TL;DR. A five year contract is often a one year contract plus four well-timed pieces of paper, and the paper is less forgiving than your calendar reminder.
- Contracting officer? Give the written notice of intent within the time the contract specifies, then exercise the option exactly as written.
- Contractor? Find the notice window in your contract now, and expect a price conversation if you have an economic price adjustment clause.
- Bridging a gap? The short-term extension tool tops out at 6 months total, so it is a bridge, not a plan.
- Worried about 2026 rule changes? The two core clauses stayed unchanged in the overhaul deviations we reviewed, but the proposed rewrite is still worth watching.
A "five year contract" is really a series of small decisions
Most multi-year deals are not signed as five years. They are signed as a base period, usually a year, plus options. Each option is the government's unilateral right to buy another slice of time at prices that were already set. The contractor cannot say no, and the government does not have to say yes.
That asymmetry is exactly why the paperwork matters. The government is holding a right, and rights that come from a contract only work if you use them the way the contract describes. Boards of contract appeals have said for years that options must be exercised in strict accordance with their terms. (We did not get the specific case name, so treat that as background, not breaking news.)
So what: if you are the government, an option is not a default. It is an action someone has to take. If you are the contractor, your next year of revenue depends on a piece of paper you do not control.
Get the Acqlerate Acquisition Starter Kit (Free)
Key terms, ACAT levels, career roadmaps, and the 5 most common acquisition mistakes. Tailored to your role: USG, contractor, or career changer.
The notice before the notice
Before the government exercises an option, it usually has to tell the contractor it intends to. The model clause language in the current overhaul guidance says the contracting officer may exercise options only after giving the contractor written notice of intent "within the time specified in the contract." Notice, then exercise. Two steps, not one.
How long is "the time specified"? Older contracts often used 60 days. That is from our background knowledge, not from current clause text, so read your own contract instead of trusting a rule of thumb.
The same model text adds a wrinkle. If the contract has an economic price adjustment clause and the contractor asks for a price revision, the contracting officer must decide how that affects option prices before exercising. Translation: the price talk happens before the option year, not during it.
Key insight: the notice window is measured backward from the end of the current period. Put the deadline on the calendar when the contract is awarded, not when the period is almost over. A missed window can turn a routine option into a new procurement problem.
Two ways to keep going, and they are not twins
When the current period is about to end, there are two common tools for keeping services flowing. One extends the term of the contract through an option. The other extends the services themselves, and it is meant as a short bridge.
The bridge is a useful safety net when a follow-on award is running late. But the cap is real, and the rate rule is narrow. You cannot slip a raise in through the side door.
The model text also gives drafters three reasons to write in the term extension language: advance written notice of intent, a statement that an extension also extends the option, or a specific cap on total contract duration. If your contract has none of these, ask early what is actually being promised.
So what: use the bridge to cover a gap, and use options to plan. If you are leaning on the bridge every year, that is a scheduling problem wearing a contract clause as a costume.
What 2026 changed (less than you might think)
The Revolutionary FAR Overhaul has rewritten a lot, so it is fair to wonder whether option paperwork moved too. Here is what we could confirm:
- Agency Part 17 deviations we reviewed, including the Nuclear Regulatory Commission's, say both clauses "remain unchanged," and the acquisition team still has to complete them. Energy and Transportation have also published Part 17 deviations.
- DoD has its own: Class Deviation 2026-O0027, dated 18 December 2025. We did not open the text, so read it before you assume it matches the civilian versions.
- Proposed rulemaking (FAR Case 2026-006) would replace the five year cap on performance periods for supplies and services with a reference to applicable statutory or regulatory limits. We could not confirm where that rule stands, so do not treat it as final.
So what: for contracts you are managing today, the mechanics are the same. Keep an eye on the proposed rule, because it could change how long a "five year" deal is allowed to run.
Module: Defense Contracting Fundamentals
This post touches on concepts covered in depth in the Defense Contracting Fundamentals module. Contract types, source selection, IDIQs, GWACs, modifications, and the COR role.
Start This Module Free →A practical checklist
| Question | Government | Contractor |
|---|---|---|
| When is the notice due? | Calendar it backward from the end of the period | Ask if you have not seen it as the window nears |
| Is the notice in writing? | Yes, and keep the file copy | Log the date you received it |
| Does a price adjustment clause apply? | Settle the effect on option prices before exercising | Raise any revision request early |
| Is a gap coming? | Remember the 6 month bridge cap | Plan staffing for the cap, not for hope |
| Does the modification match the contract? | Exercise exactly as written | Read it before signing |
One caveat: this post draws on the clause pages and deviation guidance we could access, not on a full review of every agency's rules. Check your own contract and your agency's current deviation before you act on anything here.
Base Period, Option, Ordering Period: Not the Same Thing
| Term | What It Is | What Guarantees You Work | Common Mistake |
|---|---|---|---|
| Base period | The work the government has committed to now | Funded and obligated scope | Assuming the total value is committed |
| Option period | Government's unilateral right to extend | Nothing until it is exercised in writing | Staffing up before the notice arrives |
| Ordering period (IDIQ) | The window in which task orders may be issued | Only the guaranteed minimum | Reading the ceiling as revenue |
| Extension under 52.217-8 | Short continuation at existing rates | Up to six months, at the government's option | Treating it as a new option year |