FAR 17.206—Evaluation.
Plain-English Summary
FAR 17.206 explains when the Government must evaluate option quantities or option periods as part of the initial competition for a basic contract. It covers two related topics: the general rule that option prices or periods must be evaluated when the Government has already determined, before issuing the solicitation, that it is likely to exercise the option; and the limited exception allowing the contracting officer to omit that evaluation when doing so is not in the Government’s best interests and the decision is approved above the contracting officer. The section ties directly to FAR 17.208, which governs the use and exercise of options, and it is intended to ensure that option pricing is considered up front when the Government expects to use the option. In practice, this rule affects how solicitations are structured, how offers are compared, and whether the Government can later exercise an option without having to reopen competition. It also creates a documentation and approval requirement when the agency chooses not to evaluate option quantities, helping prevent arbitrary exclusion of option pricing from the source selection. For contractors, this section matters because it determines whether option pricing will be part of the award decision and therefore whether an offeror should price options aggressively or strategically. For contracting officers, it is a planning and acquisition-strategy requirement that must be resolved before solicitation issuance.
Key Rules
Evaluate likely options
If the Government has already determined before solicitation that it is likely to exercise an option, the contracting officer must evaluate offers for the option quantities or periods as part of the initial award decision. This means option pricing or terms are part of the competition, not an afterthought.
Exception requires approval
The contracting officer may skip evaluation of option quantities only when that approach is determined to be in the Government’s best interests and the determination is approved above the contracting officer. The exception is not automatic and requires higher-level concurrence.
Funding uncertainty may justify omission
A stated example supporting non-evaluation is when there is reasonable certainty that funds will not be available to exercise the option. In that situation, evaluating option pricing may not provide meaningful value to the Government.
Pre-solicitation decision required
The decision whether to evaluate options must be made before issuing the solicitation. The agency cannot wait until after proposals are received to decide whether option pricing will count in the evaluation.
Coordinate with option exercise rules
This section works together with FAR 17.208, which addresses the conditions for exercising options. Evaluating options at award does not itself authorize exercise; the option still must satisfy the separate requirements for exercise later.
Responsibilities
Contracting Officer
Determine before solicitation whether option quantities or periods are likely to be exercised and, if so, include them in the evaluation of offers. If choosing not to evaluate options, prepare the determination that doing so is not in the Government’s best interests and obtain approval above the contracting officer.
Approving Official / Higher-Level Authority
Review and approve the contracting officer’s determination to omit evaluation of option quantities when the Government decides that evaluation is not in its best interests. This approval provides oversight and ensures the exception is justified.
Agency / Requirement Owner
Support the acquisition strategy by identifying whether future needs are likely to require option exercise and whether funding is expected to be available. Provide the factual basis for deciding whether option evaluation should be included in the solicitation.
Offerors / Contractors
Price and structure proposals with awareness that option quantities or periods may be evaluated and may affect award selection. If options are not evaluated, understand that option pricing may not influence the initial competition, though it may still matter later if the option is exercised.
Practical Implications
Option pricing can materially affect award decisions, so contractors should treat option CLINs as potentially evaluation-significant unless the solicitation clearly says otherwise.
Contracting officers should make the option-evaluation decision early and document the rationale; failing to do so can create protest risk or an inconsistent evaluation record.
A common pitfall is assuming options can be ignored in evaluation simply because they are not guaranteed; FAR 17.206 requires evaluation when exercise is likely.
If the agency expects funding uncertainty, it should still document the basis for concluding that non-evaluation is in the Government’s best interests and secure the required higher-level approval.
This rule helps avoid later surprises: if the Government plans to use the option, evaluating it up front supports better price comparison and smoother future exercise under FAR 17.208.
Official Regulatory Text
(a) In awarding the basic contract, the contracting officer shall, except as provided in paragraph (b) of this section, evaluate offers for any option quantities or periods contained in a solicitation when it has been determined prior to soliciting offers that the Government is likely to exercise the options. (See 17.208 .) (b) The contracting officer need not evaluate offers for any option quantities when it is determined that evaluation would not be in the best interests of the Government and this determination is approved at a level above the contracting officer. An example of a circumstance that may support a determination not to evaluate offers for option quantities is when there is a reasonable certainty that funds will be unavailable to permit exercise of the option.