IDIQ Contracting

1
IDIQ Contracting NCMA Luncheon
16 April 2008 Mark Schweer
2
Why discuss IDIQ Contracting?

• Most of DoDs services needs are acquired on IDIQ
  contracts
• Multiple award IDIQs follow unique rules for
  competition and award
• Many San Diego contractors have SeaPort task
  orders. SeaPort is a multiple award IDIQ

3
Overview

• Contract Types
• IDIQs in General
• Multiple-Award IDIQs
• Funding Issues
• Fee Issue on SeaPort IDIQ
• Other IDIQ Issues
• QA

4
Contract Types

• How to identify an Indefinite Delivery contract
• N00039-08-D-9999
• D-type contracts are indefinite delivery
• Types of Indefinite Delivery contracts
• Definite Quantity FAR 52.216-20
• Requirements FAR 52.216-21
• Indefinite Quantity FAR 52.216-22

5
Contract Types

• Types of Indefinite Delivery contracts
• Definite Quantity
• Provides for delivery of a definite quantity of
  specific supplies or services for a fixed period,
  with deliveries or performance to be scheduled at
  designated locations upon order (FAR 16.502)
• Requirements
• Provides for filling all actual purchase
  requirements of designated Govt activities for
  supplies or services. (FAR 16.503)

6
IDIQs In General

• Indefinite Delivery, Indefinite Quantity
• Description
• Provides for an indefinite quantity, within
  stated limits, of supplies or services during a
  fixed period. (FAR 16.504)
• Characteristics
• Minimum guarantee (more than nominal)
• Stated maximum quantity
• Description of work (SOW, PWS, etc.)
• Authorized ordering activities/individuals
• Identified ordering period and procedures

7
IDIQ Ordering In General

• TOs vs. DOs
• Orders not synopsized
• Max practicable use of PBA
• Work described sufficiently to price
• Mandatory information included
• Date
• Contract/order number
• CLIN/Qty/Price etc.
• Delivery Schedule
• Place of Delivery
• Funding/payment information

8
Multiple Award IDIQs

• Is the preferred method for IDIQs
• Not appropriate if
• Only one source is capable
• More favorable terms if single award
• Cost of admin exceeds benefits
• Orders are integrally related
• Contract below SAP threshold
• Not in the Govt's best interests
• Special rules apply for advisory and assistance
  services

9
Multiple Award Ordering

• Govt must provide fair opportunity for each
  awardee to be considered unless an exception
  applies. (See next slide)
• Streamlined procedures/evaluation
• Orders not protestable, except
• Scope
• PoP FAR 16.505(a)(9)
• Max Amount
• Exceeds 10M
• Ombudsman

10
FAIR OPPORTUNITY EXCEPTIONS

• Agency's need is of such unusual urgency that
  providing an opportunity to all awardees would
  result in unacceptable delays
• Only one source is capable of responding due to
  the unique or specialized nature of the work
• The new work is a logical follow-on to an
  existing task order where contractors were given
  a fair opportunity to be considered
• The order must be placed with a particular
  contractor in order to satisfy a minimum
  guarantee.
• There is a statute that authorizes or requires
  purchase from a particular source.

11
Funding Issues
12
Funding Issues

• Color of Money Issues
• Alignment with PWS/SOW paragraphs
• PoP implications extensions
• OMN crossing FYs
• Prior years cost growth funded by then
  current money
• Full vs. Incremental funding (OPN)

13
Funding Issues

• If the order is fully funded at award, 52.232-20,
  Limitation of Cost clause applies.
• If the order is incrementally funded at award,
  52.232-22, Limitation of Funds clause applies.
• 75 within 60 days LOF notification
• Govt not obligated to pay costs incurred in
  excess of funding provided
• Contractor not obligated to continue performance
  beyond funded amount
• Only Contracting Officer can commit the Govt to
  an increase in funds allotted.
• (apparent authority and at risk situations)
• Fee proportionate to work funded

14
HANG IN THEREHALFWAY!!
15
Fixed Fee Issue on SeaPort-e IDIQ extracts
from Jon Wester Brief May 2007
16
Fee Issue

• CPFF IDIQ Contract Types
• Completion full fee (and no more) if work
  completed regardless of cost/hours expended
• Level of Effort (Term) fee only on labor
  delivered. Methods to calculate interim payment
  of fixed fee
• Percentage of Costs Incurred.
• Percentage of Hours Expended.

17
Fee Issue

• Scenario - CPFF Level of Effort TO on SeaPort-e
  expends less LOE than negotiated.
• Possible Causes
• Government Partial Incremental Funding
• Contractor Delivering more expensive labor
  categories than originally proposed.
• Example
• Original cost estimate of 25,000
• 25 per hour at 1,000 hours
• Actual performance
• 50 per hour
• Expends 25,000 ceiling with only 500 hours
• Result 500 fewer hours expended than
  negotiated, but all estimated costs expended.

18
Fee Issue

• What happens with fixed fee if the negotiated
  Level of Effort (LOE) is not expended?
• SeaPort contracts/orders have included a clause
  to handle a proportionate reduction in fixed fee
• SEA 5252.216-9122 (g)
• If the total level of effort is not provided by
  the contractor during the period of the task
  order, the contracting officer shall reduce the
  fee as follows
• Reduced Fee (Required LOE - Expended
  LOE)/Required LOE e.g. If the contractor expended
  80 of the LOE, the contractor will receive 80
  of the fixed fee.

19
Fee Issue

• On SPAWAR orders issued through May 2007,
  interim payment of fixed fee was made to the
  contractor equal to X (negotiated rate) percent
  of the incurred costs invoiced.
• At Close Out
• Any balance of fixed fee due the contractor shall
  be paid to the contractor.
• Any overpayment of fixed fee shall be repaid to
  the Government by the contractor at the time of
  final payment.
• Final payment of fixed fee is made on the basis
  of labor hours expended/delivered.

20
Fee Issue - Problem

• If the interim fee payment is based on costs
  incurred and the final fee payment is based on
  hours expended, then this inconsistency can lead
  to a significant overpayment of fee to the
  contractor.
• Recoupment of overpaid fee may occur long after
  performance is over.

21
Example of Problem
22
Fee Issue - Solution

• Since May 2007, SPAWAR has used a new Section B
  clause (B-2) in new TOs and urged PCOs to modify
  existing TOs to include this clause, which makes
  the interim fee payment formula consistent with
  final fee payment formula.
• Payment of Fee
• The Government shall pay fixed fee to the
  contractor on each direct labor hour performed by
  the contractor or subcontractor, at the rate of
  X.XX per labor hour invoiced by the contractor.
• Computation of Interim Fee
• The fee per direct labor hour is computed by
  dividing the fixed fee amount shown in Section B
  by the number of estimated hours proposed.

23
Example of Solution
24
Other IDIQ Issues

• Small Business Implications
• (For LB primes) Subcontracting Goals scored at
  contract level rather than TO level unless a
  separate subcontracting plan is negotiated at the
  TO level
• (For SB primes) Limitations on Subcontracting
  scored at the contract level, not the TO level

25
Other IDIQ Issues

• Ordering Period
• Orders can be issued until the last day of the
  ordering period
• PoP of order near end of ordering period
  dependent on clean-up period (See 52.216-22 or
  on SPAWAR contracts F-303)
• Ex. Order placed on last day of ordering period.
  Clean-up period is 180 days. PoP of order can
  be no longer than 181 days.

26
Other IDIQ Issues

• Maximum Quantity (Ceiling) Management
• Straight forward if single-award IDIQ
• Multiple-award IDIQs
• Acq Plan (AP) authorizes ceiling (ex. 100M)
• If 3 awardees the max ceiling of the procurement
  is not 300M, but remains 100M per the AP
• Section B of each contract may show max ceiling
  (100M) because TO awardees not known
• Ceiling management must aggregate TOs of all
  awardees, i.e. ceiling may be reached well before
  any of the 3 contracts reaches 100M

27
Congratulations!

• You have now achieved the degree of Very
  Dangerous in IDIQ Contracting!

28
QUESTIONS/COMMENTS

• Mark Schweer
• mark.schweer_at_navy.mil
• 619-524-7165