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Seed Project Required?

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I am crafting a solicitation which will result in award of up to five IDIQ Contracts for General Construction. I'm told my solicitation requires a Seed Project. I cannot find anything that sets forth this requirement. Is this something unique to construction? I understand my agency uses Seed Projects as a method of evaluating price but I wonder if there are other, more meaningful, methods of satisfying this requirement. Any ideas?

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Whether using sealed bidding or competitive negotiation, you are required to evaluate price or cost. There are two primary methods for evaluating price when the quantity of work is unknown (like in an IDIQ)--the sample task method and the estimated quantities method. I assume that "seed project" is your organization's vernacular for using the sample task method. Under the sample task method, the solicitation will require offerors to submit prices for a typical requirement to be ordered under the IDIQ. The requirement may be real or fictional. The offeror's prices for the sample task are then used in making the source selection decision in a competitive negotiation.

Alternatively, can use the estimated quantities method. Under this method, agencies can normalize certain cost elements such as labor hours and material costs by stating in the solicitation that offerors must use the prescribed amounts of labor hours and material in developing their proposed prices. There typically is no sample task when using this method.

Some agencies prefer sample task, others prefer estimated quantities. Personally, I prefer estimated quantities. Whichever method you use, some element of the offeror's price must be binding to pass muster at the GAO.

For more on this, I suggest you read "EVALUATING PRICE OR COST IN TASK ORDER CONTRACTS" in the November 2005 issue of the Nash & Cibinic Report.

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Whether using sealed bidding or competitive negotiation, you are required to evaluate price or cost. There are two primary methods for evaluating price when the quantity of work is unknown (like in an IDIQ)--the sample task method and the estimated quantities method. I assume that "seed project" is your organization's vernacular for using the sample task method. Under the sample task method, the solicitation will require offerors to submit prices for a typical requirement to be ordered under the IDIQ. The requirement may be real or fictional. The offeror's prices for the sample task are then used in making the source selection decision in a competitive negotiation.

Alternatively, can use the estimated quantities method. Under this method, agencies can normalize certain cost elements such as labor hours and material costs by stating in the solicitation that offerors must use the prescribed amounts of labor hours and material in developing their proposed prices. There typically is no sample task when using this method.

Some agencies prefer sample task, others prefer estimated quantities. Personally, I prefer estimated quantities. Whichever method you use, some element of the offeror's price must be binding to pass muster at the GAO.

For more on this, I suggest you read "EVALUATING PRICE OR COST IN TASK ORDER CONTRACTS" in the November 2005 issue of the Nash & Cibinic Report.

The GAO has expressed problems with using sample tasks when they are non-binding upon the offerors. Don mentioned this above. These have been discussed in other threads in the Forum. The GAO has also expressed problems with just using fixed unit prices and estimated quantities to compare overall price reasonableness because those quantities may not actually represent realistic labor mixes and quantities on real task orders. Apparently, GAO doesnt consider either of those methods by themselves to represent meaningful price competition.

Many material prices experience considerable price fluxuation each month or quarter. Contractors and their subs dont normally pay catalog prices, they usually pay various discounts off list prices, which varies as the price of materials fluxuate up and down, delivery need dates, quantities, etc. The Government would be foolish to try to accomplish significant amounts of construction over extended periods using pre-determined, fixed prices for materials and labor (much of which varies, depending upon whether it is subcontracted, when it is subbed and who it is subbed to).

Even the Job Order Contracting method with fixed multipliers for all prices that are covered in a database taken from an estimating cost data book (such as R.S. Means) is very difficult in real practice to make work fore anything other than very small construction projects.

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The GAO has also expressed problems with just using fixed unit prices and estimated quantities to compare overall price reasonableness because those quantities may not actually represent realistic labor mixes and quantities on real task orders.

If the estimated quantities do not realistically reflect the amount of work to be ordered, then the GAO will have a problem. See AirTrak Travel, Comp. Gen. Dec. B-292101, 2003. However, if the estimates are realistic, the GAO should not have a problem.

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In addition to evaluation of price your Agency may use a "see project" to provide a task order award at time of the award of the basic contract to meet the minimum of the IDIQ and or to provide nominal consideration. There have been many fiscal law cases regarding IDIQ contracts and providing "nominal consideration" at time of the Award of the basic IDIQ contracts. Your Agency may be using the seed project as a vehicle to provide an award of a task order when the base contract is awarded to provide nominal consideration and thus, in the eyes of the Courts, a valid contract. The FAR does not require meeting the minimum at time of award but there are reasons to do so based on Fiscal Law requirements. It may be helpful if you check internally to see if this is indeed the case with your Agency.

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Thank you for your responses. So, if I understand correctly, no one who responded believes that a seed project is required when soliciting for IDIQ contracts for General Construction? Use of a seed project is simply one method of evaluating price, not the required method?

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I am crafting a solicitation which will result in award of up to five IDIQ Contracts for General Construction...I understand my agency uses Seed Projects as a method of evaluating price but I wonder if there are other, more meaningful, methods of satisfying this requirement. Any ideas?

Verbatim, In order to respond to your question concerning other possible, "more meaningful methods of satisfying this requirement", one must understand more about the scope of task orders to be used. By "general construction", are you referring to construction of broad types of buildings, site utilities, etc. ? If not, what type projects are you contemplating accomplishing as task orders? Are they mostly repetitive at a certain location? How big will task orders typically be? What is the geographical coverage of the possible task orders?

In today's market, construction pricing is quite volatile and dynamic, unless one is talking about relatively routine, simple, repetitive type tasks at a single location.

Thanks!

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I checked my archive and found a legal memo that discussed this topic but unfortunately when the author discussed relevant case law specific case(s) were not provided.

However, the author did make reference to the Anti-Deficiency's act prohibition on incurring an obligation in advance of or in excess of available appropriations.

Addiitonally, the author referenced GAO's "Principles of Federal Appropriations Law Vol. II". At page 7-17 and quotes a statement "...the obligational impact of a variable quantity contract depends on exactly what the government bound itself to do. A fairly simple generalization can be deduced from the decisions: In a variable quantity contract (requirements or indefinite-quantity), any required minimum purchase must be obligated when the contract is executed..."

The attorney's opinion at the time (1994) was that GAO and Agency policy (Army) require that funds sufficient to the cover the specified minimum quantity be obligated on the contract at the time of award in order to avoid a violation of the ADA. The contract writing system used at the time would not allow funds on the basic contract so the task or deliver order was used.

The discussion of nominal consideration was part of the analysis in the begining of the opinion as the elements of an valid contract with consideration being one of the elements.

Again it may or may not be a requirement to place an order at time of the award of the basic contract but it has been a practice I followed in the past especially if the contract writing system would not allow funds to be placed on the bsic contract. Hence my suggestion that the one asking the question check internally.

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In addition to evaluation of price your Agency may use a "see project" to provide a task order award at time of the award of the basic contract to meet the minimum of the IDIQ and or to provide nominal consideration. There have been many fiscal law cases regarding IDIQ contracts and providing "nominal consideration" at time of the Award of the basic IDIQ contracts.

Only 13 GAO decisions have mentioned "nominal consideration," and only one was a fiscal law decision: 15 Comp. Gen. 539, Dec. 18, 1935, which had to do with a real estate transaction. It is the only such decision cited in the GAO Redbook, in Vol. 3, Ch. 13 "Real Property." There have not been "many" fiscal law cases about nominal consideration. There have been only two or three that mentioned nominal consideration in the context of a bid protest of the award of a multiple award IDIQ contract, e.g., Aalco Forwarding, Inc., B-277241, 96-1 CPD para. 87, March 11, 1998.

In the context of government contracting, "nominal consideration" refers to the problem of consideration in name only, which is not adequate consideration to bind the parties contractually. That problem is mentioned in FAR 16.504(a)(2). The objective of a seed project is not to provide nominal consideration, since doing that would mean there is no contract.

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