Option clauses may be included in contracts when increased requirements are foreseeable during the contract period or when continuing performance past the original period is in the best interest of the Postal Service. Option clauses may require that additional quantities be priced the same as the basic quantities or at a different price. The clauses may also allow for unpriced options at the time of award. The price for these options is subject to discussions and negotiations when the option is exercised. Priced options may require suppliers to guarantee prices for definite time periods, with no guarantee that the option will be exercised. Their improper use may result in unfair prices to the Postal Service or an unfair financial burden on the supplier. When additional requirements are foreseeable and subsequent competition would be impracticable because of factors such as production lead time and delivery requirements, the use of priced options may be preferable to negotiating a price later when the supplier is the only practicable source. Contracts containing priced options that exceed 5 years must include an economic price adjustment clause (such as Clause 2-28: Economic Price Adjustment — Labor and Materials or Clause 2-29: Economic Price Adjustment (Index Method)).
The contract must limit the additional quantities of supplies or services that may be purchased or the duration of the period for which performance of the contract may be extended under the option, and it must fix the period within which the option may be exercised. This period should be set to give the supplier adequate notice for performance under the option. In fixing the period, consider the lead time needed to ensure continuous production and the time required for additional funding and other approvals. The period for exercising the option should always be kept to a minimum. When a solicitation contains an option for additional quantities of supplies at prices no higher than those for the initial quantities, care should be taken to ensure that the option quantities are reasonable and do not cause the supplier financial hardship. The quantities or the period under option and the period during which the option may be exercised must be justified and documented in the contract file by the CO.
The solicitation may allow varying prices to be offered for the option quantities, depending on the quantities actually ordered and the dates when ordered. If so, the solicitation must specify the price at which the options will be evaluated (e.g., highest option price offered or option price for specified quantities or dates).
An option for increased quantities may be expressed as a percentage of specific line items, a number of additional units of specific line items, or additional numbered line items (identified as the option quantity) with the same name as the items initially included in the contract. An option for increased services (including construction) may similarly be expressed in terms of percentages, increases in specific line items, or additional numbered line items expressed in the units of work initially used in the contract (e.g., labor hours, square feet, or pounds or tons handled). When exercising the option would result in extending the duration of the contract, the option may be expressed in terms of an extended completion date or an additional time period.
