Appeal alleging that government improperly exercised options out-of-sequence is denied. The contract had two option periods and an additional six-month “option to extend services” period. Instead of exercising the two options, the government extended the contract under the option to extend services provision. The contractor argued that the government could not exercise the option to extend services until it had exercised the other two options. The board disagreed, finding that an option to extend services provision is not limited to use after the exercise of other option periods. What’s more, nothing in the contract indicated there was a particular order in which the government had to exercise an option to extend services.
Mission1st had a contract with the Army to provide communications and networking infrastructure. The contract had one nine-month base period and two nine-month option periods. The contract further specified an additional six-month “option to extend services.” The contract required the Army to exercise options by providing written notice “within 90 days before the expiration of the contract.”
Before Mission1st completed the base period, the Army indicated that it wanted to exercise the first option period. Mission1st balked. It had been losing money on the contract, so it asked the Army to pay more the option period. The Army offered instead to only exercise a partial option for three months. Mission1st stated that it would only agree to the three-month option if the government made an upward adjustment in price.
The Army executed a modification to exercise a three-month option. The Army did not exercise the option under the two nine-month options periods in the contract. Instead, the Army exercised the option under the contract’s additional “option to extend services” provision.
After that three months expired, the Army and Mission1st executed another contract modification, which exercised the government’s remaining three months (out of the six) under the options to extend services provision. As part of this modification, the parties also agreed to upwardly adjust the value—i.e., pay Mission1st more—for the option period.
After completing the contract, Mission1st filed a claim asserting that the Army had improperly exercised its option to extend services, and, consequently, the company was entitled to $3.6 million in excess costs. The Army denied the claim. Mission1st appealed to the ASBCA
Mission1st asserted on appeal that the government exercised the option to extend services out-of-sequence. Mission1st reasoned that the contract had two nine-month options. The option to extend services was essentially a third option that could only be exercised after the first two had been exercised.
The board noted that under its precedent an option to extend services is not limited to use after the exercise of other option periods. Moreover, the board continued, even absent this precedent, the terms of the contract allowed the Army to exercise the option to extend services independent of the of the other options. The board noted that in Lockheed Martin Corp. v. Walker, 149 F.3d 377 (Fed. Cir. 1998), the Federal Circuit had held that the government improperly exercised options out-of-sequence. But the options in that case contained declining prices and a beginning and end data for the options. Here, the options did not have declining prices so exercising the out of the order did would not harm the contractor. Moreover, the option to extend services only had an end date, indicating that it did not have to be exercised in any particular order.
Mission1st further argued that the Army had not provided adequate notice when exercising the option. The contract provided the Army had to provide notice “within 90 days before expiration of the contract.” Mission1st contended that “within 90 days” meant that the Army was required to provide notice prior to the 90th day before expiration. Here, however, the Army had provided formal written notice four days before expiration.
The board, however, disagreed with Mission1st’s interpretation of the “within.” The word “within” means inside the range, or occurring within a particular time period. In this case, the government exercised the option “inside” the 90 day period before the end of the contract.
The board further noted that even if the Army had not properly exercised the extension, Mission1st had waived any potential claim. Mission1st and the Army had executed bilateral modification agreeing to extend the option period and to modify the value of the contract. This modification resolved any dispute Mission1st had regarding the procedure for exercising the option.
Mission1st is represented by Joshua R. Turner, Elizabeth J. Cappiello, and Jason W. Workmaster of Miller & Chevalier Chartered. The government is represented by Scott N. Flesch and Zachary F. Jacobson of the Army.
