How Do FAR Options Work and When Can a Modification Add Them After Award?

How do FAR options work before they are exercised?

FAR 17.207 says a contracting officer may exercise an option only by written notice within the time period specified in the contract and only after making the required determinations: funds are available, the option meets an existing Government need, the option is the most advantageous method after considering price and other factors, the option was synopsized unless an exemption applies, the contractor has no active exclusion record in SAM, past performance has been considered, and current performance has been acceptable. FAR 17.207 also requires the option to have been evaluated as part of the initial competition and to be exercisable at an amount specified in or reasonably determinable from the basic contract, and the notice exercising the option must cite the option clause as authority. AFARS 5117.290 adds that contracting officers shall obtain prior approval before modifying a contract to incorporate option clauses or additional option quantities after award, and FAR Part 43 says only contracting officers acting within their authority may execute contract modifications. For GSA procurements, GSAM 552.217-70 says formula-based option year pricing is automatically considered when evaluating the base-year price, and that evaluation does not obligate the Government to exercise the options.