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Prezmil2020

Competitive T&M Task Order Under FSS Contract with FFP Projects

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Good Morning,

I overheard a KO state that he awarded a competitively procured T&M task order under a GSA FSS contract. Each POP has an estimated NTE and the government sends the contractor specific projects and tasks that it needs to submit a FFP for before proceeding. If the government accepts the FFP it fully funds the project while at the same time technically incrementally funding the overall total estimated NTE of the task order. I am assuming that there is a minimum guarantee in the task order to make it legally binding but I am not sure. Nonetheless, I was curious what others think of this practice. In theory it reduces the government's risk by requiring the contractor to perform work under FFP once specific projects/information is known. It also reduces the overall PALT by not having to procure the service using FAR Part 15 procedures (assuming that the work fits under the scope of the FSS contract). When the task order was procured, I am assuming that the government could not provide enough specifics for contractors to provide FFP across the board. I plan on following up with the KO but wanted to start a discussion on this and see what issues/ideas come from it.

Prezmil2020

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It sounds like an ordering vehicle under a GSA FSS contract. The task order is a "mini" IDIQ contract. People have been doing it for years. Nothing new. No big deal.

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Technically, this type of award should be described as a BPA awarded under FAR Part 8.405-3. There is no requirement for a minimum guarantee for the award to be "legal".

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Vern/Fizzy,

Yes, the award is acting like a BPA (I understand that you cannot award an IDIQ against an IDIQ). I do not know the dollar amount, but if it did exceed $103 million I can see where this is an issue because it could run afoul of 8.405-3(a)(3)(ii). Assuming it is less than $103 million, there is no legal issue in having a task order act like a "mini-IDIQ" when the intent of a task order is to have the contractor perform a specific task(s)?

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No. There is no issue that I know of. And on what basis do you understand that you cannot award an IDIQ against an IDIQ?

It is my understanding that when an IDIQ is awarded the government does not know the exact amount of goods or services it requires nor when it will need them. When a specific bona fide need arises, the government will issue an order under the IDIQ's scope, terms and conditions. If the order itself is indefinite in quantity or delivery, what then was ordered?

The FAR defines a delivery order as "an order for supplies placed against an established contract or with Government sources" and a task order as "an order for services placed against an established contract or with Government sources." If the order itself is open-ended, did the government really order something?

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In the contracting world we have today, people have cooked up all kinds of unorthodox schemes. What do you think of a "BPA" against an IDIQ contract? It's common practice. An order that permits orders is not illegal as far as I know. Call it a "blanket order." Call it a "cover order." Whatever.

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A BPA awarded against a MAS is being confused with an Order against an ID/IQ as defined by FAR Part 16.5. Part 38 describes MAS contracts and the basis for their stuatuory authority.

The GSA blogger referenced above is attempting to explain this fact to a person asking a similary confused question. There are other excellent FAQ documents on the GSA website that specifically address questions about BPAs established under FAR Part 8.

http://www.gsa.gov/portal/content/200549

There are three ways to place a competitve Order against a Schedule contract. First, issue a FUNDED competitve task order for a service by issuing an RFQ in eBuy to Schedule holders with the approriate Special Item Number award using the procedures in FAR Part 8.405-2. Second issue a FUNDED competitive delivery order for a commodity item that does not require a Statement of Work using any procedure described in FAR Part 8.405-1.

Or, three issue an un-funded Blanket Purchase Agreement against an underlying Schedule contract using the procedures in FAR Part 8.405-3. The BPA may be made a single awardee or to multiple awardees. If the award is made to multiple awardees the CO is responsible for establising the internal Ordering process and whether or not competitions will be held at the Order level- when the work is directed and funded.

If the BPA is made to a single awardee, and the BPA Ordering lifetime value is expected to exceed $103 million dollars, then the CO must document the reasons why it is in the government's interest to limit sources.

A caveat here is that a Task Order placed directly against the Schedule may have unfunded optional periods of performance OR optional ceiling quantities to be exercized and ordered at a later date.

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Vern is right – this is nothing new in terms of what people have been doing for years. This is an example of the “if FAR does not specifically prohibit it, then you can do it” attitude that enjoys a significant level of acceptance within the federal acquisition community. However, I contend that the FAR does contain such a prohibition.

Consider the specific FAR language at Subpart 16.504(a) (emphasis on the language in bold):

“Description. An indefinite-quantity contract provides for an indefinite quantity, within stated limits, of supplies or services during a fixed period.
The Government places orders for individual requirements.
Quantity limits may be stated as number of units or as dollar values.”

Clearly, by this language, the FAR indicates the orders against an IDIQ contract should be for individual requirements. I contend that an IDIQ scope for multiple future undefined requirements is not an individual requirement. Therefore, the regulatory prescription to place orders for individual requirements prohibits the issuance of an IDIQ type order. Yes, I said the nasty, unthinkable, “p” word: prohibits.

By identifying the specific type of orders that are intended to be placed against IDIQ contracts – orders for individual requirements – the FAR, by implication, establishes that orders should not be for a collection of possible individual requirements to be defined in the future.

To allow for such types of orders would be to promote ineffective contracting, which is contrary to the FAR requirement at Subpart 6.102 that charges contracting officers to ensure effective contracting. Awarding IDIQ orders against IDIQ contracts is ineffective contracting because it increases, by duplication of effort, the cost of awarding and administering contracts. If you can award an IDIQ order against an IDIQ contract, why not an IDIQ order against an IDIQ order? And why not award additional IDIQ orders at succeeding lower levels?

While you ruminate on that thought, let’s examine a number of considerations relative to this practice. Even if you believe there is a lack of a specific FAR prohibition against the practice, is that a good indication of either the wisdom in, or level of risk associated with, engaging in the practice?

If IDIQ is considered a legitimate order type, then it must provide for a minimum guarantee (as Prezmil2020 speculated in his post) and that minimum guarantee amount must be obligated. My experience has been that the advocates for these types of orders typically want them in order to either ensure that a specific contractor gets all of the agency’s work or park funds that would otherwise expire, or both reasons. Prezmil2020 states that he believes the agency is “…technically incrementally funding the overall NTE amount of the order…” I assume he ascribes that characterization to the practice of fully funding each task order for which the agency agrees to the proposed FFP. But if the agency is actually incrementally funding the order, let’s say, quarterly with a lump of available funding, then it is committing violations of the recording statute, 31 U.S.C. § 1501(a). It may be useful for you to review the subject of the recording of obligations in GAO’s Redbook, Third Edition, Volume II, Chapter 7. Here are several excerpts from the reference to put this issue in context:

"The
typical question on obligations is framed in terms of when the obligation may or must be “recorded,” that is, officially charged against the spending agency’s appropriations. Restated, what action is necessary or sufficient to create an obligation? This is essential in determining what fiscal year to charge, with all the consequences that flow from that determination. It is also essential to the broader concern of congressional control over the public purse.

Before proceeding with the specifics, two general points should be noted. First, an obligation arises when the definite commitment is made, even though the actual payment may not take place until a future fiscal year.
B-300480.2, June 6, 2003; 56 Comp. Gen. 351 (1977); 23 Comp. Gen. 862 (1944). Second, for appropriations law purposes, the term “obligation” includes both matured and unmatured commitments. A matured commitment is a legal liability that is currently payable. An unmatured commitment is a liability which is not yet payable but for which a definite commitment nevertheless exists. ”

The overrecording and the underrecording of obligations are equally improper. Both practices make it impossible to determine the precise status of the appropriation and can lead to other adverse consequences. Overrecording (recording as obligations items that are not) is usually done to inflate obligated balances and reduce unobligated balances of appropriations expiring at the end of a fiscal year. Underrecording (failing to record legitimate obligations) may result in violating the Antideficiency Act. 31 U.S.C. § 1341.3 A 1953 decision put it this way:

The standards for the proper recording of obligations are found in 31 U.S.C. § 1501(a), originally enacted as section 1311 of the Supplemental Appropriation Act, 1955, Pub. L. No. 83-663, 68 Stat. 800, 830 (Aug. 26, 1954). A Senate committee has described the origin of the statute as follows:

Section 1311 of the Supplemental Appropriation Act of 1955 resulted from the difficulty encountered by the House Appropriations Committee in obtaining reliable figures on obligations from the executive agencies in connection with the budget review. It was not uncommon for the committees to receive two or three different sets of figures as of the same date. This situation, together with rather vague explanations of certain types of obligations particularly in the military department
, caused the House Committee on Appropriations to institute studies of agency obligating practices.

The result of these examinations laid the foundation for the committee’s conclusion that loose practices had grown up in various agencies, particularly in the recording of obligations in situations where no real obligation existed, and that by reason of these practices the Congress did not have reliable information in the form of accurate obligations on which to determine an agency’s future requirements. To correct this situation, the committee, with the cooperation of the General Accounting Office and the Bureau of the Budget, developed what has become the statutory criterion by which the validity of an obligation is determined. . . .” Thus, the primary purpose of 31 U.S.C. § 1501 is to ensure that agencies record only those transactions which meet specified standards for legitimate obligations. 71 Comp. Gen. 109 (1991); 54 Comp. Gen. 962, 964 (1975); 51 Comp. Gen. 631, 633 (1972); B-192036, Sept. 11, 1978.5

If an agency engages in the use of IDIQ orders, then it must be careful to observe the rules for recording obligations to avoid statutory violations.

Let’s go back to a basic rule of using IDIQ vehicles. The FAR and underlying statute expresses a preference for multiple award IDIQ contracts. That preference would have to extend to the use of the IDIQ vehicle at the order level. FAR at Subpart 16.504©(ii)© requires the contracting officer to document the decision whether or not to use multiple awards in the acquisition plan or contract file. And your agency may have supplementing regulation that requires approval for a single award IDIQ. An agency engaging in the use of IDIQ orders must make sure it meets these requirements.

Use of these types of orders lessens the transparency of government procurement. The public loses visibility on all those requirements that are sole-source negotiated with the single IDIQ order holder. And the sole-source negotiations expose the Government to higher price risk – putting the agency out of line with the administration’s focus on reducing high-risk contracting practices.

Now let’s turn to some serious considerations, and start with small business. Using an IDIQ order approach brings up questions of bundling and the Rule-of-Two. As you may know, the GAO said in the Delex decision that the Rule-of-Two applies at the task order level. If there is a single award and it is not to a small business, you have a problem if an individual requirement arises that is appropriate for small business performance. You cannot issue it against the single award, large business IDIQ order. And the COFC said in the Mori decision that you must perform a Rule-of-Two analysis before selecting a contract vehicle. However, if you compete each individual requirement for separate task order award under the IDIQ contract, as intended by FAR regulation, and there are small business contract holders, then you can place any requirement that is suitable for small business performance against the IDIQ contract.

There are also concerns with administrative processes. The typical contract forms on which orders are issued are designed to capture the IDIQ contract number and the task order number, not a tertiary level instrument identification number. On what form then do you issue each individual task against an IDIQ order so that reporting data is accurate with respect to contract document identifiers?

Some that use these IDIQ orders issue a separate order form for each task against the blanket order and place the original order number on the form as the contract number and assign a new task order number on the form in the order number block. Thus the agency loses the ability to track scope availability through the automated systems since they cannot capture all obligations that actually belong against the IDIQ contract.

Others that use these IDIQ orders issue an order modification on an SF-30 for each task, and then that form again for modifications to each individual task scope. This makes for sloppy documents that are hard to follow in administration. The agency loses the ability to track each project separately in an automated fashion.

Last, but certainly not the least important issue, agency finance centers often have difficulties in payment administration against blanket IDIQ orders with multiple requirements eventually obligated on the same document.

All of these administrative concerns, even if work-arounds are found, lead to more inefficiency and ineffectiveness in contracting.

To summarize, I believe such order types are prohibited, but if you do not and choose to utilize them, you will need to deal with these issues, and maybe more.

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HCuffage:

You are reading waaaay too much into a mere description, which is not a directive or prohibition. It does not contain any verb or verb phrase such as shall, shall not, must, must not, may not, or even should or should not. Nor is it an official definition, such as the ones in FAR 2.101.

Consider the description of a firm-fixed-price contract in FAR 16.202-1:

A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract.

Anyone who knows anything about FFP contracts knows that description is not correct. The price of a firm-fixed-price contract is subject to adjustment on the basis of the contractor's cost experience for all sorts of reasons.

I could point out dozens of such descriptions and other passages. FAR says all kinds of things that cannot be taken literally. Consider FAR 4.101, "Contracting Officer's Signature," which says that the CO "normally" signs a contract after the contractor. Taken literally, that's not true. In the vast majority of acquisitions, which are purchase orders or orders against existing contracts, the CO signs first and, in fact, may be the only one who signs.

So I do not agree with your thinking at all. I have no opinion as to whether issuing an order that permits the CO to issue orders is a good practice. It's just a scheme that people use for the sake of convenience, like orders that contain options. It may be that it's a good practice is some cases and a bad practice in others. In some cases the issuance of an order under such an order might be improper, but that depends on the facts, not on some FAR description. So I'm not defending the practice, and I'm not going to argue further its legality. If you can't find anything more than a description to rely on to declare it illegal, then you won't convince me.

Finally, as for FAR 1.102(d) and 1.102-4(e) -- of course they enjoy a significant level of acceptance in the acquisition community. They are government official policy and guiding principles of the acquisition system.

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