On August 24, 2017, the National Aeronautics and Space Administration’s (NASA) final rule amending the NASA Federal Acquisition Supplement by adding a policy on the use of “award terms” will take effect. Award terms are an incentive for contractors to go above and beyond a satisfactory performance to obtain an additional period of performance. Each award term cannot exceed one year in length, but is in addition to the base and option years.
The difference between exercising an option and an award term is that award terms require excellent performance, while exercising an option only requires acceptable performance. This provides contractors additional incentives to perform as best as possible. Both award terms and contract options can be used under the same contract.
Award terms will most likely be found in contracts that involve long term relationships and for service contracts valued at more than $20 million dollars. In considering whether to use an award term, the government must weigh the administrative burden and cost of more frequent procurements versus market stability, technology advances, and the need for flexibility. Contractors may be evaluated and earn an award term for their work in the base period, option periods, and even during earned award terms. The requirements to provide an award term is that there must be an on-going need for the service, funds available, and the contractor must not be listed in the SAM Exclusions List. An award term plan must also be included in all contracts that include award terms and contain the following information: evaluation factors, performance standards, adjectival ratings, weighting system, the evaluation period, and decision point timeframes. This rule has the potential to incentivize greater contractor performance on large service contracts.
The full final rule can be found here:
About the Author
Colin Johnson is a Contracts Manager who focuses on business development and federal contracts management. His expertise is in preparing quotes and responses for both government and commercial entities for training and legal support services.