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IDQ Minimum Guarantee

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Multiple award IDIQ contract was awarded with the guaranteed minimum obligated on the base contract with FY11 funds. The base ordering period is July 2011 - July 2012.

(I am the ACO, I cannot speak as to why it was awarded this way.)

While I understand that contractors aren't due the minimum guarantee until after the end of the base ordering period - I am concerned about violating fiscal law if all of the contractors are not awarded a task order by 30 SEP and the minimum is sitting on the base contract when we go into FY12.

Am I required to spend the FY11 funds prior to 30 SEP, or can they be used in FY12? My gut feeling is that they must be spent in FY11 but I am not a fiscal law expert by any means.

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September 30 is the deadline for obligating funds. The funds have been obligated. They do not have to be expended (paid out) by September 30. They can be expended after September 30 to purchase the bona fide needs of FY2011. You mentioned "task order," which indicates that the contract is for services. If the contract is for services, FY2011 funds can be obligated for the needs of a 12 month period beginning in FY2011 and ending in FY2012, and used for the bona fide needs of of the 12 month period. See FAR 37.106. That may be why the contract is funded as it is.

See Principles of Federal Appropriations Law, Vol. 1, 3d ed., Chapter 5, available at www.gao.gov. Have you discussed this matter with the PCO? He or she may be able to bring you up to speed.

If you are an ACO, then you should bone up on appropriations law. You don't have to be an expert.

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Multiple award IDIQ contract was awarded with the guaranteed minimum obligated on the base contract with FY11 funds. The base ordering period is July 2011 - July 2012.

(I am the ACO, I cannot speak as to why it was awarded this way.)

While I understand that contractors aren't due the minimum guarantee until after the end of the base ordering period - I am concerned about violating fiscal law if all of the contractors are not awarded a task order by 30 SEP and the minimum is sitting on the base contract when we go into FY12.

Am I required to spend the FY11 funds prior to 30 SEP, or can they be used in FY12? My gut feeling is that they must be spent in FY11 but I am not a fiscal law expert by any means.

In addition to what Vern said, the minimum guarantee on an ID/IQ is an obligation created at the time of award of the base contracts, right? That obligation doesn't start over as a contract crosses into the next fiscal year.

As I understand it, the funds which were current at the time of the initial obligation are used to pay that obligation if it isn't supplanted by task order(s) that equal or exceed the minimum guarantee.

I believe that the funding appropriate for any awarded task order(s) would replace the initial funding, if different than the initial funding.

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I believe that the funding appropriate for any awarded task order(s) would replace the initial funding, if different than the initial funding.

I don't understand that.

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Guest carl r culham

A couple of thoughts as I have learned there is always more to the story than is represented in the basic questions when first posted.

First there is a difference in application of the bona fide need rule if a contract is funded by one year, multiple year, or no year appropriations. I believe Vern's example represents a view of one year appropriations with the difference in appropriation types- one, multiple, no - emphasized by Vern's suggestion with regard learning more about appropriations law to help understand the differences.

As to Joel's comment about the obligation not starting over in the next fiscal year I would be careful. Specific contract language would dictate this fact. Generally speaking Joel is correct but I have seen it handled differently, again based on the specific contract language.

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I don't understand the remarks about an obligation "starting over." I don't know what that means.

Also, just to make sure that everyone understands: The bona fide needs rule does not apply to no year funds. It applies only to one-year and multiple year funds. (I know you didn't say otherwise, Carl. I just wanted to make that clear to people who are not familiar with fiscal law.)

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Guest carl r culham

Vern - Understand the clarification on the fiscal law, thanks.

On the obligation starting over, I have actually seen where some contracts have set a minimum for each year, sometimes one that changes with each year and sometimes one that repeats the same each year. Rare, absolutely, and as CO's become educated I would probably say even more rare today. The real intent of my post was - When we provide answers they should be made as general ones as the contract specifics dictate.

Heck looking back I could even pick on my own comments as in reality one needs to speak in terms of base periods and option periods and their relationship to minimum guarantee obligations and fiscal years. Monumental post to sort it out in detail even for a general response.

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I don't understand that.

If a task order has specific funding, it may be different than the funds used to fund the minimum obligation. For instance, a construction ID/IQ could involve O&M or MILCON task orders. One wouldnt partially fund a MILCON task order with some other type of funds used to obligate the minimum guarantee. That's all I meant.

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Start with GAO's Redbook, Volume I, Chapter 5, and Volume 2, Chapter 7. Get those down. There is more to know, but those two chapters cover the material that is most immediately important to most COs.

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Multiple award IDIQ contract was awarded with the guaranteed minimum obligated on the base contract with FY11 funds. The base ordering period is July 2011 - July 2012.

(I am the ACO, I cannot speak as to why it was awarded this way.)

While I understand that contractors aren't due the minimum guarantee until after the end of the base ordering period - I am concerned about violating fiscal law if all of the contractors are not awarded a task order by 30 SEP and the minimum is sitting on the base contract when we go into FY12.

Am I required to spend the FY11 funds prior to 30 SEP, or can they be used in FY12? My gut feeling is that they must be spent in FY11 but I am not a fiscal law expert by any means.

There's no fiscal law violation if September 30 comes and goes and you have not used the funds to issue a task order. However, you would not be able to use the FY11 funds used for the guaranteed minimum to issue a task order in FY12.

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Don:

I think I'm going to have to disagree with you. Why do you say he cannot use the FY11 funds obligated for the minimum to issue an order in FY12 to purchase the minimum? And Don, why not cite some authority for your statement? I don't understand why you didn't do that.

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Don:

I think I'm going to have to disagree with you. Why do you say he cannot use the FY11 funds obligated for the minimum to issue an order in FY12 to purchase the minimum? And Don, why not cite some authority for your statement? I don't understand why you didn't do that.

Vern, to clarify, Don didn't say "he cannot use the FY11 funds obligated for the minimum to issue an order in FY12 to purchase the minimum." He said "you would not be able to use the FY11 funds used for the guaranteed minimum to issue a task order in FY12."

That makes sense to me. It would seem that if the scope of work of a task order is for work that would otherwise funded by FY 12 funds, one couldn't use FY11 funds. The nature of an ID/IQ is that you will issue separate task orders for various tasks, some of which may be valid needs of one fiscal year while others come up later, in the following FY.

Of course, it depends upon the scope and funding for each task order. As for a citation, this pertains to the purpose and time statutes for appropriations in general and the Bonafide Needs rule.

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I know what Don said. I have spoken with Don by phone about it and I think I understand him, and I await his next post. Thank you.

And I understand IDIQ contracts. Thank you.

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Vern,

Generally, a bona fide need of FY12 would have to be funded with an FY12 appropriation. An exception to this would be the "severable services" exception, which is stated at FAR 32.703-3( b ):

The head of an executive agency, except NASA, may enter into a contract, exercise an option, or place an order under a contract for severable services for a period that begins in one fiscal year and ends in the next fiscal year if the period of the contract awarded, option exercised, or order placed does not exceed one year (10 U.S.C. 2410a and 41 U.S.C. 253l). Funds made available for a fiscal year may be obligated for the total amount of an action entered into under this authority.

As such, the exception permits the use of FY11 funds to fulfill the Bona Fide Needs of FY11 and FY12.

This exception differentiates between 1) contracts, 2) options, and 3) orders placed under contracts. The exception applies if the contract was entered into, the option was exercised, or the order was placed in one fiscal year and performance extended into the next fiscal year. Thus, if a task order was not placed in FY11, this exception to the Bona Fide Needs rule does not apply.

Based on our conversation, I expect that you will argue that the "severable services" exception allows for the use of funds obligated to cover the IDIQ minimum to fund a task order in a subsequent fiscal year. If that's true, I ask the following question:

In the OP's scenario, the IDIQ contract ordering period was 1 Jul 2011 to 30 June 2012. If a task order was issued under the contract on 1 October 2011 and funded with the same funds that were obligated when the IDIQ contract was awarded (FY11 funds), then what would be the limit on the period of performance of the task order? Assume the IDIQ contract was awarded on 1 Jul 2011.

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Guest carl r culham

Don and Vern - Interesting discussion that like many threads I will follow with interest. I did want to pose a "what if" that might be pertinent to your discussion, or not. Hope you don't mind.

Would solicitation/contract langauge that might speak to needs and use of funding used to fund the minimum of the parent IDIQ have any bearing on the discussion? Example specific wording that might indicate that the first task order issued would be to meet a specific CLIN of the IDIQ? I know I have only provided basic information on a subject that could be complicated with my real intent being - Would wording of the parent contract have any bearing on the matter of bona fide need?

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Don:

In the August 2007 edition of The Nash & Cibinic Report, I wrote about this issue and discussed a GAO decision that supports my position, which is that an order for the minimum can be issued in FY2012 using the FY2011 funds obligated at the time of award. The article was entitled, ?Obligating Funds for Services Under IDIQ Contracts That Cross Fiscal Years: What Are the Rules?? 21 N&CR ? 42. Take a look at it and let me know what you think. If you can?t access it, let me know and I?ll email it to you. For other readers, the GAO decision was Interagency Agreements--Obligation of Funds Under An Indefinite Delivery, Indefinite Quantity Contract, Comp. Gen. Dec. B-308969, 2007 CPD ? 120, 2007 WL 1695125 (May 31, 2007).You should be able to find the decision by Googling <GAO B-308969>.

When an IDIQ contract is awarded, the Government obligates itself to buy a minimum quantity and must record the obligation. I know of nothing in statute, FAR, or GAO decisions that says that an agency must issue an order for performance at the time of contract award. Funds are obligated by the award, but the Government can defer issuing the order to perform until later. This is not the usual procedure. The usual procedure these days, I think, is to issue an order for the minimum at the time of award.

Ordinarily, we contracting types conflate "order" with "obligate." We think that the order is what makes the obligation. That is usually true, perhaps, but it is not necessarily true. If the order is for the minimum, the obligation was made by the award of the contract, but the "order to perform" can be deferred to a later date. I know of nothing in statute, FAR, or GAO decision that says otherwise. If such a deferred ordering procedure is used -- and I used it myself more than 30 years ago when I was an Air Force contracting officer and later when I was a Department of Energy contracting officer -- then an order for the minimum issued some time after award specifies the work to be done, and the time and place of performance, but it does not create a new obligation. It merely fulfills the original obligation.

If the contract is for services and the minimum is funded with one-year funds, then the Government can invoke the exception to the bona fide needs rule at FAR 32.703-2(B) and 37.106(B). Here is the statute at 10 U.S.C. ? 2410a:

(a) Authority.--(1) The Secretary of Defense, the Secretary of a military department, or the Secretary of Homeland Security with respect to the Coast Guard when it is not operating as a service in the Navy, may enter into a contract for a purpose described in paragraph (2) for a period that begins in one fiscal year and ends in the next fiscal year if (without regard to any option to extend the period of the contract) the contract period does not exceed one year.

(2) The purpose of a contract described in this paragraph is as follows:

(A) The procurement of severable services.

(B) The lease of real or personal property, including the maintenance of such property when contracted for as part of the lease agreement.

(B) Obligation of funds.--Funds made available for a fiscal year may be obligated for the total amount of a contract entered into under the authority of subsection (a).

Here is the implementing language in FAR 32.703-3(B):

(B) The head of an executive agency, except NASA, may enter into a contract, exercise an option, or place an order under a contract for severable services for a period that begins in one fiscal year and ends in the next fiscal year if the period of the contract awarded, option exercised, or order placed does not exceed one year (10 U.S.C. 2410a and 41 U.S.C. 253l). Funds made available for a fiscal year may be obligated for the total amount of an action entered into under this authority.

I believe that when an agency awards an IDIQ contract with an ordering period that crosses fiscal years, and promises to buy a minimum, the agency can order performance of the minimum in the second fiscal year using the funds of the first fiscal year as long as the minimum is a bona fide need of the funding period. I do not think that is inconsistent with the plain language of the statute or FAR, and I know of no interpretation of the statute or of FAR by GAO that contradicts my position. Do you?

As I thought about this I wondered if the statute or FAR require actual contractor performance to cross fiscal years as a prerequisite to invoking the exception. If that were true, then I could not use the exception to permit my deferred ordering scheme. But I see nothing in the statute or FAR that requires the contractor?s performance to cross fiscal years. The contractor can be obligated to do work when ordered, but need not actually be working across fiscal years.

I could be wrong about this, but I cannot think of why I would be. If I am wrong about any of this, in fact or reasoning, please show me my error. But I need to see language in the GAO Redbook or in a GAO decision.

Carl, forgive me, but I cannot take on your question. In the past these kinds of interesting threads have become free-for-alls of posters injecting new considerations and arguments. I won't try to keep up with that sort of thing any more. I hope you understand.

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Don:

You asked a question, but I didn't answer it. You asked:

In the OP's scenario, the IDIQ contract ordering period was 1 Jul 2011 to 30 June 2012. If a task order was issued under the contract on 1 October 2011 and funded with the same funds that were obligated when the IDIQ contract was awarded (FY11 funds), then what would be the limit on the period of performance of the task order? Assume the IDIQ contract was awarded on 1 Jul 2011.

Based on the language of the statute and FAR, I think that the answer is that the limit on the period of performance of an order for the minimum would be the end of the 12-month funding period. However, the GAO decision that I cited might allow a longer period. The decision is really quite peculiar, as I noted in my article.

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Don:

In the August 2007 edition of The Nash & Cibinic Report, I wrote about this issue and discussed a GAO decision that supports my position, which is that an order for the minimum can be issued in FY2012 using the FY2011 funds obligated at the time of award. The article was entitled, ?Obligating Funds for Services Under IDIQ Contracts That Cross Fiscal Years: What Are the Rules?? 21 N&CR ? 42. Take a look at it and let me know what you think. If you can?t access it, let me know and I?ll email it to you. For other readers, the GAO decision was Interagency Agreements--Obligation of Funds Under An Indefinite Delivery, Indefinite Quantity Contract, Comp. Gen. Dec. B-308969, 2007 CPD ? 120, 2007 WL 1695125 (May 31, 2007).You should be able to find the decision by Googling <GAO B-308969>.

When an IDIQ contract is awarded, the Government obligates itself to buy a minimum quantity and must record the obligation. I know of nothing in statute, FAR, or GAO decisions that says that an agency must issue an order for performance at the time of contract award. Funds are obligated by the award, but the Government can defer issuing the order to perform until later. This is not the usual procedure. The usual procedure these days, I think, is to issue an order for the minimum at the time of award.

Ordinarily, we contracting types conflate "order" with "obligate." We think that the order is what makes the obligation. That is usually true, perhaps, but it is not necessarily true. If the order is for the minimum, the obligation was made by the award of the contract, but the "order to perform" can be deferred to a later date. I know of nothing in statute, FAR, or GAO decision that says otherwise. If such a deferred ordering procedure is used -- and I used it myself more than 30 years ago when I was an Air Force contracting officer and later when I was a Department of Energy contracting officer -- then an order for the minimum issued some time after award specifies the work to be done, and the time and place of performance, but it does not create a new obligation. It merely fulfills the original obligation.

If the contract is for services and the minimum is funded with one-year funds, then the Government can invoke the exception to the bona fide needs rule at FAR 32.703-2(B) and 37.106(B). Here is the statute at 10 U.S.C. ? 2410a:

Here is the implementing language in FAR 32.703-3(B):

I believe that when an agency awards an IDIQ contract with an ordering period that crosses fiscal years, and promises to buy a minimum, the agency can order performance of the minimum in the second fiscal year using the funds of the first fiscal year as long as the minimum is a bona fide need of the funding period. I do not think that is inconsistent with the plain language of the statute or FAR, and I know of no interpretation of the statute or of FAR by GAO that contradicts my position. Do you?

As I thought about this I wondered if the statute or FAR require actual contractor performance to cross fiscal years as a prerequisite to invoking the exception. If that were true, then I could not use the exception to permit my deferred ordering scheme. But I see nothing in the statute or FAR that requires the contractor?s performance to cross fiscal years. The contractor can be obligated to do work when ordered, but need not actually be working across fiscal years.

I could be wrong about this, but I cannot think of why I would be. If I am wrong about any of this, in fact or reasoning, please show me my error. But I need to see language in the GAO Redbook or in a GAO decision.

Carl, forgive me, but I cannot take on your question. In the past these kinds of interesting threads have become free-for-alls of posters injecting new considerations and arguments. I won't try to keep up with that sort of thing any more. I hope you understand.

Vern, can you clarify something you wrote in the above post? You stated "the agency can order performance of the minimum in the second fiscal year using the funds of the first fiscal year as long as the minimum is a bona fide need of the funding period. " I am unclear as to the meaning of some of your terminology. From what you wrote, I understand the funding period to be the period for obligating funds in the first year. If that is correct, then I understand your statement. However, if the funding period somehow relates to the second year, i..e., when the period of availability for obligation of the first year funds has expired, then I don't understand this statement since we would be talking about bona fide needs of different fiscal years.

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Guest carl r culham

Vern ? Thanks I do understand.

So in keeping with the specific topic of the thread one conclusion you have made in your most recent post is miss leading, that being using an order to accomplish a minimum without a separate obligation.

I believe this is improper and not in keeping with proper fiscal management based on the following. Further I do not believe your referenced GAO decision goes far enough into the nuances of fiscal management of IDIQ contracts to support your conclusion.

The parent IDIQ contract is an action in and of itself and therefore requires an obligation of its minimum. A task order is an action in and of itself and therefore requires a separate obligation when issued. By example using dollar figures from the referenced GAO decision the proper fiscal management effort that should have occurred on the books is as follows ? IDIQ minimum obligated at award for $1,000,000. Task Order 1 issued for $45,000 and obligated separately BUT a separate action, via modification, should have occurred where the $1,000,000 obligation of the parent IDIQ is reduced (de-obligated) to $955,000. This de-obligation step is what the GAO decision fails to address.

This sequence of task order award and de-obligation of minimum occurs until the minimum is met. This sequence is required because there are in fact two obligations that must be met and the parent IDIQ contract obligation is a decreasing one as the task order(s) are issued and separate obligations made.

Another way to look at it is if you have the parent IDIQ at $1 million and issue a task order valued at $1 million but not have a separate obligation and this effort is followed by an immediate need to T4C both the parent and the task order at the same time prior to complete performance of the task order would you not have the potential of having termination costs under both that need to be covered by separate obligations? Yes, they need to be separate obligations and I believe your comments regarding ?deferred ordering? to be misleading with regard to proper IDIQ administration.

Further it would seem that past discussions in this forum support this view as well where the conclusion has been made that a task order is a separate contract. http://www.wifcon.com/discus/messages/8522/9575.html

Keeping to the primary subject of this thread - bona fide need - and my disagreement expressed above the determination of whether there is a bona fide need or not would need to be made with regard to the funds themselves and not the contract. In other words, by my example above, when the $45,000 is de-obligated from the parent IDIQ with intent to then use to fund Task Order 1 the bona fide need determination would need to be made on use of funds for the task order and its intended work.

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All:

I will no longer participate in Wifcon free-for-all discussions. I don't have the time or the interest. In this thread, I have made my point. I have nothing to add. Agree or disagree as you see fit. My days in the discussion pit are done. My conversation is with Don, and we'll continue it offline. Whether he wants to continue here is his business. We haven't spoken about that. Anyone interested in a fuller explanation of my views about the funding of IDIQ contracts can read my article in The Nash & Cibinic Report. Those of you with my personal email address can contact me if you want a copy.

Retread: By "funding period" I meant the 12 months for which one-year funds are appropriated, either the actual fiscal year or the 12 months beginning in one year and ending in the next.

Have at it, gang.

Vern

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