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Excess Ceiling Available and Options

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A co-worker has posed the following matter: The ceiling for our entire CPAF, IDIQ contract is $94M, Base Year $10M and 4 option years $21M each. The estimate was $10M for the base year and only $4M was utilized. Can we use the excess ceiling in the option year given we are likely to burn in excess of our estimate? The prevailing view is 'yes,' since the approval to award was based on not exceeding the entire $94M estimated ceiling rather than on annual amounts. There are no clauses in the contract specifically addressing this matter in the exercise of options. We have not yet received a legal position on the matter. Thoughts?

There is a second aspect to this contract that we are looking into with regard to improving, or simplifying the administration. The contract is currently structured by SLINs with an estimated dollar amount for each leading up to the ceiling. Can we simply state in Section B, the estimated amount for the Year and remove the dollar estimates from the SLINs? Again, the view of the PCO is 'yes,' because we are not changing the ceiling and the estimated SLIN amounts are not realistic. This creates additional admin since the PCO has to modify the basic anytime the estimated amount is exceeded, creating something of a domino effect moving between the SLINs. The result is an administrative nightmare based upon the volume of IDIQ task activity. Suggestions, or guidance? Thanks all.

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Why bother with options? You don't need them with an IDIQ contract. Simply award an IDIQ contract with a five year ordering period. Stipulate that the government will order the minimum quantity during the first 12 month period and may order up to the maximum quantity over the course of the entire five year period. Then set prices for each fiscal year or for 12-month pricing periods within the five year ordering period.

As for your question: "Can we use the excess ceiling in the option year," the answer depends on how you wrote the contract. If you wrote it so that there is a maximum for each option year, then the answer is no. If you don't order the maximum in the basic period or any option year, you cannot carry the balance over into the next option year. Each option year stands on its own. Carrying over the balance into the next option year would violate the rule at FAR 17.207(f) that you must exercise an option in accordance with its terms. Since you have set a maximum for each of your options, carrying over the balance from one year to the next would increase the maximum of a following year, and thus would increase the scope of the option. Doing that would leave you vulnerable to a protest.

And by the way, the proper terminology is maximum quantity, not "ceiling.

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Agree with the longer-than-one-year ordering period. Folks make them annual options out of habit thus requiring a new contract modification and set of CLINs each fiscal year. (Note: I said CLINs, not SLINs. You will always need more SLINs to differentitate between funding lines within and in different fiscal years.)

As to the other original comments, it is a good idea to avoid subdividing units/pricing at the SLIN level on services efforts. This allows more flexibility in contract administration (i.e. again, few contract modifications).

Yes, follow what the contract states with regards to transferring unused quantity from one CLIN to another. If not in the contract, folks often do a bilateral modification to allow the Govt. to do so without requiring a bilateral modification each time. Yes, you need to be mindful of the protest risk (i.e. out of scope of original competition).

One last note: If you are transferring unused quantity from one CLIN to another, be sure you are not transferring any award fee pool that was eligible to be earned but was not earned. This would result in award fee "rollover". You should transfer only the award fee pool portion that is associated with the unexpended work. Of course, if the contract already has language covering award fee rollover, then follow the contract accordingly. I am not saying award fee rollover is good or bad, but, given the current anti-rollover Govt. leadership sentiment, just making sure one doesn't inadvertently rollover award fee for which the contractor expended effort but didn't earn the full amount.

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t is a good idea to avoid subdividing units/pricing at the SLIN level on services efforts. This allows more flexibility in contract administration (i.e. again, few contract modifications).

I disagree. Five years is too long a period to lock a contractor into prices.

One last note: If you are transferring unused quantity from one CLIN to another, be sure you are not transferring any award fee pool that was eligible to be earned but was not earned. This would result in award fee "rollover". You should transfer only the award fee pool portion that is associated with the unexpended work. Of course, if the contract already has language covering award fee rollover, then follow the contract accordingly. I am not saying award fee rollover is good or bad, but, given the current anti-rollover Govt. leadership sentiment, just making sure one doesn't inadvertently rollover award fee for which the contractor expended effort but didn't earn the full amount.

What you have described is not rollover. If the unearned award fee was attached to unpurchased quantities, attaching the unearned balance to other quantities is not "rollover." I don't know what you would call it. Rollover is when the contractor's performance isn't good enough to earn all of the available fee and the government gives it another chance to earn the unearned portion.

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I disagree. Five years is too long a period to lock a contractor into prices.

I didn't advocate or oppose locking in prices over five years. The pricing remains at the CLIN level. The question dealt with further subdividing hours & cost/prices down to the SLIN level. It was a contract administration question, not a pricing question.

What you have described is not rollover. If the unearned award fee was attached to unpurchased quantities, attaching the unearned balance to other quantities is not "rollover." I don't know what you would call it. Rollover is when the contractor's performance isn't good enough to earn all of the available fee and the government gives it another chance to earn the unearned portion.

I did describe rollover appropriately. The 2nd sentence of the quote could have been interpreted two ways (as your reply has shown). Failure to avoid transferring only the unearned AF attached to unpurchased quantities (i.e transferring unearned fee for purchased quantities) results in rollover.

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I did describe rollover appropriately. The 2nd sentence of the quote could have been interpreted two ways (as your reply has shown). Failure to avoid transferring only the unearned AF attached to unpurchased quantities (i.e transferring unearned fee for purchased quantities) results in rollover.

Since the award fee is earned through performance, I don't see how we couldn't include it if we 'rollover' the capacity. As to the idea of having a single, five-year ordering period, would that not require special multi-year authority? Also, how would we actually price out and evaluate the offers, since we usually include the base and options. Can't we use the options and simply allow for ordering during any option period up to the total award amount?

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Since the award fee is earned through performance, I don't see how we couldn't include it if we 'rollover' the capacity. As to the idea of having a single, five-year ordering period, would that not require special multi-year authority? Also, how would we actually price out and evaluate the offers, since we usually include the base and options. Can't we use the options and simply allow for ordering during any option period up to the total award amount?

"Rollover" is a term used to describe the carryover of award fee (AF) the contractor FAILED to earn (key is FAILED to earn) to a later award fee period/event in the contract.

For example, if the contractor was eligible to earn $100 (i.e. AF pool is $100) during the 1st AF period but only earned $90, the remaining $10 would be considered "rollover" if it was added to a subsequent potential award fee pool.

Let's say the CLIN price was $9000 cost and $900 award fee and the unit price was $90/hr. cost & $9/hr. AF pool for a maximum quantity of 100 hours for the current CLIN. If the contractor was tasked and delivered 80 hours at $7200 and earned only $700 of the $720 AF pool for those 80 hours, the remaining $20 is what the contractor FAILED to earn. $120 is what the unused award fee pool associated with unexpended work that could be transferred (not rolled over) to a subsequent CLIN, providing the contract language allows you to do that or there is a bilateral modification (mindful of orignal scope of competition) executed. Please note that this scenario assumes the maximum quantity is defined in terms of dollars (not hours). If it is in terms of hours, then this scenario assumes the hourly unit price is the same from one CLIN to the next. If not, then you should be transferring unused hours from one CLIN to the next CLIN but applying the price of the next CLIN. Otherwise, you are likely denying the contractor (or Govt.) the benefit of then-year pricing.

Your recent comment about evaluating offers implies you are talking about transferring unused "ceiling" in a multiple award environment. If so, you should be transferring equal amounts of unused "ceiling" per contractor to ensure an equilibrium of fair opportunity for the remainder of the contract.

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Failure to avoid transferring only the unearned AF attached to unpurchased quantities (i.e transferring unearned fee for purchased quantities) results in rollover.

Huh? What are you talking about?

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I disagree. Five years is too long a period to lock a contractor into prices.

I didn't advocate or oppose locking in prices over five years. The pricing remains at the CLIN level. The question dealt with further subdividing hours & cost/prices down to the SLIN level. It was a contract administration question, not a pricing question.

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Huh? What are you talking about?

Distinguishing between: (i) award fee pool dollars that the contractor has not yet had a chance to earn; and (ii) award fee pool dollars that the contractor had a chance to earn but failed to do so (i.e. got a score < 100%).

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Distinguishing between: (i) award fee pool dollars that the contractor has not yet had a chance to earn; and (ii) award fee pool dollars that the contractor had a chance to earn but failed to do so (i.e. got a score < 100%).

And if the contractor has not had a chance to earn part of an award fee pool because the government did not purchase up to the maximum, do you consider adding the balance of the maximum and the associated award fee pool dollars to the next period to be "rollover"?

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And if the contractor has not had a chance to earn part of an award fee pool because the government did not purchase up to the maximum, do you consider adding the balance of the maximum and the associated award fee pool dollars to the next period to be "rollover"?

No.

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Why bother with options? You don't need them with an IDIQ contract. Simply award an IDIQ contract with a five year ordering period.

I was hoping someone else did'dnt know how this would be done, but now it appears I am the only one B)

FAR part 16.504(a)(4)(i) a solicitation for IDIQ must specify the period of the contarct, including the number of options and the period for which the government may extend the contract under each option.

I would very much love to award a 5 year IDIQ and not worry about options, but I cannot justify it.

Sorry to derail this thread, but the idea of this caught my attention.

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I was hoping someone else did'dnt know how this would be done, but now it appears I am the only one :)

FAR part 16.504(a)(4)(i) a solicitation for IDIQ must specify the period of the contarct, including the number of options and the period for which the government may extend the contract under each option.

I would very much love to award a 5 year IDIQ and not worry about options, but I cannot justify it.

Sorry to derail this thread, but the idea of this caught my attention.

You haven't derailed the thread.

The reason you don't need options and can award an IDIQ contract with a five-year ordering period is that most agencies fund IDIQ contracts on each order. So if you issue a five-year IDIQ contract (without options) you can fund orders with annual appropriations without violating the bona fide needs rule. You order the minimum during the first year with the funds of that year. Then you can issue and fund orders when a bona fide need arises using the appropriate funds at any time during the five year ordering period. You don't need options because you aren't funding the entire five years at the time of award, only the minimum to be bought in the first year.

I don't know why you say you can't justify such an approach. If I were your boss you would have a hard time justifying the use of options. They would be a needless nuisance.

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You order the minimum during the first year with the funds of that year.

Vern,

Assuming you mean that you must order the minimum during the first year with the funds of that year, why is that so?

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You haven't derailed the thread.

The reason you don't need options and can award an IDIQ contract with a five-year ordering period is that most agencies fund IDIQ contracts on each order(Which we do). So if you issue a five-year IDIQ contract (without options)(So are you saying that the period can be for a duration of five years?[) you can fund orders with annual appropriations without violating the bona fide needs rule. You order the minimum during the first year with the funds of that year. Then you can issue and fund orders when a bona fide need arises using the appropriate funds at any time during the five year ordering period. You don't need options because you aren't funding the entire five years at the time of award, only the minimum to be bought in the first year.

I don't know why you say you can't justify such an approach. If I were your boss you would have a hard time justifying the use of options. They would be a needless nuisance.

FAR part 16.504(a)(4)(i) a solicitation for IDIQ must specify the period of the contract, including the number of options and the period for which the government may extend the contract under each option.

If I understand correctly we are defining period as being longer than one year. I have always assumed that the "period" was defined as being no more than one year.

Forgive me as I work this out as I am typing. I have discussed this with some of my experianced COs, and dont know of any VA CO's that have done this. And naturally we are fearful of things we don't understand like fire, magic etc.

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If the ID/IQ contract itself can be awarded for a 5 year period, could it then also have one or more options, each 5 years in duration? I have been taught that all contracts are restricted to 5 years duration without specific authority for a longer period of time. This could be an ephiphany for my office, which constantly has a problem with long term projects for software development that goes on for a decade or more.

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VA Junior CO:

FAR part 16.504(a)(4)(i) a solicitation for IDIQ must specify the period of the contract, including the number of options and the period for which the government may extend the contract under each option.

If I understand correctly we are defining period as being longer than one year. I have always assumed that the "period" was defined as being no more than one year.

Forgive me as I work this out as I am typing. I have discussed this with some of my experianced COs, and dont know of any VA CO's that have done this. And naturally we are fearful of things we don't understand like fire, magic etc.

Your first mistake was assuming that a period is defined as one year. Where did you find that definition? You can have an IDIQ period of five years, or even ten years.

Your second mistake is assuming that because none of the "experienced" COs has heard of something or done it makes in wrong or risky. Ignorance is not a benchmark for correctness.

There is nothing new or radical in what I'm telling you. If there were anything wrong in it, Carl Culham, here_to_help, Joel Hoffman, formerfed, Don Mansfield, and/or others would have been all over me by now. That's one of the great things about Wifcon.

To all: This is a demonstration of something that I have been saying for years. Part of the workforce "shortage" is due to the fact that COs do not know how to do things simply. VA Junior CO and his/her colleagues are spending time sending option notifications and exercising options when they need not do so. That is inefficiency. Inefficiency amplifies workforce shortages.

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dwgerard:

If the ID/IQ contract itself can be awarded for a 5 year period, could it then also have one or more options, each 5 years in duration? I have been taught that all contracts are restricted to 5 years duration without specific authority for a longer period of time. This could be an ephiphany for my office, which constantly has a problem with long term projects for software development that goes on for a decade or more.

An IDIQ contract with an ordering period of five years can include options to extend the ordering period for an additional five years. The five year limit you might be thinking of is the one mentioned in FAR 22.1002-1, associated with the Service Contract Act. However, the Department of Labor has interpreted that law such that each option is considered a new contract for purposes of the Act. See 29 CFR ? 4.145(a).

Sometimes I think that "I have been taught" is the worst phrase in our business.

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I agree with the "I have been taught" comment, but sometimes breaking out of that fog of misinformation is by simple chance. An example is this thread, which is one reason I have recommended this website to everyone I have ever worked with in contracting.

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If the ID/IQ contract itself can be awarded for a 5 year period, could it then also have one or more options, each 5 years in duration? I have been taught that all contracts are restricted to 5 years duration without specific authority for a longer period of time. This could be an ephiphany for my office, which constantly has a problem with long term projects for software development that goes on for a decade or more.

If you are in DoD, see DFARS 217.204:

217.204 Contracts.

(e)(i) Notwithstanding FAR 17.204(e), the ordering period of a task order or delivery order contract (including a contract for information technology) awarded by DoD pursuant to 10 U.S.C. 2304a?

(A) May be for any period up to 5 years;

( B ) May be subsequently extended for one or more successive periods in accordance with an option provided in the contract or a modification of the contract; and

( C ) Shall not exceed 10 years unless the head of the agency determines in writing that exceptional circumstances require a longer ordering period.

I can remember having the IDIQ w/options debate at a contracting office that I used to work at. My relatively inexperienced PCO, who liked to try new things, started to structure his IDIQ contracts with five-year ordering periods instead of the traditional one base year plus four one-year options (he probably got the idea from reading something Vern wrote on Wifcon or said in a training class). Despite the obvious advantages of this approach, none of the other "experienced" PCOs could bring themselves to do it. They really didn't have a good argument for using IDIQs with options, other than that was what they had been taught, that is what they had been doing for years, and that is what they felt comfortable doing.

Whenever I teach special contracting methods, I always challenge my students to come up with a good reason to award an IDIQ with options. I get a lot of "that's just the way my office has always done it."

The best argument that I've heard, which is a practical one, came from an attorney where I used to work. He said that having an IDIQ contract is like having a special sales license. This license allows contractors greater access to get on base and hassle the technical folks in an attempt to drum up business. If you have a contractor that turns out to be a turkey, you could take away their license by not exercising their option. However, if their contract had a five-year ordering period, you could not take away that license as easily.

Best argument I've heard, but not persuasive.

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