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Are contract ceilings (total estimated potential values) required?


Oversight

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A program official asked whether agency-wide mandatory-use strategic sourcing contracts are required to have contract ceilings. Would it ever be permissible to award a five to ten-year contract with no ceiling? I would appreciate your thoughts on that. I have combed through my agency's policy and cannot find anything that expressly states that a contract ceiling is required. 

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On 11/21/2022 at 11:39 AM, Oversight said:

agency-wide mandatory-use strategic sourcing contracts

Are those indefinite-delivery indefinite-quantity (IDIQ) contracts? See 16.501-2(a). If so, and if by "ceiling" you mean a maximum quantity, then the answer is that you must have a "ceiling" (maximum quantity).

See FAR 16.504(a)(1).

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On the other hand, 

On 11/21/2022 at 2:39 PM, Oversight said:

A program official asked whether agency-wide mandatory-use strategic sourcing contracts are required to have contract ceilings.

It depends.

(1) If these are IDIQ contracts under FAR 16.5, well, that question has already been answered.

(2) However, if these are BPAs against schedule contracts under FAR 8.4, no maximum or ceiling is required -- if such a BPA has a maximum or ceiling, that is a self-inflicted (and unnecessary) limitation.  Only an estimate is required at time of establishing the BPA, but ordering beyond the estimate is okay provided the contracting officer gives some thought to requesting additional price reductions.

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4 hours ago, ji20874 said:

However

Are you sure?  It would seem FAR 8.4 requires a limitation that could be analogous to or cause an action like a ceiling.

 

"(4) BPAs shall address the frequency of ordering, invoicing, discounts, requirements (e.g., estimated quantities, work to be performed), delivery locations, and time"

And

"Review of BPAs.

 

(1) The ordering activity contracting officer shall review the BPA and determine in writing, at least once a year (e.g., at option exercise), whether-

                (i) The schedule contract, upon which the BPA was established, is still in effect;

                (ii) The BPA still represents the best value (see 8.404(d)); and

                (iii) Estimated quantities/amounts have been exceeded and additional price reductions can be obtained.

           (2) The determination shall be included in the BPA file documentation."

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Yes, I'm sure -- BPAs against schedule contracts only require an estimate, not a ceiling or maximum.  The review you cited occurs yearly after BPA establishment -- it clearly allows for orders exceeding the estimate, and suggests trying to obtain price reductions in such a case and discontinuing use of the BPA only if it no longer represents best value.  A GAO report from several years ago looked at agency compliance with your citation, and used a case of a Marine Corps 10-year BPA where the estimate was met and exceeded in the 3rd year but faulted the agency not for exceeding the estimate (as that is allowed) but for not doing the annual reviews.

BPAs against schedule contracts are not IDIQ contracts, and do not require ceilings or maximums.

FAR 8.4 says nothing about a ceiling or maximum for a BPA; indeed, it expressly allows for orders exceeding the estimate.

For further reading:  https://buy.gsa.gov/interact/community/5/activity-feed/post/2daa4239-74c4-474f-aa3b-be1524e77bbf/Comparing_And_Contrasting_FAR_8_4_BPAs_And_IDIQs

See also:  https://www.gao.gov/assets/gao-09-792.pdf (and note the following extract:  "BPAs are not contracts, but rather agreements between government agencies and vendors with terms and conditions, including prices, in place for future use. The Federal Acquisition Regulation (FAR) was amended in 2004 to require agencies to follow certain procedures when establishing and ordering from schedule BPAs and to document annual reviews to determine: whether each BPA still represents the best value; whether the GSA schedule contract under which the schedule BPA was established is still in effect; and whether the agency has exceeded its initial estimated purchase amount under the BPA, indicating a potential for discounts when more orders are placed." (my emphasis)

In my practice, I generally do not impose ceilings or maximums on BPAs against schedule contracts.  I recommend this approach to other contracting officers.  By the way, BPAs under FAR 13 also do not require ceilings or maximums -- each order has to be within the appropriate threshold, but the aggregate value of all orders need not be limited.

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11 hours ago, ji20874 said:

exceeded its initial estimated purchase amount under the

Ergo a ceiling on which an action is to be taken.

Ceiling - an upper limit, typically one set on prices, wages, or expenditure.

Some such as the Commerce OIG believes FAR discussion regarding GSA FSS BPAs are analogous to ceiling. REF OIG-18-014-A, 2/26/18 and OIG-18-023-A, 7/30/18.

So as it goes it depends on the eyes of the beholder.

The OP has gotten opinion here, he/she shoukd discuss internally with fellow practioners as the agency view is most likely more important than those of WIFCON.  There may be risks to the approach and there may not be. 

 

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Re: NOAA OIG-18-014-A

At the bottom of page 6 and the top third of page 11, one can clearly read that the NOAA OIG acknowledges that orders may exceed the estimate for schedule BPAs.  However, in my opinion, the NOAA OIG errs in its use of the homemade term "estimated ceiling price" for a BPA -- they correctly used "estimated" and incorrectly inserted "ceiling" -- FAR 8.4 never mentions a ceiling for BPAs at all, but only calls for an estimate.  And which is it, an estimate or a ceiling?  It cannot be both at the same time, and one must make a choice.

This is an example of where loose or sloppy terminology interferes with real learning.

FAR 8.4 speaks of "estimated value" and "estimated quantities/amounts," but too many practitioners sloppily use "ceiling" instead.  They err in doing so, and they perpetuate error by conflating FAR 8.4 BPAs with 16.5 IDIQ contracts.

I hope this discussion is helpful for WIFCON readers.

 

 

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2 hours ago, C Culham said:

Or a view that it is proper analogous terminology.  https://www.gao.gov/products/b-410682 

Carl, that is a 9-page decision. When you want us to refer to something in a decision that you think supports your position, please quote it or tell us on what page(s) it appears and in what paragraph(s).

The word "ceiling," which I presume is what you want us to see, appears only once in that decision, in Footnote 1 at the bottom of page 2, as follows:

Quote

The solicitation provided that “calls” or task orders pursuant to the BPA would subsequently be issued on either a fixed-price, labor-hour, and/or time and materials basis. RFQ at 8. The estimated ceiling price for all task orders issued under this BPA was $49,999,000. Id. at 9.

Now, if you are claiming that BPA's must contain a ceiling on purchases, just how does that footnote support your claim?

There is no question that a BPA may contain a ceiling on purchases, but if you are saying that the footnote supports a contention that a BPA must contain a ceiling, they I do not agree with you. Moreover, I don't know what the mere mention of an estimated ceiling price says about the BPA in question.

Help us understand you. I don't know of anything in FAR that requires a ceiling (limit) on purchases under a BPA.

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An electronic search of the entire FAR System showed that the term "BPA" or the term "blanket purchase agreement" do not appear FAR anywhere in the system in the same paragraph with the word "ceiling."

They appear in the same paragraph with the word "maximum" five times. Two times with the phrase "to the maximum extent practicable," once with the phrase "maximum profit," once with the phrase "maximum order threshold of the FSS contract," and once with the phrase "maximum practicable competition."
 

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On 11/21/2022 at 11:39 AM, Oversight said:

A program official asked whether agency-wide mandatory-use strategic sourcing contracts are required to have contract ceilings. Would it ever be permissible to award a five to ten-year contract with no ceiling?

@Oversight, can you please state the proposed contract price, quantity, item description and delivery schedule you and or the program official are talking about, with and without a "contract ceiling" and with and without a "total estimated potential value?"

Edited by Neil Roberts
delete duplicate word
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18 hours ago, Vern Edwards said:

Now,

 

16 hours ago, Don Mansfield said:

Just

 

On 11/21/2022 at 12:39 PM, Oversight said:

no ceiling?

 

22 hours ago, ji20874 said:

 

I hope

My continued discussion has been an attempt to support that the guiding principles of FAR 8.405-3(a)(4) and 8.405-3(e)(1)(iii) are ANALAGOUS to a ceiling in that the reqiured ("shall") actions are to address an upper limit of a GSA FSS BPA when initially established and annually.  The actions are in my view counter to a statement that GSA FSS BPAs donot have an upper limit,  albeit an estimate, at which an action is to occur.  In support of my view the references I have provided demonstrate that others such as GAO and OIG have furthered that estimate of need/use is a upper limit ("ceiling") at which certain actions are required. 

The premise that a GSA FSS BPA is procurement strategy that has no maximum or ceiling required is off base in my view.   It may not be a ceiling that establishes scope but it is a ceiling that demands action of a CO in establishing and administering a GSA FSS BPA.  A standard that is even addressed in this training - "Blanket Purchase Agreements(BPAs) and the GSA MAS Program" at page 49.

Others may not see it the same way as I do and thats ok by me.

Thanks.

 

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Carl,

It seems you want our readers to walk away thinking that a ceiling is needed for BPAs against schedule contracts, and that you want to blur the difference between a ceiling and an estimate -- in my mind, too many practitioners already believe these errors.  I want them to walk away understanding the correct principle that ceilings are not required, and I want them to know the difference between a ceiling and an estimate.

 

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On 11/21/2022 at 11:39 AM, Oversight said:

A program official asked whether agency-wide mandatory-use strategic sourcing contracts are required to have contract ceilings. Would it ever be permissible to award a five to ten-year contract with no ceiling? I would appreciate your thoughts on that. I have combed through my agency's policy and cannot find anything that expressly states that a contract ceiling is required. 

That's the opening post. The talk about BPAs is a distraction and I see no point in pursuing that matter with Carl.

I don't know what the OP meant by "agency-wide mandatory-use strategic sourcing contracts." If the OP was referring to a MATOC of some kind, then I must assume the contract is an IDIQ, which means that it must include a maximum quantity.

The question whether it would "ever" be permissible to to award a five to ten-year contract with no ceiling is too broad to merit a response. The word "ceiling" could refer to any of a number of things. Except for "cancellation ceiling," the word "ceiling" is not defined anywhere in the FAR system. It's jargon.

One day someone is going to write a useful article about the importance of asking good questions and how to do it.

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This is from a GSA blog that answers agency questions.  It addresses differences between IDIQ contracts and BPAs

Quote

IDIQs

Do you have a ceiling price or maximum value on an IDIQ contract?  Yes

FAR 8.4 BPAs

Do you have a ceiling price or maximum value on a FAR 8.4 BPA? No. Why would an ordering agency add an extra limitation that is not required by the FAR? Instead, IAW FAR Part 8.405-3, an estimated value is established with the FAR 8.4 BPA.

IDIQs

What happens to the IDIQ when the ordering agency reaches the maximum value threshold? The IDIQ contract is dead.  For example, let’s say an IDIQ was awarded for a base year + 4 option years, $1 million/per year for a total of $5 million.  If the ordering agency incorrectly calculated IDIQ value due to poor historical data, and has used up its first $1 million in 3 months, what normally happens? The CO modifies the IDIQ and exercises the next option.  What happen if 2.5 years into the contract, the agency has reached the maximum value threshold? The IDIQ contract is dead.

FAR 8.4 BPAs

What happen to a FAR 8.4 BPA when the ordering agency reaches the estimated value of the BPA? IAW FAR Part 8.405-3(e)(iii), the ordering agency seeks additional price reductions and continues on with the performance of the BPA.

 

 

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4 hours ago, ji20874 said:

Carl,

It seems you want our readers to walk away thinking that a ceiling is needed for BPAs against schedule contracts, and that you want to blur the difference between a ceiling and an estimate -- in my mind, too many practitioners already believe these errors.  I want them to walk away understanding the correct principle that ceilings are not required, and I want them to know the difference between a ceiling and an estimate.

 

Nope they should walkaway knowing an estimated value/quantity is required for a GSA FSS BPA that is ANALAGOUS to a ceiling as having such requires an action.

4 hours ago, Vern Edwards said:

The talk about BPAs is a distraction and I see no point in pursuing that matter with Carl.

@ji20874brought up BPA's not me.  I didn't want folks walking away thinking that a GSA FSS BPA didn't require an estimated/quantity that is ANALAGOUS to a ceiling that requires an action.

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31 minutes ago, C Culham said:

@ji20874brought up BPA's not me.  I didn't want folks walking away thinking that a GSA FSS BPA didn't require an estimated/quantity that is ANALAGOUS to a ceiling that requires an action.

@C CulhamWell, I don't know why you think an estimated quantity is analogous to a ceiling, i.e., a limit or "cap," but I'm not asking you to explain. I don't care why.

And I won't tell you to feel free to think what you like, because you already do that. 😇

Happy Thanksgiving weekend! 🦃

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Happy Thanksgiving weekend!

Yes, a BPA against a schedule contract must include an estimated value/quantity/amount; however, in no way do I see that estimate as analogous to a ceiling.

No specific action or approval is required to issue an order that exceeds the estimate.  An annual review is required, and that annual review occurs whether or not orders have been placed beyond the estimate -- ordering beyond the estimate does not trigger the annual review -- there is no trigger.  Contracting officers may seek discounts for orders at any time, and should consider doing so for a BPA at the annual review especially if orders have exceeded the estimate.

A schedule BPA is not an IDIQ contract, and should not be treated as one.  I want practitioners to know the differences.  I hope this discussion is helpful to WIFCON readers.

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On 11/21/2022 at 2:39 PM, Oversight said:

A program official asked whether agency-wide mandatory-use strategic sourcing contracts are required to have contract ceilings. Would it ever be permissible to award a five to ten-year contract with no ceiling? 

Several years ago when strategic sourcing was in vogue, some agencies awarded requirements contracts for commonly purchased supplies and services.  Since those contracts were mandatory in agency use, they felt requirements type was appropriate as opposed to IDIQ.  As such they didn’t necessarily need to specify maximum quantities.

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On 11/21/2022 at 2:39 PM, Oversight said:

I have combed through my agency's policy and cannot find anything that expressly states that a contract ceiling is required. 

I'm not sure exactly what you have in mind, however, if you are equating "ceiling" with limitation on government liability, have you thought of the effect the Anti-Deficiency Act has on your question?  Unless there is a statutory exception, the ADA generally prohibits agencies from entering into contracts that are open ended and do not place a limitation on the government's liability under a contract.

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  • 1 month later...

Hello everyone, 

I sincerely apologize for the late response. I have been away for many weeks unexpectedly. I very much appreciate all of your responses. After reading them all, I agree with Vern that I submitted a "poor question." Here is my scenario. I work for an Agency that follows its own acquisition regulation; it's called Acquisition Management System (AMS). The same acquisition principles that serve as the foundation for the FAR are in full force and effect in the AMS; however, the application of those principles differs in some instances. That said, I work for the Office of Financial Oversight. We work for the CFO, who exercises approval authority over all procurement actions with aggregate estimates that meet or exceed $10M. I was approached recently by a Sr. Executive who oversees one of our mandatory use strategic sourcing programs, which consists of multiple strategic sourcing IDIQ contracts; each with different total estimate potential values (aka ceilings); I would like us to consider allowing the COs to award new contracts after the current ones end with open ended contract values (no ceilings). These strategic sourcing contracts are all for commodities that range from software and hardware to IT peripherals and copiers. All of the aforementioned currently have ceilings valued at or above $100M. Nowhere in the AMS does it expressly mandate that every contract must include a contract ceiling. The AMS requires that anytime a contract is modified to increase the ceiling by $10M, the CFO has to review the request and approve it before the CO can award the mod. So the Sr. Executive wants to take advantage of the lack of ceiling mandate language by awarding new contracts with no ceiling limits for these strategic sourcing mandatory-use contracts, similar to how GSA manages some of its schedule contracts and BPAs. This would eliminate his folks from having to submit multiple requests for authorization to increase the ceiling amounts. Based on the valuable feedback you provided, I would like to support it, but I am uncomfortable with recommending approval to award contracts with no contract ceiling amounts. The CFO would still exercise a measure of governance over these contracts, either way. 

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