Can an Expired Contract Come Back to Life?
March 8, 2023
Category: Purchasing and Contracting
To me, the skill of any magician is impressing the audience with the ability to provide a magical experience that seems to defy the laws of the known universe. You don’t know how they made it happen, but the magician somehow navigated within the laws of the universe to conjure magic.
I consider those in local government procurement to be magicians as well, conjuring magic on numerous occasions for customers within your agency, all within the laws of your procurement universe — also known as the statutes and policies your agency follows for public works, services, goods, equipment, and supplies. Customers don’t know how you make it happen, you just navigate this universe and make magical solutions!
In your career as a procurement magician, if you haven’t already, at some point you will be asked to use magic and extend a contract after the term date on the contract has passed. Your customers will anticipate your magic can conjure up an amendment that extends the contract and eliminates the need to conduct a new solicitation or contract.
When a contract expires, is it a good idea to wave your procurement wand to create an amendment that will bring the contract back to life?
Let’s look at a scenario.
In this scenario your public agency has a awarded a Personal Services Contract for media design services to a local consulting firm. The contract, which is set to expire on March 1, 2023, has a not-to-exceed amount of $25,000 and was awarded by formal competitive bid following agency policy for this type of service.
On March 3rd, the coworker in your agency who is using the contract (e.g., your customer) requests assistance creating an amendment to extend the contract another year to finish the project within the scope of the contract. The agency has spent $20,000 to date, and the customer says the scope of media design services and pricing awarded to the consulting firm through the competitive process will stay in place for another year if the agency elects to extend the contract.
When reviewing the contract, in the “Term” section it states:
This Contract shall begin on the date of the final signature and shall end on March 1, 2023, unless terminated sooner or extended by agency as provided herein.
In this scenario, where the contract expired on March 1st, should the procurement magician try some magic and bring the contract back to life?
The answer is: Don’t use magic to bring back a dead contract, as it defies the laws of local government procurement.
Can An Expired Contract Come Back to Life?
From the MRSC perspective, the answer is No. A contract that has expired cannot be extended.
An expired contract means that there is no document or legal relationship to amend or extend, so the agency and contractor must enter into a new contract. If the original contract was subject to bidding or competitive selection requirements, any new contract must follow the same procedure.
In the procurement context, the common understanding of why an expired contract cannot be extended is that if an agency could assume that an expired contract could be amended, then the agency would never be required to follow competitive requirements to award contracts. Instead, it would just keep extending and amending otherwise expired contracts.
Consider the purpose of having competitive requirements that an agency must follow for public works, services, goods, equipment, and supplies: A contract opportunity where a business competes for and is awarded a contract is based on an established contract period. Should a new opportunity arise, all interested parties should have the right to compete for this future contract.
Businesses do not have the opportunity to compete for a contract that stays with the current contractor due to an amendment to a contract that has expired. Market and business conditions change over time and an agency could be missing out on getting the most of its public dollars. While settle for the same old quarter pulled from behind the ear when you might be able to get a silver dollar?
With these thoughts in mind, it is best to plan for this situation and have an answer as to why magic cannot be used to extend a contract that has expired.
As a procurement magician, you only seem to defy the known universe: You still must navigate within the laws of your procurement universe when you make magic happen.
Knowing the situation of potentially amending an expired contract, an agency may want to develop policy clarifying the agency’s position that an expired contract cannot be amended. This will ensure customers will take action sooner to extend contracts while the contract is still active, and it will support the efforts of the procurement magician creating magical solutions for customers, like a new contract when a previous contract expires.
Happy Procurement Month!
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