Gives government the right to extend contract for additional periods on same terms and conditions.
Applicability: Often included in service and supply contracts to extend performance period.
Key Requirements
Accept government option to extend on pre-negotiated terms
Pricing for option period must be stated in original proposal
Be prepared to continue performance under same contract terms
Notify government if you cannot continue at option period
Common Issues & Pitfalls
Including option pricing that is significantly lower (triggers audit = you lose it)
Assuming option is guaranteed (it is not—government can cancel)
Failing to staff up for option period (creates performance issues)
Including escalation clauses that are excessive (government may not exercise option)
Contractor Guidance for Your Bid
Options can make or break a contract. Price them aggressively—it is free money if exercised. But price reasonably or government will question fairness. Plan to be available for option period from day 1.