Sippican, Inc.

B-257047.2 Nov 13, 1995 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights Protest that contracting agency improperly exercised a contract option is denied where the protester has not shown that the agency failed to follow applicable regulations or that the determination to exercise the option was unreasonable. Which was awarded to Sechan Electronics. Sippican contends that the agency's determination to exercise the option was made without complying with applicable regulations. The first year option was exercised concurrently with the award of the base year contract. The second year option was exercised in March 1995. Was exercised on June 28. Sippican contends that the Navy improperly exercised the most recent option without making a reasonable determination that the option was the most advantageous method of fulfilling the government's needs. View Decision Matter of: Sippican, Inc. File: B-257047.2 Date: November 13, 1995 Protest that contracting agency improperly exercised a contract option is denied where the protester has not shown that the agency failed to follow applicable regulations or that the determination to exercise the option was unreasonable. Attorneys DECISION Sippican, Inc. protests the exercise of the third option year under contract No. N00024-94-C-6153, which was awarded to Sechan Electronics, Inc., by the Department of the Navy. Sippican contends that the agency's determination to exercise the option was made without complying with applicable regulations. We deny the protest. On April 8, 1994, the Navy awarded a contract for a base year plus 3 option years to Sechan, under solicitation No. N00024-93-R-6126, to produce EMATTS (expendable anti-submarine warfare sonar training targets). The first year option was exercised concurrently with the award of the base year contract. The second year option was exercised in March 1995. The third year option, the subject of the current protest, was exercised on June 28, 1995. Sippican contends that the Navy improperly exercised the most recent option without making a reasonable determination that the option was the most advantageous method of fulfilling the government's needs, as required by Federal Acquisition Regulation (FAR) Sec. 17.207. Sippican, the incumbent contractor, bases its protest principally upon the fact that the firm sent several communications to the agency after Sippican lost the base contract competition to Sechan in 1994, stating that Sippican believed recompetition for the contract's option requirements was in the agency's best interest. In those letters, Sippican stated that it would now be able to offer the agency lower prices for option quantity EMATTS than those prices offered by Sechan since Sippican had recently "downsized" its organization and found alternative and less expensive sources for some of the EMATT components. Sippican contends that the agency failed to follow regulatory requirements in not issuing a new solicitation and requesting proposals to confirm whether Sechan's third option year price (and the exercise of the option) was still the most advantageous method of fulfilling the agency's need. As a general rule, option provisions in a contract are exercisable at the discretion of the government. See FAR Sec. 17.201. An informal analysis of prices or an examination of the market which indicates "that the option price is better than prices available in the market or that the option is the more advantageous offer" is one of three methods specifically set forth in FAR Sec. 17.207(d) as a basis for determining whether to exercise an option. Person-System Integration, Ltd., B-246142; B-246142.2, Feb. 19, 1992, 92-1 CPD Para. 204. The form of such examination is largely within the discretion of the contracting officer, so long as it is reasonable. See Kollsman Instrument Co., 68 Comp.Gen. 303 (1989), 89-1 CPD Para. 243; Action Mfg. Co., 66 Comp.Gen. 463 (1987), 87-1 CPD Para. 518. The FAR also permits a determination that the option price is the most advantageous based upon a finding that the time between contract award and option exercise is short enough and the market stable enough that the option price remains most advantageous. FAR Sec. 17.207(d). Our Office will not question an agency's exercise of an option under an existing contract unless the protester shows that the agency failed to follow applicable regulations or that the determination to exercise the option, rather than conduct a new procurement, was unreasonable. Tycho Technology, Inc., B-222413.2, May 25, 1990, 90-1 CPD Para. 500. The intent of the regulations is not to afford a firm that offered high prices under an original solicitation an opportunity to remedy this business judgment by undercutting the option price of the successful offeror. Person-System Integration, Ltd., supra. We find no basis to question the agency's determination to exercise the option.