the 4 months, the Army added CLIN 7 to provide the fourth month’s funding, then again bilaterally modified the contract to add CLIN 8, extending the CLIN 6 period through January 31, 2010 and modifying the option year periods accordingly.
Glasgow Investigative Solutions (GIS) apparently had no problem with these changes. Nor did it complaint when the Army exercised Option Year 1 (through January 31, 2011). It was only when the Army notified GIS that it intended to only partially exercise the Option Year 2 that the contractor began to raise issues about the Army’s approach. Despite its concerns, GIS executed a bilateral modification on February 1, 2011 that extended Option Year 1 by two months. A trio of subsequent contract modifications extended Option Year 1 month by month through the end of June.
In response to the last of those modifications, GIS notified the Contracting Officer that it was executing the modification under protest and intended to submit “a claim stemming from this substantial change in Contract terms.” The CO responded by explaining that the Army is unable to exercise the entire 1-year contract option due to limited funding and offered to extend the contract for an additional month to July 31, 2011. GIS accepted the additional extension but maintained its position that the modification was contrary to the original contract terms and expressly reserved its rights.
True to its word, GIS filed a constructive change claim for just under $100,000 and, when the CO failed to issue a decision, appealed to the ASBCA, arguing that FAR 52.217-8: (i) may only be used to extend the contract term after all options have been exercised; and (ii) may only be invoked where there is a follow-on contract and the Government needs to bridge performance between the incumbent and the new contract. Therefore, according to GIS, the option extensions at issue constituted constructive changes to the contract. GIS also asserted that the Army had “exhausted” its FAR 52.217-8 extension rights by extending the contract by more than 6 months prior to its exercise of Option year 1 (and the subsequent month-to-month extensions about which GIS complained).
The Army responded by moving for summary judgment, contending that FAR 52.217-8 options may be exercised prior to exercising all contract option years. With respect to the “exhaustion” argument, the Army argued that the ASBCA lacked jurisdiction over this issue because GIS’s pleading did not assert it.
Analyzing the first question – whether the Army had the right to use FAR 52.217-8 to extend the contract before exercising all option years, the Board first reviewed the cases on which GIS relied. It determined that none of those decisions actually limit the use of FAR 52.217-8 to situations where all contract options have expired and the Government needs to extend the incumbent’s performance until a new contract was awarded. It also noted that FAR 37.111 identifies delays due to bid protests and alleged mistakes as appropriate circumstances for FAR 52.217-8 extensions. Thus, the Board concluded, post-option extensions are not the only potential use for FAR 52.217-8 and granted summary judgment in favor of the Army on that issue.
With respect to the issue of its jurisdiction over GIS’ exhaustion argument, the ASBCA noted that CDA jurisdiction depends on the sufficiency of a party’s claim, not its pleading, and found it had jurisdiction because GIS’ new theory did not alter its fundamental claim. Unfortunately for GIS, the Board made short work of the argument itself, pointing out that FAR 52.217-8 grants authority to unilaterally extend a contract and explaining that the Army’s bilateral modifications (that GIS also executed) did not implicate the clause. For this reason, the Army retained the authority under FAR 52.217-8 to later extend the contract by up to 6 months. Again, the Board granted summary judgment for the Army.
Bottom line: Given ongoing budget constraints, you should not be surprised to find yourself facing similar issues in the future. If you do, remember: when a contract contains FAR 52.217-8, the Government may unilaterally extend it for up to six months without first exercising all the options – and bilateral contract extensions along the way do not count against those 6 months.
Eric Whytsell is the attorney responsible for the content of this article.