5-10.2 Exercising Options

Before exercising an option, the purchase/SCM team must determine that:

• Funds are available.
• The Postal Service still needs the supplies or services covered by the option.
• Exercising the option is the most advantageous alternative, price and other factors considered (“other factors” includes any need for continuity of operations and the switching costs or other costs of disrupting operations discussed above).

The CO must determine that the option price is the most advantageous to the Postal Service, based on one of the following:

• Market research clearly indicates that a better price than that offered by the option cannot be obtained.
• The time between the award of the contract containing the option and the exercise of the option is so short that the option price is probably the lowest obtainable, considering such factors as market stability and usual duration of supply or service contracts.
• A new solicitation fails to produce a better price than that offered by the option (this method of testing the market should be used only if neither of the other methods is satisfactory).

If the contract provides for economic price adjustment, the effect of such adjustment on prices under the option must be ascertained in determining whether to exercise the option.

When an option is to be exercised, the CO must, in writing:

• Determine that the option may properly be exercised (as discussed above).
• Notify the supplier within the time specified in the contract that the option is being exercised.
• Modify the contract as needed, citing the option clause as authority.