Army Contracting:

Training and Guidance Needed to Ensure Appropriate Use of the Option to Extend Services Clause

GAO-16-262R: Published: Jan 28, 2016. Publicly Released: Jan 28, 2016.

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Michele Mackin
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mackinm@gao.gov

 

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What GAO Found

GAO found that contracting officials at the Army Contracting Command-Redstone Arsenal improperly used the option to extend services clause by extending three of five contracts reviewed for periods longer than 6 months. When included in a contract, the Federal Acquisition Regulation's (FAR) option to extend services clause allows contracting officers to extend a contract more than once as long as the total extension does not exceed 6 months. However, the three contracts GAO identified were extended for periods between 10 and 12 months using contract modifications that cited the option to extend services clause. All three contracts were sole-source bridge contracts included as a part of GAO's October 2015 review of bridge contracts. In that report, GAO found that multiple factors contributed to the use of bridge contracts, including those reviewed at the Army, such as an inexperienced and overwhelmed acquisition workforce.

Why GAO Did This Study

The option to extend services clause provides a way for the government to continue to receive services for up to 6 months when, for example, the award of subsequent contracts might be delayed. When noncompetitive contracts are used frequently or for prolonged periods, the government is at risk of paying more than it should for goods and services. The same is true when the option to extend services clause is used for longer than permitted, thus delaying potential competition. In October 2015, GAO reported on federal agencies' use of bridge contracts, which GAO defined as including extensions to an existing contract beyond the period of performance of a contract (including base and option years).

As a follow-up to its October 2015 report, GAO developed this report to address the Army Contracting Command-Redstone Arsenal's use of the option to extend services clause on selected contracts, and to bring the issues GAO found to the command's attention. For this report, GAO examined, for selected Army contracts, how the option to extend services clause was used to bridge a potential gap in services and the extent to which it was used in accordance with federal regulations.

To conduct this work, GAO relied on audit work completed as part of an October 2015 review of federal agencies' use of bridge contracts. As part of that review, GAO selected 29 contracts, including 5 Army contracts awarded by the Army Contracting Command-Redstone Arsenal, for an in-depth review. To review the Army contracts, GAO collected and analyzed contract documentation and interviewed contracting and program officials. In addition, GAO reviewed FAR sections 37.111 and 17.208 (f), which provides for the use of FAR clause 52.217-8, the option to extend services, to better understand the rules related to the use of this clause, and compared the Army's use of this clause on the selected contracts to the terms and limitations of the clause.

What GAO Recommends

GAO recommends that the Executive Director of the Army Contracting Command-Redstone Arsenal provide training and, in a timely manner, issue a formal reminder to contracting officers on the appropriate use of the option to extend services clause, in particular the period of performance limitations prescribed by the FAR. The Department of Defense concurred with the recommendation.

For more information, contact Michele Mackin at (202) 512-4841 or mackinm@gao.gov.

Recommendation for Executive Action

  1. Status: Open

    Comments: The Army Contracting Command (ACC) has taken some steps to address this recommendation, but additional actions are needed. An ACC official told us that in April 2016 the Executive Director of ACC Redstone Arsenal briefed all the command's directors (which include contract supervisors above the division level) on the appropriate use of the option to extend services clause, including the period of performance limitations prescribed by the clause. The official further indicated that the directors were responsible for communicating this information to others. However, DOD has yet to issue a formal reminder to contracting officers on the appropriate use of the clause, as DOD stated it would do. In its response to our draft report, DOD stated that the Army intended to issue a memorandum by March 31, 2016 to remind its contracting professionals about the appropriate use of the option to extend services clause and the importance of ensuring that modification authorities are correctly cited, but as of August 2016, a memorandum has not been issued.

    Recommendation: The Executive Director of the Army Contracting Command-Redstone Arsenal should provide training and, in a timely manner, issue a formal reminder to contracting officers on the appropriate use of the option to extend services clause, in particular the period of performance limitations prescribed by the clause.

    Agency Affected: Department of Defense: Department of the Army: U.S. Army Contracting Command: Army Contracting Command-Redstone Arsenal

 

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