United States Government Accountability Office 

Washington, DC 20548 

Comptroller General

of the United States

 

Decision 

Matter of: Nutriom, LLC 

File: B-402511 

Date: May 11, 2010 

Hernan G. Etcheto for the protester. 

Michael P. Wilson, Esq., Defense Logistics Agency, for the agency. 

Armani Vadiee, Christina Sklarew, Esq., and Guy R. Pietrovito, Esq., Office of the 

General Counsel, GAO, participated in the preparation of the decision. 

DIGEST 

Protest that contracting agency improperly exercised a contract option is denied 

where agency reasonably determined that exercising the option was the most 

advantageous means of satisfying the agency’s needs. 

DECISION 

Nutriom, LLC, of Lacey, Washington, protests the exercise of an option by the 

Defense Logistics Agency (DLA) under contract No. SPM3S1-08-D-Z186, awarded to 

Oregon Freeze Dry (OFD), of Albany, Oregon, under request for proposals (RFP) 

No. SPM3S1-06-R-7003, for a dehydrated egg product. 

We deny the protest. 

BACKGROUND 

The RFP, issued on August 30, 2006, provided for the award of a fixed-price with 

economic price adjustment, indefinite-quantity contract for a base year with four 

option years for a dehydrated egg mix for the Unitized Group Ration-Heat and Serve 

(UGR-H&S) Program.1

 During the initial competition for this contract, DLA received 

offers from three small business firms, including Nutriom. Following discussions, 

DLA made award to OFD on the basis of that firm’s low price and technical rating. 

Concurrent with the award of the contract to OFD on January 10, 2008, DLA 

 

1

The UGR-H&S program supports military personnel in worldwide operations that 

allow organized food service facilities. www.dscp.dla.mil/subs/rations/programs. 
exercised the contract’s first option year.2

 The agency’s initial award, and its 

simultaneous exercise of the first option, were not protested. 

On September 28, 2009, Nutriom informed DLA that the firm had made “a capital 

investment in new production equipment” that Nutriom claimed would allow it to 

offer its product at a lower price than OFD’s price for the next option period. See

Protest, exhib. A, Nutriom Letter to Contracting Officer, at 2. Subsequently, DLA 

conducted a market survey, requesting pricing from Nutriom and the other 

unsuccessful offeror under the initial RFP. See AR, Tab G, DLA Email to Nutriom, 

Nov. 30, 2009. Only Nutriom responded, identifying a total unit price that was less 

than OFD’s per-case option price (with economic price adjustment). 

While noting Nutriom’s lower unit price, the contracting officer concluded that 

exercising the option in OFD’s contract was the most advantageous method of 

fulfilling the government’s needs. AR, Tab H, Justification of Exercise Option Year 2. 

In this regard, the contracting officer states that unitized group rations, such as this 

dehydrated egg product, are critical mission support items for military personnel in 

the field and that he was aware that recent troop activity had increased the demand 

for these rations. See Contracting Officer’s Statement at 4-5. The contracting officer 

also noted OFD’s excellent past performance, quality history, and conformance to 

contractual terms, conditions, and price. AR, Tab H, Justification of Exercise Option 

Year 2, at 1-2. 

In addition, the contracting officer considered whether Nutriom could provide the 

UGR-H&S dehydrated egg product at its market survey price in a reliable and 

continuous manner such that it was more beneficial to conduct a new procurement 

than exercise the option in OFD’s contract. Id. at 2-3. Specifically, the contracting 

officer noted that Nutriom’s survey price for the second option of the UGR-H&S 

contract could not be reconciled with Nutriom’s much higher price for another egg 

product under the unitized group ration-A (UGR-A) program, given that the UGR-A 

dehydrated egg product requires a less expensive and less complicated 

manufacturing process than the UGR-H&S egg product. See Id.; see also Tab G, 

Contract Specialist’s Market Survey Analysis. Finally, the contracting officer 

questioned whether Nutriom could provide a technically compliant product at this 

low price, noting that the new process for the egg product offered by Nutriom had 

not yet been tested. See Contracting Officer’s Statement at 5 n.4. 

 

2

 The first option year was exercised to support surge requirements during Operation 

Enduring Freedom. 

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In justifying the exercise of OFD’s second option, the contracting officer concluded 

that: 

Due to the urgency of the current requirement, resoliciting is not an 

option since there is no guarantee that Nutriom’s product could 

meet the 2[-percent] moisture requirement and that their price will 

be lower than the current contract price . . . . Additionally, by 

exercising the option year 2, the Government’s need for continuity 

of operations is met, and avoids additional cost associated with 

disruption of said operations. 

AR, Tab H, Justification of Exercise Option Year 2, at 3. 

Following notification that the agency would exercise the second option year in 

OFD’s contract, Nutriom filed an agency-level protest, which DLA denied. This 

protest followed. 

DISCUSSION 

The crux of the protester’s argument is that the contracting officer did not give 

appropriate consideration to Nutriom’s new manufacturing process for this 

dehydrated egg product, or to Nutriom’s claim that it could provide the egg product 

at a lower price than OFD’s second option year price. In addition, the protester 

complains that the DLA should have conducted the market survey earlier to avoid a 

concern about continuity of operations. 

As a general rule, option provisions in a contract are exercisable at the discretion of 

the government. AAA Eng’g & Drafting, Inc., B-236034.3, Apr. 6, 1993, 93-1 CPD 

¶ 295 at 5. Our Office will not question an agency’s exercise of an option under an 

existing contract unless the protester shows that the agency failed to follow 

applicable regulations or that the determination to exercise the option, rather than 

conduct a new procurement, was unreasonable. Sippican, Inc., B-257047.2, Nov. 13, 

1995, 95-2 CPD ¶ 220 at 2; Tycho Tech., Inc., B-222413.2, May 25, 1990, 90-1 CPD 

¶ 500. Before an option can be exercised, an agency must make a determination that 

exercise of the option is the most advantageous method of fulfilling its need, price 

and other factors considered. Federal Acquisition Regulation (FAR) § 17.207(c)(3). 

One of the means available under the FAR for determining whether option exercise 

is the most advantageous method is an informal market survey or price analysis. 

FAR § 17.207(d)(2). The FAR also directs that the contracting officer’s consideration 

of “other factors” should take into account the need for continuity of operations, as 

well as the potential costs of disrupting operations. FAR § 17.207(e). 

Where, as here, an agency elects to conduct an informal market survey, the form the 

survey takes is largely within the discretion of the contracting officer, as long as it is 

reasonable. National Customer Eng’g, B-251034, Feb. 11, 1993, 93-1 CPD ¶ 129 at 5. 

The intent of the regulations is not to afford a firm that offered high prices under an 

Page 3 B-402511 
original solicitation an opportunity to remedy this business judgment by 

undercutting the option price of the successful offeror. Person-System Integration, 

Ltd., B-246142, B-246142.2, Feb. 19, 1992, 92-1 CPD ¶ 204 at 2. 

Here, we find no basis to question the agency’s exercise of the option in OFD’s 

contract. The record shows that, before deciding to exercise the option, the contract 

specialist conducted an informal market survey of the unsuccessful offerors under 

the original RFP and specifically considered Nutriom’s statement that it could 

provide the dehydrated egg product at a lower unit price than OFD’s second option 

year price, due to its new manufacturing process. The contracting officer weighed 

several factors, including: (1) the status of unitized group rations as a critical 

mission-support item for the military with a need for quality, continuity of 

performance and competitive price; (2) Nutriom’s ability to continually provide a 

compliant product at its stated market price; and (3) OFD’s excellent past 

performance record of providing a quality product in a timely manner, particularly 

under surge requirements. See Contracting Officer’s Statement at 6-8. 

Contrary to Nutriom’s arguments, we do not agree that the agency’s informal survey 

was unreasonable because the agency did not discuss with Nutriom the agency’s 

concerns with Nutriom’s survey price and new manufacturing process. As noted 

above, the record shows that DLA was concerned that Nutriom’s new manufacturing 

process had not yet been tested. In addition, the agency was concerned about the 

discrepancy between Nutriom’s claimed price for the UGR-H&S dehydrated egg 

product and the firm’s higher price for the UGR-A egg product, which requires a less 

expensive and less complicated manufacturing process. Although Nutriom disagrees 

with the agency’s judgment and argues that it could have addressed the agency’s 

concerns, the FAR does not require a contracting agency to conduct a new 

procurement or to perform extensive or detailed research into the marketplace to 

determine whether the exercise of a contract option is most advantageous to the 

government. See Alice Roofing & Sheet Metal Works, Inc., B-283153, Oct. 13, 1999, 

99-2 CPD ¶ 70 at 4. Rather, as noted above, the regulations permit a contracting 

agency to base its judgment upon an informal survey and price analysis. See FAR 

§ 17.207(d)(2). 

We also find no merit to Nutriom’s complaint that DLA should have conducted the 

informal market survey earlier. Here, the record shows that the agency first received 

pricing information from Nutriom more than 2 months before--and conducted its 

informal market survey a month before--the exercise of the option. Again, there is 

no requirement that the agency conduct a full-blown procurement in order to 

determine whether the exercise of a contract option is the most advantageous 

method of fulfilling its needs. 

In sum, the contracting officer concluded here that it was more advantageous to 

exercise the option in OFD’s contract than to conduct a new procurement, given that 

exercising the option would ensure continuity of operations for the supply of a 

critical item and given the contracting officer’s concerns with Nutriom’s market 

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survey price. A contracting officer is accorded broad discretion in making the 

determination that the exercise of an option is in the best interest of the government, 

and we will not question the contracting officer’s decision unless, unlike here, it is 

shown to be unreasonable or contrary to applicable regulations. Sippican, Inc., 

supra, at 2. 

The protest is denied. 

Lynn H. Gibson 

Acting General Counsel