By: Eric Whytsell
In the recent decision of APAC-Southeast, Inc. n/k/a Oldcastle Southern Group, ASBCA No. 58057 (Sept. 27, 2012), the Armed Services Board of Contract Appeals (ASBCA) expressly adopted the Federal Circuit’s interpretation of FAR 52.217-8 and 52.217-9, two standard clauses providing for contract extensions in holding that the Government may extend services under the fixed price of the contract even after the contract term has ended without paying the contractor’s additional costs.
The case involved a claim for compensation in excess of agreed-upon prices for work performed after the contract had allegedly ended. The contract in question called for the delivery of various concrete targets and established firm fixed prices for each type of target during the base year and two option years. APAC-Southeast, at 1. After exercising the options to extend the contract term under FAR 52.217-9, the Air Force twice extended the second option year for a total of six months under FAR 52.217-8. Id. at 2-3. The contract terms (including prices) were not modified. Id. at 3.
The contractor, APAC Southeast, Inc. (APAC) essentially argued that once the contract term reached the maximum period identified in FAR 52.217-9 (in this case, 36 months), the contract expired and its firm fixed prices ceased to apply. According to APAC, it was therefore entitled to recover almost $300,000 in increased costs incurred for targets delivered after the first 36 months. Id. When APAC submitted a certified claim, the contracting officer rejected it, finding the Air Force had timely provided written notice of contract extension as required by the applicable clause, FAR 52.217-8, which provides “[t]he Government may require continued performance of any services within the limits and at the rates specified in the contract.” Id. at 2-3.
On appeal, the Air Force moved for summary judgment and the ASBCA made short work of the alleged “inconsistency” between the two contract extension clauses by adopting the Federal Circuit’s interpretation of them in Arko Executive Services, Inc. v. United States, 553 F.3d 1375 (Fed. Cir. 2009). That approach differentiates the “limits on contract duration (base plus any option years) set forth in FAR 52.217-9 from the Government’s right to add short extensions outside that period in accordance with FAR 52.217-8.” APAC-Southeast, at 5. The Board noted that the Federal Circuit found it significant that the contract duration identified in FAR 52.217-9 is expressly limited to contract extensions under that clause (but not to those under FAR 52.217-8). It also quoted with approval the Federal Circuit’s explanation that its interpretation is consistent with the purpose of FAR 52.217-8, which “allows the government to extend services without negotiating short extensions to existing contracts.” Id. (quoting Arko Executive Services, 553 F.3d at 1380).
Finding that APAC had provided no reason to ignore the language or purpose of FAR 52.217-8 or to not apply the court of appeals’ precedential interpretation, the ASBCA held that the Air Force had properly extended the contract under FAR 52.217-8 and APAC “is not entitled to additional compensation as a result of the extensions” Id.
Bottom line: when dealing with contract extensions, make sure you know which FAR clause is involved and keep their separate purposes in mind.
Eric Whytsell is the attorney responsible for the content of this article.