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John93545

IDIQ VS. Requirements

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Reviewed the WIFCON forum for this exact scenario, but haven’t found exactly what I’m looking for.  We currently have a number of reoccurring (simple) commercial services within our contracting office. These services have been IDIQs for the last several efforts, however, I am being advised by management to change them to a Requirements type contract. My question, is an Indefinite Delivery Requirement contract type appropriate for a simple service? From reading FAR 16.5 (ad nauseam), I have determined they are similar, with a major exception being that a Requirements type effort is “from one contractor” and “the contract shall state, if feasible, the maximum limit of the contractor’s obligation.” It is my opinion that the Government would benefit from the utilization of an IDIQ, due to an IDIQ offering more flexibility with the use of multiple contractors and not being locked into the contract after the minimum quantity is met. I would like to go to management with specific examples of the benefits of an IDIQ over a Requirements type effort, but have had little luck in finding specific cases. Any insight would be greatly appreciated, unless I’m wrong, in which case I will gladly eat crow.

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There is no minimum guarantee in a requirements contract.  Instead, the "consideration" is that all specified (recurring) work will be given to that vendor for a period of time, so one advantage of a requirements contract is that there is no need to obligate funds at time of award to cover the minimum.  In fact, there is no need to order anything. 

Under a requirements contract, the Government is pretty much on the hook to get their goods/services from the vendor for a specified period. There may be a "maximum" amount established in which the Government is tied to order from the Vendor, after which the Government could go elsewhere.   Under an IDIQ, the Government needs to guarantee a minimum (and obligate that amount at time of award), but is not necessarily tied to that vendor beyond the minimum.

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Rather than resort to incomplete paraphrases of the FAR, why not read the FAR description:

Quote

16.503 Requirements contracts.

(a) Description. A requirements contract provides for filling all actual purchase requirements of designated Government activities for supplies or services during a specified contract period (from one contractor), with deliveries or performance to be scheduled by placing orders with the contractor.

(1) For the information of offerors and contractors, the contracting officer shall state a realistic estimated total quantity in the solicitation and resulting contract. This estimate is not a representation to an offeror or contractor that the estimated quantity will be required or ordered, or that conditions affecting requirements will be stable or normal. The contracting officer may obtain the estimate from records of previous requirements and consumption, or by other means, and should base the estimate on the most current information available.

(2) The contract shall state, if feasible, the maximum limit of the contractor’s obligation to deliver and the Government’s obligation to order. The contract may also specify maximum or minimum quantities that the Government may order under each individual order and the maximum that it may order during a specified period of time.

Note the requirement for stating an estimated total quantity in the solicitation as well as stipulation, if feasible, of a maximum in the contract. The government will be liable for a negligently developed estimated total quantity that mislead the contractor when it developed its proposed prices.

Whether the IDIQ or the requirements contract is more "flexible" depends on the circumstances of the procurement. Multiple award IDIQ contracts, which are the norm, are a pain in the ***.

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4 hours ago, John93545 said:

is an Indefinite Delivery Requirement contract type appropriate for a simple service?

It could be. It would be appropriate for mortuary services. I don't see the simplicity of the service being much of a factor when deciding between IDIQ and requirements.

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Use an IDIQ contract when you know you're going to need some quantity of a supply or service, but you don't know how much.

Use a requirements contract when you think you might need some quantity of a supply or service, but you might not need any.

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22 hours ago, John93545 said:

“from one contractor”

True but I have seen an approach where "one contractor" is awarded the requirement for this geographic area or other defined location (building?) and another "one contractor" is awarded the requirement for the other geographic area or location.   In essence multiple requirements contracts potentially for the same service but that have a delineation that the contractor only gets the requirement based on specifics that separate the delivery location out from being the same requirement delivered somewhere else.

More of pain, who knows but I have seen it done.

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I don't think prime contractors award enough Requirements subcontracts. I bet if they really looked at them, they might find some attractive features. Hmm, I feel an article a-brewin'.

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1 hour ago, here_2_help said:

Hmm, I feel an article a-brewin'.

Then you might want to read this: "A NEW APPROACH TO THE IDENTIFICATION AND ENFORCEMENT OF OPEN QUANTITY CONTRACTS: REFORMING THE LAW OF EXCLUSIVITY AND GOOD FAITH," by Shelley Smith, Valparaiso University Law Review (Spring 2009), 43 Val U.L. Rev. 871.

The opening paragraph:

Quote

Among the many varieties of open term contracts, open quantity contracts have been particularly problematic for scholars, attorneys, and judges, especially in the areas of formation and breach. Courts are issuing decisions on whether the parties have entered into an enforceable requirements contract or an unenforceable indefinite quantity agreement at a pace that is troubling, given how long courts have been grappling with the formation issue. Litigation also continues at a steady clip over whether the buyer in a requirements contract has breached the implied duty of good faith by reducing or eliminating his requirements. The decisions in these cases have been criticized for displacing the parties' own allocations of risk with misguided evaluations of business judgments based on an ill-defined standard. Further, the fragmented open quantity contracts jurisprudence reveals that courts have failed to provide uniform standards and have inconsistently applied the standards in cases with comparable facts.

Footnotes omitted.

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2 hours ago, Vern Edwards said:

Then you might want to read this: "A NEW APPROACH TO THE IDENTIFICATION AND ENFORCEMENT OF OPEN QUANTITY CONTRACTS: REFORMING THE LAW OF EXCLUSIVITY AND GOOD FAITH," by Shelley Smith, Valparaiso University Law Review (Spring 2009), 43 Val U.L. Rev. 871

Thank you. (Sincerely.)

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