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Subutai

IDIQ Unit Pricing for 5 Years - Why?

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Newish CO here.   I am pre-award with an IDIQ that will have a BOM for a bunch of contractor-provisioned IT COTS hardware (maybe 100 different items, up to $80K unit price).

 These IT materials are from a dynamic market.  Prices, models, features all change quickly.  

I am being asked by management to get 5-year pricing at the unit level for everything, and incorporate that pricing into the IDIQ.  To me, this is a bad idea and a waste of time. My question to you all is - am I right in my assessment?  Am I missing something?

I see nothing in FAR 16.5 requiring any pricing of any type at the IDIQ level.  Pricing and price analysis occurs at the order level.  I understand that ceiling unit prices can be established by the IDIQ and found fair and reasonable, so that orders with unit prices at or below those levels are also fair and reasonable automatically, and this greatly speeds up the procurement process.  However, this is predicated upon the assumption that the unit prices and things being priced will be stable over time.  For example, carpenters and database administrators exist now and are reasonably likely to exist five years from now, and their hourly rates aren't going to change very much between now and then.  This is not the case with IT hardware. Basically everything on the IDIQ's BOM has a lifecycle of less than 5 years and prices will change quickly, and by a lot.  Also, new stuff comes onto market all the time. So why bother with IDIQ level pricing, you are going to have to do the price analysis per order anyways?  If you know now, before award, that the IDIQ unit pricing will be obsolete and therefore can't be used for price analysis in the future, why bother having it?  

I know I will not win this battle with management, so this is for my personnel edification. 

 

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Will this be MATOC with competition for hardware?

Also, do the requirement people plan to lock in prices for five years for products that will obviously be updated and changed over the course of the life of the contract?  How would that be written? I don't think that it would be practical for either the provider or the user to lock in prices for future products in a highly competitive market. 

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Civilian agency, so MATOC/SATOC is not applicable, but it is a single award directed 8(a).  Don't like that, but not my call and not going to change unless the SBA agrees, which is unlikely.

Yes, indeed - why would you do that?  That is my question as well.  It appears to me that my office thinks that IDIQs *must have* pricing for all years for all things. Perhaps its because they think that anything that is not priced out in the IDIQ would be out of scope?  Maybe is just custom, since the large majority of our IDIQ-type contracts are for labor/services? 

 

 I don't know and am not going to ask, as I pick my battles and am electing to not fight over this.  Ultimately, the IDIQ will have this specious pricing, and I will ignore it when pricing and analyzing orders.  But I wanted to check, anonymously, whether this is, in fact, as crazy as it sounds or if I am missing something.

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If sole source 8( a ), then it's all negotiable. Just don't lock yourself into prices for items that will change over the 5 year period. When the specs or models change you should be able to negotiate new prices and line/sub-line items. 

 

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Subutai:

What are your market research/intelligence findings? Since this is commercially available off-the-shelf (COTS), what is the standard industry practice?

Your contract structure may require pricing if you have tradtional 52.217-8 and 52.217-9 options. Remember, FAR 17.207 requires a price as a condition of exercising options.

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Jamaal, this is not a competitive acquisition. 

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On August 10, 2016 at 6:32 AM, Subutai said:

These IT materials are from a dynamic market.  Prices, models, features all change quickly....

Basically everything on the IDIQ's BOM has a lifecycle of less than 5 years and prices will change quickly, and by a lot.  Also, new stuff comes onto market all the time. So why bother with IDIQ level pricing, you are going to have to do the price analysis per order anyways?  If you know now, before award, that the IDIQ unit pricing will be obsolete and therefore can't be used for price analysis in the future, why bother having it?  

That being the case, why do you want to enter into a five year "contract"? You want a "contract" for you don't know what at you don't know what prices? What sense does that make? How is that good business?

The question isn't why should you get pricing. The question is why do you want a "contract"? As you said: "[W]hy bother having it?"

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Guest Jason Lent

Out of curiosity, is the IDIQ valued at over $22M?

Also, Vern's question should arm you with some information to go back to your management and discuss another, more meaningful, solution to your situation.

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That being the case, why do you want to enter into a five year "contract"? You want a "contract" for you don't know what at you don't know what prices? What sense does that make? How is that good business?  The question isn't why should you get pricing. The question is why do you want a "contract"? As you said: "[W]hy bother having it?"

Having a contractor build and run these things for us is definitely a good idea.  We don't know what we are doing here and do not have the manpower or technical capacity to in-source.  From that perspective, its typical contractor build-run IT.  The difference is that its hardware intensive, and the hardware in question has unusually rapid turn-over, even for IT.   Hence, the pricing issue.  

As for 5-years....I am not at all convinced 5 years is a good idea.  Basically, the justification is that admin cost in terms of time and effort for new contracts/orders is extremely high, and so minimizing that cost via longer contracts is a legitimate objective.  Reflects poorly on our efficiency, but that is the reality.   A completely different acquisition approach - I'd much prefer an agency (or department)-wide multiple-award BPA with broad scope covering A/V support -  however, that is something outside of my control.  I have gone back to management to propose setting up that BPA I described in FY17.

 

 

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From your supervisor's perspective, a five-year contract offers stability and consistency to your customer and his management, and less work for his staff.  He likely does not want you to have to recompete this requirement each year because that is time consuming.  Further, he probably wants you to issue a five-year 8(a) contract because it is 1) less time consuming to award that a competitive contract; 2) provides small business credit; and 3) less risky to receive a protest.  I do not know your unit's workload this Fiscal Year, or what your supervisor is thinking, but sometimes managers need to realistically balance quality versus time to ensure the business unit runs effectively, especially at the end of the Fiscal Year.  This may result in not awarding the optimum contract, but instead the best contract considering the circumstances.    

It seems to me that you are concerned about including prices for items that will change significantly overtime.  If you are buying all the same brand, many companies have discount bands (e.g. Class M products are discounted 30%).  Many other agencies and corporate consumers use discount from list rather than unit prices in their contracts.  Using a discount from list gives you a baseline for new products that you already determined fair and reasonable when you first award the contract.  For example, for Cisco products, a quick Google search will tell you what other customers typically receive.  So rather than negotiate specific prices for items that are likely going to change and become obsolete, why not negotiate discount from the Contractor's published list price?  Another idea is you could include discount tiers where you discount increases the more that you purchase over the life of the contract. 

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