A contract extension is the exercise of a contract option to extend the agreed terms for a further period, and both parties agree to extend for that period. An extension to the contract period can also be accompanied, for example, by a change in price, personnel, and/or services.

Negotiations for contract extensions should commence and be agreed before the expiry date of the contract. Contract extensions that start late can place the entity in an inferior negotiating position. This is especially so if a contract is critical to an entity's services since it shortens the time available to assess whether it still offers the best value for money. In effect, limited time restricts an entity's ability to assess the need for a contract, test the provider's price in the current market, and/or modify contractual terms and conditions.

Negotiations for contract extensions should commence and be agreed before the expiry date of the contract.

Reminder: A variation to extend a contract beyond the terms of the original contract (rather than exercising an extension option with the terms of a contract) means a new checklist for procurement must be conducted in accordance with the CPGs.