FAR 17.203—Solicitations.
Plain-English Summary
FAR 17.203 tells contracting officers how to draft solicitations when the resulting contract may include options. It covers when to include option provisions and clauses, how to state the basis for evaluation, whether option quantities may be priced without limitation, how to handle options priced differently from the basic requirement, what to do when the Government may exercise an option at award, when an unusual circumstance justifies requiring option prices no higher than the initial requirement, the special acceptance and quantity limits that apply in that situation, and how option value affects trade agreement threshold determinations. In practice, this section is about making the solicitation clear enough that offerors know how options will be evaluated and priced, while also protecting competition and preserving the Government’s ability to exercise options lawfully and fairly. It matters because option language can affect price competition, award decisions, and whether the acquisition is subject to WTO GPA or Free Trade Agreement rules. Poorly drafted option terms can create evaluation errors, unfairness among offerors, or compliance problems later in the procurement.
Key Rules
Include option clauses
If the resulting contract will provide for options, the solicitation must include the appropriate option provisions and clauses. This ensures offerors know the Government may later extend the contract or order additional quantities under stated terms.
State evaluation basis
When a solicitation includes option provisions, it must say whether the Government will evaluate offers with the option included or excluded. If the Government expects to exercise the option at award, the solicitation should say so when appropriate.
Allow option pricing flexibility
Solicitations normally should let offerors price option quantities without limitation. If the option quantity will be evaluated for award, there can be no price limitation on the option quantity.
Disclose differing option prices
If the solicitation allows option unit prices to differ from the basic requirement, it must tell offerors they may propose different option prices based on quantities ordered and the dates of order. This is especially important where future ordering patterns affect price.
Specify evaluation price for early exercise
If the Government may exercise the option at award and differing option prices are allowed, the solicitation must identify the price the Government will use for evaluation, such as the highest option price offered or the price for specified requirements.
Limit no-higher-than-base pricing to unusual cases
A solicitation may require option prices to be no higher than the initial requirement only in unusual circumstances, such as when the option cannot be evaluated under FAR 17.206 or when future competition for the option is impracticable.
Apply special acceptance and quantity limits
If the solicitation requires option prices no higher than the base price, it must say the Government may accept an offer with a higher option price only if doing so does not prejudice any other offeror. It must also limit option quantities for additional supplies to no more than 50 percent of the initial quantity of the same line item, unless a higher percentage is approved by an authorized official above the contracting officer.
Count options for trade agreement thresholds
The value of options must be included when determining whether the acquisition exceeds WTO GPA or Free Trade Agreement thresholds. This affects whether trade agreement procedures and obligations apply.
Responsibilities
Contracting Officer
Draft the solicitation to include the correct option clauses and provisions, state the evaluation basis, disclose how option prices will be treated, identify the evaluation price when early exercise is anticipated, and ensure any restriction requiring option prices no higher than the base price is used only in unusual circumstances and with the required limits and approvals.
Offerors/Contractors
Review the solicitation’s option terms carefully, price option quantities as permitted by the solicitation, understand whether option pricing may vary by quantity or timing, and recognize that option value may affect the acquisition’s trade agreement status and evaluation approach.
Approving Official Above the Contracting Officer
Approve any exception allowing option quantities for additional supplies to exceed 50 percent of the initial quantity of the same line item when unusual circumstances justify a greater percentage.
Agency
Ensure procurement planning and solicitation drafting account for option evaluation rules and trade agreement threshold calculations, and support compliance with applicable competition and international trade requirements.
Practical Implications
Option language can change who wins the award, so the solicitation must be precise about whether options are part of the evaluation and how they are priced.
If the Government expects to exercise an option at award, failing to say so can create fairness and protest risk because offerors may have priced differently had they known.
Requiring option prices to be no higher than base prices is the exception, not the rule; using that approach without a valid reason can restrict competition and create compliance problems.
When option prices vary by quantity or timing, the solicitation must tell offerors exactly how the Government will evaluate those prices; otherwise, the evaluation may be ambiguous or challengeable.
Option value counts toward WTO GPA and Free Trade Agreement threshold determinations, so contracting officers must include options early in acquisition planning to avoid misclassifying the procurement.
Official Regulatory Text
(a) Solicitations shall include appropriate option provisions and clauses when resulting contracts will provide for the exercise of options (see 17.208 ). (b) Solicitations containing option provisions shall state the basis of evaluation, either exclusive or inclusive of the option and, when appropriate, shall inform offerors that it is anticipated that the Government may exercise the option at time of award. (c) Solicitations normally should allow option quantities to be offered without limitation as to price, and there shall be no limitation as to price if the option quantity is to be considered in the evaluation for award (see 17.206 ). (d) Solicitations that allow the offer of options at unit prices which differ from the unit prices for the basic requirement shall state that offerors may offer varying prices for options, depending on the quantities actually ordered and the dates when ordered. (e) If it is anticipated that the Government may exercise an option at the time of award and if the condition specified in paragraph (d) of this section applies, solicitations shall specify the price at which the Government will evaluate the option (highest option price offered or option price for specified requirements). (f) Solicitations may, in unusual circumstances, require that options be offered at prices no higher than those for the initial requirement; e.g., when- (1) The option cannot be evaluated under 17.206 ; or; (2) Future competition for the option is impracticable. (g) Solicitations that require the offering of an option at prices no higher than those for the initial requirement shall- (1) Specify that the Government will accept an offer containing an option price higher than the base price only if the acceptance does not prejudice any other offeror; and (2) Limit option quantities for additional supplies to not more than 50 percent of the initial quantity of the same line item. In unusual circumstances, an authorized person at a level above the contracting officer may approve a greater percentage of quantity. (h) Include the value of options in determining if the acquisition will exceed the World Trade Organization Government Procurement Agreement or Free Trade Agreement thresholds.