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Minimum Ordering Amount Under Multiple Award IDIQ Contract

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Scenario: A multiple award IDIQ contract for R&D servcies was awarded sometime near the end of FY'09. The vehicle consisted of 37 base contracts with 37 different contractors. All base contracts were funded with the established minimum ordering amount. I have recently taken over this contract and the time has come to exercise an option period on all of the contracts.

To date there are 15 to 20 contractors that have not been awarded task orders. My reasoning tells me that upon exercising the option on these base contracts, I should be required to obligate funds in an amount equal to the minimum ordering amount and ensure that those funds remain present throughout all periods of performance until that time when a task order is awarded and the minimum ordering amount has been satisfied.

I don't think this has taken place to date. I believe the contracts were modified to exercise the options, but the amount required to satisfy the minimum ordering amount was never carried through to the new period of performance. What would be the effect had the funds that were obligated upon award been no-year funds?

Also, the specific language that was used in the contract seems to suggest that the minimum ordering amount is payable only at the end of the contract period, inclusive of options. Does that make a difference as regards the amount that should have been funded on the contract at time of award?

The exact language from the contract follows:

Fulfilling Minimum Ordering Requirements

The Government has no obligation to issue task orders to any contractor beyond the minimum amount specified above. For each successful contractor, there will be a one time "minimum guarantee award amount" during the life of the contract, which includes all option years, if exercised. This amount can only be claimed at the end of the contract period if the contractor takes advantage of fair opportunity by proposing on at least one Task Order, within the Technical Areas for which the Contractor received award, offered to the contractor during the years for which the contractor is eligible.

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If you do not exercise an option for a contractor that has submitted at least one proposal for a TO, would that not trigger the obligation to pay that contractor the minimum amount based on the language of the clause you quoted?

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To date, the available options on each of the 37 contracts has been exercised. We anticipate exercising all options on each of the contracts.

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Guest Vern Edwards

The government breached the contract if it did not fulfill its obligations during the first year. You should have sorted that out with the contractors that did not receive an order before you exercised the options.

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That is interesting Vern. Was the Government required to comply with providing an order in the first year even if there were other optional periods to be exercised? What about the language that was used in the contract suggesting that the amount is not payable until the last year if no award was made to a contractor?

Also, the language I provided above (from the contract) states that the contractor must have submitted a proposal to qualify for that amount. I don't agree with that. I think that by virture of having won one of the contracts, we're on the hook to place an order or pay the minimum. What's your opinion on this?

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One other thing Vern, had we paid those contractors who did not receive an award the first year the minimum guaranteed amount, would we continue to be on the hook the following periods as options are exercised? Would that minimum amount have to be funded again?

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Apologies for the broken response. Vern, tell me if this helps. I should have included this with my original post. The section of the contract that precedes the section I provided above states the following:

Minimum and Maximum Contract Amounts

During the contract period of performance (which includes the base period plus all exercised options), the Government shall place orders at a minimum of $1,000 under this contract. The maximum value of all contracts is $140,000,000.00. The cumulative amount of all task orders shall not exceed $140,000,000.00 for the entire lifecycle of all the R&D 2014 contracts. The authority and ordering procedures to issue task orders are addressed under Section G.3 and Section H.5 of the contracts.

I think they messed up with the language. I think the section in parenthses should probably have stated all exercised and unexercised options.

Based on this language, do you still believe the contract was breached?

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We are beginning to work on these modifications and I'm unclear as to whether we've breached our contract or not. Since we provided the following language in the contract, were we required to award a task order to all contractors or pay the minimum ordering amount during the base period of performance, or does the following language allow us to comply with this requirement at any point throughout the life of the contract, inclusive of options?

Minimum and Maximum Contract Amounts

During the contract period of performance (which includes the base period plus all exercised options), the Government shall place orders at a minimum of $1,000 under this contract. The maximum value of all contracts is $140,000,000.00. The cumulative amount of all task orders shall not exceed $140,000,000.00 for the entire lifecycle of all the R&D 2014 contracts. The authority and ordering procedures to issue task orders are addressed under Section G.3 and Section H.5 of the contracts.

Fulfilling Minimum Ordering Requirements

The Government has no obligation to issue task orders to any contractor beyond the minimum amount specified above. For each successful contractor, there will be a one time "minimum guarantee award amount" during the life of the contract, which includes all option years, if exercised. This amount can only be claimed at the end of the contract period if the contractor takes advantage of fair opportunity by proposing on at least one Task Order, within the Technical Areas for which the Contractor received award, offered to the contractor during the years for which the contractor is eligible.

Returning to my original question and assuming that we did not breach the contract, when exercising the options on contracts that have not been awarded task orders, are we required to fund the new option period for the minimum ordering amount? It seems that the funds that were originally obligated were no-year funds.

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