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CS

Minimum IDIQ Order Award FY vs POP FY

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GAO decision B-308969, Interagency Agreements--Obligation of Funds under an Indefinite Delivery, Indefinite Quantity Contract, May 31, 2007 indicates that it is the responsibility of the agency to immediately issue an obligation order off an IDIQ contract meeting the amount of the required minimum purchase.

My agency is often competing and awarding IDIQ contracts in the FY prior to the anticipated and advertised POP.  Therefore award is often in May -August for POP start date October 1 aligning with the Fiscal Year.  In this case is it really appropriate to issue a minimum order at the point of award.  In actuality the appropriate FY funding doesn't even exist yet.

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CS,

Be careful!  The GAO said the agency needed to record the obligation -- it didn't say the agency needed to "immediately issue an obligation order."  To meet the recording requirement, an agency (1) can issue an order; or (2) administratively record the obligation on its internal books.

 

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Reference the following GAO decision and the GAO “Redbook” at Chapter 6 with regard to bona fide needs.  https://www.gao.gov/products/C00513  for the GAO decision.   Here is the link to the GAO Redbook http://www.wifcon.com/bonafidecontents.htm

As noted you must “record” the minimum as an obligation.  It then gets complicated from there depending on whether  the available monies for the obligation are no year funds or otherwise, such as one year funds.

Generally speaking a course for recording an IDIQ parent contract obligation and issuing an order that is obligated goes like this –

  • IDIQ awarded.   An obligation for the minimum is recorded.  The parent IDIQ contract is the reference.  The funds that are used must represent a bona fide need for the funds being used for this recording.

  • IDIQ order is issued that accomplishes the minimum.   The IDIQ parent recorded obligation is de-obligated and the recording of an obligation for the awarded order occurs and must represent a bona fide need for the products/services on the order.

  • If no order is ever issued for parent IDIQ the recorded obligation remains on the books for the life of the parent IDIQ. 

  • If an order is issued that is less than the minimum then the parent IDIQ obligation is reduced to that amount that when added to the order represents the minimum.   Example - Parent IDIQ minimum is $1000 and the $1000 is recorded.   Order issued for $500 and obligates this amount.   Parent IDIQ recorded obligation is reduced to $500.

I would offer that the current data systems used by agencies probably make following this course very complicated, difficult or simply can not be followed.   But back in the old stubby pencil days this is what happened.

Under new systems many agencies try to accomplish these steps together as a work around– Award an IDIQ and issue a obligating order at the same time that accomplishes the minimum (might even be for more than the minimum) but as you can see with regard to the GAO decision and Redbook discussion this may be counter to the bona fides need rule and/or the “recording” statute.

My suggestion with these thoughts in mind is that you contact your fiscal office to discuss the matter armed with the references I have provided and let them guide you.

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18 hours ago, C Culham said:

The funds that are used must represent a bona fide need for the funds being used for this recording.

Carl, what does this mean?

In the case of the OP, the "parent" contract is being awarded for needs that are anticipated to arise in the next fiscal year and no funds are currently available to satisfy those anticipated needs. 

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Retreadfed - Sorry the statement is confusing.   I have borrowed the quote below from the GAO decision I referenced to hopefully clarify.

"Accordingly, the guaranteed minimum amount in an IDIQ contract must not only constitute sufficient consideration to make the contract binding, but also reflect the bona fide needs of the agency at the time of execution of the contract. B-318046, July 7, 2009."

Due to such issues as limitation on funds  (no year, one year, etc.) again I leave it to the OP's Fiscal folks and how they would counsel the OP on how to accomplish the award scenario that has be posed and still meet the conclusions of bona fide need and recording statute.

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Guest Vern Edwards

You cannot legally obligate the government to buy a minimum in advance of the availability of funds to cover the obligation. That's Antideficiency Act 101. See https://www.gao.gov/legal/anti-deficiency-act/about

Quote

The Antideficiency Act prohibits federal employees from

  • making or authorizing an expenditure from, or creating or authorizing an obligation under, any appropriation or fund in excess of the amount available in the appropriation or fund unless authorized by law. 31 U.S.C. § 1341(a)(1)(A).
  • involving the government in any obligation to pay money before funds have been appropriated for that purpose, unless otherwise allowed by law. 31 U.S.C. § 1341(a)(1)(B).
  • accepting voluntary services for the United States, or employing personal services not authorized by law, except in cases of emergency involving the safety of human life or the protection of property. 31 U.S.C. § 1342.
  • making obligations or expenditures in excess of an apportionment or reapportionment, or in excess of the amount permitted by agency regulations. 31 U.S.C. § 1517(a).

Federal employees who violate the Antideficiency Act are subject to two types of sanctions: administrative and penal. Employees may be subject to appropriate administrative discipline including, when circumstances warrant, suspension from duty without pay or removal from office. In addition, employees may also be subject to fines, imprisonment, or both.

Emphasis added.

The award of an IDIQ contract that requires the purchase of a minimum amount of supplies or services obligates the government, unless the award is conditioned upon the availability of funds.

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On 1/29/2018 at 2:36 PM, ji20874 said:

(2) administratively record the obligation on its internal books.

Hmmm.  Is that the contracting version of "sort-of pregnant"?

 

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42 minutes ago, REA'n Maker said:

Hmmm.  Is that the contracting version of "sort-of pregnant"?

No, it is a standard and required procedure.  Agency comptrollers administratively record obligations on the books of the agency every day of the week for all sorts of reasons.  We err if we believe that an obligation can only be recorded by citing funds in a contract -- the world is much, much bigger than us and our contracts.

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11 minutes ago, ji20874 said:

No, it is a standard and required procedure.  Agency comptrollers administratively record obligations on the books of the agency every day of the week for all sorts of reasons.  We err if we believe that an obligation can only be recorded by citing funds in a contract -- the world is much, much bigger than us and our contracts.

"Administrative obligation" is a contradiction in terms.  I would be greatly "obliged" if you would point me to the authority, agency-level or otherwise,  which allows non-COs to obligate funds. 

I understand Comptrollers being "creative" to protect funds, but obligating funds means you have created a liability on the part of the government in regard to the other contracting party.  To whom is the government obligated in your "standard and required procedure"? 

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Non-COs obligate funds all the time, every day of the week, in every federal agency.  An obligation of funds is a legal liability to disburse funds immediately or at a later date as a result of a series of actions.  The world is much, much bigger than us and our contracts.  COs routinely obligate funds, true, but contracted dollars are only a small portion of federal obligations.  Non-COs obligate all the rest.

For the CO-created obligations:  After a contracting officer creates an obligation, the agency comptroller records the obligation on the books of the agency.  These are two separate processes, with separate bases in law.  In some agencies, this is done electronically, and in these cases, sometimes one electronic action satisfies both processes.

The only place in this thread where "administrative obligation" appears is in your own post.

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54 minutes ago, REA'n Maker said:

I understand Comptrollers being "creative" to protect funds, but obligating funds means you have created a liability on the part of the government in regard to the other contracting party.  To whom is the government obligated in your "standard and required procedure"? 

When the IDIQ contract is awarded, the CO has created an obligation for the minimum. What ji is saying is that the Comptroller record the obligation on the agency's books in the event an order is not immediately issued. Nothing wrong with that. In fact, it's what the Recording statute requires.

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1 hour ago, Don Mansfield said:

When the IDIQ contract is awarded, the CO has created an obligation for the minimum.

Like I said, a contract is awarded, and funds are obligated. That's not 'administrative'.  The distinction between 'authorizing' and 'physically recording' an obligation is meaningless.  Does the CO also 'administratively sign a contract', considering that a wet signature on an SF1449 doesn't physically enter an obligation on the books?

1 hour ago, ji20874 said:

contracted dollars are only a small portion of federal obligations.  Non-COs obligate all the rest.

I do understand what you are saying, and you are certainly correct, I just don't understand why the mode of the accounting entry  has any practical relevance, or why we would even be discussing (e.g.) personnel  or entitlement funding processes.

I suggest we both accept each other's positions and move on.  Cheers!

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Discussing terms with regard to the Federal budget process can be as tricky as discussing terms that apply to Federal contracting or as budget terms apply to Federal contracting.  

This document may be of value to those that want to get into the weeds -   A Glossary of Terms Used in the Federal Budget Process https://www.gao.gov/new.items/d05734sp.pdf

Here are a few terms from the glossary that might be of interest as related to this thread.

 

Obligation A definite commitment that creates a legal liability of the government for the payment of goods and services ordered or received, or a legal duty on the part of the United States that could mature into a legal liability by virtue of actions on the part of the other party beyond the control of the United States. Payment may be made immediately or in the future. An agency incurs an obligation, for example, when it places an order, signs a contract, awards a grant, purchases a service, or takes other actions that require the government to make payments to the public or from one government account to another. The standards for the proper reporting of obligations are found in section 1501(a) of title 31 of the United States Code. See also OMB Circular No. A-11.  

Antideficiency Act Federal law that

•prohibits the making of expenditures or the incurring of obligations in advance of an appropriation; •prohibits the incurring of obligations or the making of expenditures in excess of amounts available in appropriation or fund accounts unless specifically authorized by law (31 U.S.C. § 1341(a));

•prohibits the acceptance of voluntary or personal services unless authorized by law (31 U.S.C. § 1342);

•requires the Office of Management and Budget (OMB), via delegation from the President, to apportion appropriated funds and other budgetary resources for all executive branch agencies (31 U.S.C. § 1512);

•requires a system of administrative controls within each agency (see 31 U.S.C. § 1514 for the administrative divisions established);

•prohibits incurring any obligation or making any expenditure in excess of an apportionment or reapportionment or in excess of other subdivisions established pursuant to sections 1513 and 1514 of title 31 of the United States Code (31 U.S.C. § 1517);

and •specifies penalties for deficiencies (see Antideficiency Act Violation).

The act permits agencies to reserve funds (that is, withhold them from obligation) under certain circumstances. (See also Administrative Division or Subdivision of Funds; Antideficiency Act Violation; Apportionment; Budgetary Reserves; Deferral of Budget Authority; Deficiency Apportionment; Deficiency Appropriation; Terms and Definitions Page 12 GAO-05-734SP Budget Glossary Expenditure; Fund Accounting; Congressional Budget and Impoundment Control Act of 1994; Outlay.)

Antideficiency Act Violation Occurs when one or more of the following happens:

•overobligation or overexpenditure of an appropriation or fund account (31 U.S.C. § 1341(a)); •entering into a contract or making an obligation in advance of an appropriation, unless specifically authorized by law (31 U.S.C. § 1341(a));

•acceptance of voluntary service, unless authorized by law (31 U.S.C. § 1342); or

•overobligation or overexpenditure of (1) an apportionment or reapportionment or (2) amounts permitted by the administrative control of funds regulations (31 U.S.C. § 1517(a)).

 

Once it has been determined that there has been a violation of the Antideficiency Act, the agency head must report all relevant facts and a statement of actions taken to the President and Congress and submit a copy of the report to the Comptroller General. Penalties for Antideficiency Act violations include administrative discipline, such as suspension from duty without pay or removal from office. In addition, an officer or employee convicted of willfully and knowingly violating the law shall be fined not more than $5,000, imprisoned for not more than 2 years, or both (31 U.S.C. §§ 1349, 1350, 1518, and 1519). (See also Administrative Division or Subdivision of Funds; Antideficiency Act; Expenditure.)

 

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54 minutes ago, REA'n Maker said:

I just don't understand why the mode of the accounting entry  has any practical relevance...

For a "normal" contract, the contract creates the obligation and makes the purchase at the same time. After the contract is awarded by the contracting officer, the agency comptroller records the obligation on the books of the agency. Creating the obligation and recording the obligation on the books of the agency are two different matters and two different processes (although some agencies have automated systems that seem to effectively combine these into a single automated transaction). In the old days, there could be several days or weeks between the creating of the obligation and the recording of the obligation.

But an IDIQ contract is different -- the IDIQ contract creates an obligation (for the contract minimum) but does not purchase anything -- it is an obligation without a purchase. Purchases will occur later, when orders are issued. Because an IDIQ contract creates an obligation without a purchase and without a citation of funds, the agency comptroller will administratively record the obligation on the books of the agency -- this is intended to be a temporary recording, which will be erased later when orders are issued.  You seem to be offended by use of the word "administrative" and "administratively" -- but these are the words the GAO uses to refer to this sort of recording.  I did not initiate this usage.

It has a very real practical relevance.  Some agencies (the simple-minded agencies, in my opinion) decide to satisfy the recording statute by mandating that the award of an IDIQ contract must be accompanied simultaneously with the issuance of an order purchasing an amount to satisfy the contract minimum.  Other agencies (the more mature agencies, in my opinion) satisfy the recording statute by administratively recording the minimum when an IDIQ contract is awarded, and then erase these entries as orders are issued satisfying the minimum.  A contracting officer who cannot tell the difference will likely be fine as long as he or she never leaves his or her current agency -- but a contracting officer who moves to a different agency must respect the approach of his or her new agency.  And any contracting officer who wants to move up into management echelons should understand the interplay between creating and recording obligations.

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Guest Vern Edwards

I don't have a dog in this fight, but here's a thought: Why say "administratively recording"? Why not just say "recording"?

The adverb doesn't add anything, does it? What's the difference between "administratively recording" and "recording"? If there is no difference, why use an unnecessary word? I couldn't find the word "administrative" or "administratively" used  in connection with "record an obligation" or "recording" anywhere in the GAO Red Book. I couldn't find "administratively record" anywhere in the  FAR System or the DOD FMR.

Just a thought.

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Here is my thought for consideration....

Obligation is a definite commitment, administratively recording (I have seen the wording used by GAO) is a different distinct action, such as reserving funds used in the Federal budgetary process.

With regard to an IDIQ even the minimum is a definite commitment because generally speaking it has to be paid if no orders are ever issued.  And the funds used must represent a bona fide need for that funding source therefore  the minimum is recorded as specific obligation of the contract.

PS - I know we could go off on a tangent regarding payment of the minimum if no orders are ever issued but the simple view is why the minimum is an obligation that must be recorded per the recording statute.

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Good point, Vern.

The GAO does use the adverb in some of its reports, so there is precedent for its use -- and the adverb is well understood in the comptroller communities.

There is a good reason for this:  in many agencies, the awarding of a contract will include a funds citation, and the recording happens automatically through electronic systems -- a purchase is made and the obligation is recorded. However, for an IDIQ contract, there usually is not a funds citation, and no purchase has been made, and yet a recording still has to be done -- that recording has to be done manually, so to speak, and then has to be erased as funded orders are issued and purchases are made.

 

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Guest Vern Edwards

@ji20874

Interesting.

I searched Westlaw's GAO Reports database, which includes reports issued from 1 January 1994 to the present, and the Comptroller General Decisions database for any use of "administratively record" and close variations thereof, and I did not find a single instance of such use. I did find "administratively reserve" and "administratively commit" a couple of times, but commit and reserve are not the same as obligate. I think in those cases "administratively" stands for temporarily or maybe informally.

I also searched the annotated United States Code, the entire Code of Federal Regulations, and the DOD Financial Management Regulation, but did not find "administratively record."

Are you using "administratively" as a synonym for "manually," in the sense of not done through data automation? 

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Guest Vern Edwards

According to the Red Book, Vol. 2, page 7-3, one of the definitions of "obligation" is:

Quote

a definite commitment which creates a legal liability of the Government for the payment of appropriated funds for goods and services ordered or received.

When a contracting officer signs a contract he or she creates such an obligation. When payment is to be made out of appropriated funds, we commonly say that the contracting officer has "obligated funds," although such obligations are sometimes made in the absence or in advance of funds, which is a violation of the Antideficiency Act.

The GAO tells us that the law requires that a record be made of all such obligations. We call that "recording the obligation." The making of such a record begins when the contracting officer distributes a copy of the signed contract, which cites the account from which the funds are to be taken--a "fund citation"--to the comptroller. The comptroller then makes a record of the obligation on the agency's "books." Sometimes all or part of that process is completed automatically through an agency's contract writing system. See, e.g., DOD's Financial Management Regulation, Vol. 3, Ch. 8, 080302:

Quote

31 U.S.C. § 1501, “Documentary Evidence Requirement for Government Obligations,” directs that amounts shall be recorded as obligations only when supported by documented evidence. The office that incurs an obligation shall provide, within six calendar days of the date the obligation is incurred, a copy of the obligating document(s), via electronic mail, fax, or other documented means, to the office responsible for recording the obligation. The office that is responsible for recording the obligation shall record the obligation in the official accounting records within 3 calendar days of receipt of such documentation, information, or data.

See also 080304:

Quote

The office that generates an obligating document, in the form of a contract award, order, or modification, must provide official evidence of the obligating documents, and other supporting documents, via electronic format as defined in the Defense Federal Acquisition Regulation Supplement (DFARS) and Procedures, Guidance, and Information (PGI) 204.201 and in accordance with the SFIS data elements required in Volume 1, Chapter 4, to the office responsible for recording the obligation. The office that is responsible for recording the obligation shall receive the data electronically, in the same formats identified in DFARS, PGI 204.201, and in accordance with the SFIS data elements required in Volume 1, Chapter 4 and the posting logic requirements in Volume 1, Chapter 7. If this transaction fails to take place automatically, the accounting records shall be updated manually, based on the official obligating document in the Electronic Document Access System, within three business days. If the contract contains errors, omissions or deficiencies that prevent posting a Contract Deficiency Report should be created to document the deficiency and request corrective action in accordance with DFARS, PGI 204.270-2.

I don't think it's necessary to say "administratively record," but I suppose it doesn't hurt anything to say it. It might confuse some people, who might ask about the significance of "administratively," and I wouldn't use the word for that reason (although I'd bet that I have at some time or another, for who knows what reason).

IDIQs confuse people, because they get caught in agency administrative machinery. The obligation to buy the minimum is made when the contract is awarded, whether an order is issued at that time or not. But some agencies don't want to record an obligation until an order is issued. Go figure. See DOD FMR Vol. 3, Ch. 8, 080604:

Quote

080604. Indefinite Delivery Type Contracts

Where the quantity required under a contract is indefinite, the ultimate amount of obligation is determined by subsequent orders; the amount of any required minimum order specified in the contract, however, must be recorded as an obligation upon execution of the contract. For contracts that require the contractor to perform unilaterally placed orders above the required minimum, record an obligation in the amount of the order price or ceiling at the time the order is placed. An order in excess of the required minimum that has to be negotiated or accepted by the contractor under terms of the contract must be recorded as an obligation upon contractor’s acceptance of the order in the amount of the agreed price or ceiling. In the case of orders for services where a contractor cannot undertake performance without direction from an authorized Government official, order amounts may be consolidated periodically (at least monthly) into a list of orders placed with the contractor identifying the estimated dollar amount of each. On definite quantity contracts, obligate the full amount of the definite quantity at the time of contract award.

I find the last few entries in this thread interesting, because it shows how the casual and perhaps unnecessary use of a word can become a distraction. We're always being told to edit what we write to get rid of any unneeded words, and the tiff here over "administratively record" may show us why that's good advice.

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1 hour ago, ji20874 said:

However, for an IDIQ contract, there usually is not a funds citation, and no purchase has been made, and yet a recording still has to be done -- that recording has to be done manually, so to speak, and then has to be erased as funded orders are issued and purchases are made.

I don't understand that. Why wouldn't there be a funds citation? Wouldn't there have to be sufficient appropriated funds to cover the obligation?

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12 minutes ago, Vern Edwards said:

The making of such a record begins when the contracting officer distributes a copy of the signed contract, which cites the account from which the funds are to be taken--a "fund citation"--to the comptroller. The comptroller then makes a record of the obligation on the agency's "books." 

The recording process described above doesn't work for IDIQ contracts, because generally an IDIQ contract does not cite the account from which the funds are to be taken -- it doesn't provide a "fund citation" to the comptroller.  In such a case, the normal obligation recording process doesn't work for IDIQ contracts.

20 minutes ago, Vern Edwards said:

Sometimes all or part of that process is completed automatically through an agency's contract writing system.

That's correct.  But when the process isn't completed automatically through an agency's contract writing system, the recording is done administratively or manually.

16 minutes ago, Vern Edwards said:

I don't think it's necessary to say "administratively record," but I suppose it doesn't hurt anything to say it.

I agree.  

The current spat began when REA'n Maker objected to my statement:  "To meet the recording requirement, an agency (1) can issue an order; or (2) administratively record the obligation on its internal books."  Hopefully, he understands the process now and no longer finds my statement objectionable.  Yes, it is fine if he understands administratively to mean manually.

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9 minutes ago, Don Mansfield said:

I don't understand that. Why wouldn't there be a funds citation? Wouldn't there have to be sufficient appropriated funds to cover the obligation?

In all of the agencies I have worked in, including DoD a long time ago, an IDIQ contract generally does not contain a funds citation.  Sure, there are sufficient funds within the agency to cover the contract minimum, and that obligation is administratively (or manually) recorded.  Funds citations appear on the orders.

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Guest Vern Edwards
1 hour ago, ji20874 said:

The recording process described above doesn't work for IDIQ contracts, because generally an IDIQ contract does not cite the account from which the funds are to be taken -- it doesn't provide a "fund citation" to the comptroller.  In such a case, the normal obligation recording process doesn't work for IDIQ contracts.

Not true that it doesn't work for IDIQ contracts. It doesn't work for systems programmers, because no one has explained to them what they must design their systems to do.

1 hour ago, ji20874 said:

In all of the agencies I have worked in, including DoD a long time ago, an IDIQ contract generally does not contain a funds citation.  Sure, there are sufficient funds within the agency to cover the contract minimum, and that obligation is administratively (or manually) recorded.  Funds citations appear on the orders.

What you are describing is agencies not using proper procedure, in part because their data processing systems were not designed to comply with the law, probably because no one understood the law. I awarded IDIQ contracts as a DOD CO starting in the 1970s. I never issued an order at the same time as the award. Every IDIQ contract I awarded bore a fund citation and the amount of the minimum. When we issued an order that bought the minimum we made appropriate annotations and adjustments for billing purposes and to prevent double recording. You could do that before ADP/IT systems locked people into deviant practice. Don't normalize deviancy. Teach the IT pukes to design compliant systems.

And ji--what do you mean by "manually"? Pen and ink? Pencil? Keyboard? Adverbs again!

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