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Sunstrider

Can a CO with a $1 warrant award a $100M IDIQ contract?

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I've posed this question to several folks and heard several different answers, all with strong reactions.

To clarify, this question is respect to the basic IDIQ vehicle itself, and has nothing to do with any order(s).

Can they award? Why or why not?

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Because you have asked before and gotten differing answers, I recommend checking with your own organization's regulations or policy staff.

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41 minutes ago, Sunstrider said:

I've posed this question to several folks and heard several different answers, all with strong reactions.

To clarify, this question is respect to the basic IDIQ vehicle itself, and has nothing to do with any order(s).

Can they award? Why or why not?

1.602-1   Authority “...Contracting officers may bind the Government only to the extent of the authority delegated to them. Contracting officers shall receive from the appointing authority (see 1.603-1) clear instructions in writing regarding the limits of their authority. Information on the limits of the contracting officers' authority shall be readily available to the public and agency personnel.”

See also the applicable Agency Supplements. 

1. Please show us the warrant and instructions as described above.

2. How much is the minimum amount that the government is bound to for any or each IDIQ contractor holder?

3. What is the actual or potential amount of the government’s liability if no task orders are issued ?

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29 minutes ago, joel hoffman said:

1.602-1   Authority “...Contracting officers may bind the Government only to the extent of the authority delegated to them. Contracting officers shall receive from the appointing authority (see 1.603-1) clear instructions in writing regarding the limits of their authority. Information on the limits of the contracting officers' authority shall be readily available to the public and agency personnel.”

See also the applicable Agency Supplements. 

1. Please show us the warrant and instructions as described above.

2. How much is the minimum amount that the government is bound to for any or each IDIQ contractor holder?

3. What is the actual or potential amount of the government’s liability if no task orders are issued ?

1) See attached. All other regulations and agency supplements are silent on the matter.

2) $1 minimum.

3) No matter what, the Government is obligated to award the minimum of $1. Additionally, the Contractor is not obligated to perform over the contract ceiling amount ($100 million).

SF 1402.pdf

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Before answering, there are two issues to be addressed. 

First, the original post states that the contract in question is a $100M IDIQ contract.  I will assume this means $100M is the stated contract maximum as awarded, as opposed to the estimated, evaluated value of the contract.

Second, Sunstrider states that the guaranteed minimum of the contract is $1.  It is possible that a $1 guaranteed minimum on a $100M contract is insufficient consideration to form a binding contract.  (See FAR 16.504(a)(2), “To ensure that the contract is binding, the minimum quantity must be more than a nominal quantity, but it should not exceed the amount that the Government is fairly certain to order.”)  While the courts and boards of contract appeals do not require much to establish adequate consideration, $1 might not pass muster.  However, that doesn’t address the gist of the question, so let’s assume that it $1 is adequate.

On to the question at hand:

As Joel pointed out, the authority of the KO to contract is limited by the authority delegated to him or her.  In the example warrant you provided, the limitation states, “the individual named herein is granted the authority to enter into, administer, terminate contracts, and make related determinations and findings for actions that shall not exceed $1.”

Therefore, the question presented is whether an IDIQ contract with a guaranteed minimum amount of $1 and maximum amount of $100M exceeds $1. 

Presumably, the argument that the IDIQ does not exceed $1 is that the guaranteed minimum is only $1, and any amount greater will be obligated by other contracting officers when subsequent task/delivery orders are placed.

In my opinion, this argument is incorrect as it conflates the rules governing obligating funds with entering into a contract.  Just because only $1 was obligated by the award does not mean the KO entered into a $1 contract.

FAR 1.108, FAR Conventions, states the following:

“(c) Dollar thresholds. Unless otherwise specified, a specific dollar threshold for the purpose of applicability is the final anticipated dollar value of the action, including the dollar value of all options. If the action establishes a maximum quantity of supplies or services to be acquired or establishes a ceiling price or establishes the final price to be based on future events, the final anticipated dollar value must be the highest final priced alternative to the Government, including the dollar value of all options.”

Based on this, an IDIQ contract with a $100M maximum is a $100M contract.  Because the terms of the KO’s warrant only grant “authority to enter into … contracts … that shall not exceed $1,” she cannot enter into a contract with a $100M value.

Now, it should be noted that the first sentence of FAR 1.1108 states that the “conventions provide guidance for interpreting the FAR.”  One could argue that the limitation in question is not in the FAR, rather it is in the delegation of authority.  Therefore, the conventions associated with interpreting the FAR do not apply to interpreting the delegation of authority.  And, if an agency, as a matter of policy, expressly exempted authority delegations from the FAR conventions, then I could support that interpretation. 

However if, as stated by Sunstrider, “all agency regulations and supplements are silent on the matter,” then I think the FAR convention applies to the delegation’s limitation of authority.  First, the FAR expressly directs delegations of authority to state any limitations; therefore, the limitation is in fact a FAR threshold even if the specific dollar amount is not stated in the FAR.  Second, establishing different dollar values to the same contract would add unnecessary confusion by creating scenarios where a contracting officer who is held out to the public as having authority that does not exceed the SAT is awarding a contract that cannot even be awarded using FAR Part 13 simplified procedures.

Based on the above, absent agency regulations or supplements that state otherwise, a contracting officer subject to the sample delegation provided cannot award an IDIQ contract with a maximum amount that exceeds her authority.

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Contracting Officer authority derives mainly from a delegation of authority, in writing, from the Head of Contracting Activity, the so-called “contracting warrant”.  FAR 1.602-1 states that this includes “authority to enter into, administer, or terminate contracts and make related determinations and findings.”  But the FAR cautions thatContracting officers may bind the Government only to the extent of the authority delegated to them.   The FAR also cautions that no contract may be awarded “unless the contracting officer ensures that all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances...

This KO has no real authority as a PCO to administer, terminate, make related determinations and findings, to issue or award any task orders or to effectively bind the government to anything of value. It can’t delegate any higher authority to another contracting officer.

Thanks, Lionel for the citations that I was looking for last night using this blasted iPhone. I essentially agree with you, except perhaps about the consideration.  There is no legal requirement that the consideration be “adequate”, rather it must “something of value”  plus you indicated above that it must be more than a “nominal quantity. I think that  0.00000001 of the maximum contract value is not something of value.

Plus the Procuring Contracting Officer can’t perform any meaningful KO functions. There is no guarantee that another KO would be appointed to takeover the contract administration. 

The original PCO couldn’t even terminate the contract for convenience if the termination settlement would exceed one dollar.

Thus, it would not be a binding contract.  

In addition, whoever would issue such a warrant should have their appointment authority voided for idiocy and irresponsibility. In addition to having their head examined, they should have their own warrant voided, if they have one. 

 

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6 hours ago, Lionel Hutz said:

an IDIQ contract with a $100M maximum is a $100M contract.

Lionel, I know you quoted FAR 1.108(c) as the basis for this statement.  However, the language of the text and the nature of an IDIQ contract do not necessarily support this conclusion.  For example, it can be argued that the anticipated value of an IDIQ contract is the minimum order value.  Can you elaborate on your reasoning for reaching this conclusion?  Is your conclusion supported by any court or board decisions?

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FAR 1.602-1(a) only restricts the amount the CO may bind the Government.  The FAR 2.101 definition for “contract” implies that bind means the extent the Government is obligated to pay for something.  In this scenario, that would be $1.  Therefore, a CO with a $1 warrant (i.e., the precise amount required to create the binding contract) would not be restricted by FAR from entering into the $100M IDIQ contract.

 

An agency’s intent when they issue warrants may be more restrictive.  If there’s any doubt, clarity should be sought from the issuers of the warrant (as ji20874 mentioned).  Every agency I’ve worked for has supplemental policy to address this type of thing.  Not just for IDIQs but for contracts with options, mods, task/delivery orders, etc..

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On 11/21/2018 at 4:31 PM, Retreadfed said:
On 11/21/2018 at 10:11 AM, Lionel Hutz said:

an IDIQ contract with a $100M maximum is a $100M contract.

Lionel, I know you quoted FAR 1.108(c) as the basis for this statement.

Let me clarify the sentence fragment of mine that you quoted.  I should have written, “awarding an IDIQ contract with a $100M maximum is a $100M contract contract action for purposes of applying FAR thresholds.”

On 11/21/2018 at 4:31 PM, Retreadfed said:

However, the language of the text and the nature of an IDIQ contract do not necessarily support this conclusion.

Can you clarify what "text" you are referring to that does not support the conclusion?  The text of FAR 1.108? FAR Part 16?  The warrant?

On 11/21/2018 at 4:31 PM, Retreadfed said:

For example, it can be argued that the anticipated value of an IDIQ contract is the minimum order value. 

How would that argument go?  I'm having a tough time coming up with a reasonable argument, given the language of FAR 1.108(c).

If you are arguing that a threshold established in a warrant is not governed by FAR 1.108, then I disagree as stated in my previous post, but I understand the argument.  However, assuming the warrant threshold is governed by FAR 1.108, then it is pretty clear that the "highest final priced alternative to the Government, including the dollar value of all options" would be the contract maximum.  I do not see how an IDIQ's guaranteed minimum can also be the highest final priced alternative, including the value of all options.

 

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On 11/21/2018 at 5:06 PM, jwomack said:

FAR 1.602-1(a) only restricts the amount the CO may bind the Government.  The FAR 2.101 definition for “contract” implies that bind means the extent the Government is obligated to pay for something.  In this scenario, that would be $1.  Therefore, a CO with a $1 warrant (i.e., the precise amount required to create the binding contract) would not be restricted by FAR from entering into the $100M IDIQ contract.

 

An agency’s intent when they issue warrants may be more restrictive.  If there’s any doubt, clarity should be sought from the issuers of the warrant (as ji20874 mentioned).  Every agency I’ve worked for has supplemental policy to address this type of thing.  Not just for IDIQs but for contracts with options, mods, task/delivery orders, etc..

I agree. 

The language of FAR 1.602-1(a), by itself, only restricts the amount the contracting officer may bind the Government.  However, both 1.602-1(a) and 1.603-3(a) state that other limitations on the contracting officer's authority shall be stated on the Certificate of Appointment.  A discussion of a contracting authority without reference to the warrant itself is fruitless, and that is why the last sentence of my first post had the caveat "subject to the sample delegation provided."

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9 hours ago, Lionel Hutz said:

it is pretty clear that the "highest final priced alternative to the Government, including the dollar value of all options" would be the contract maximum. 

I don't think that the veracity of this statement is clear.  I learned a long time ago that laws, regulations and contracts mean what the appeals boards and courts say they mean.  That is why I asked if you had any decisions to support your statement.  Looking simply at the text of 1.108 does not necessarily provide an authoritative interpretation of it.

The language quoted above is preceded by "the final anticipated dollar value must be the."  Reading the entire sentence, raises several questions.  First, from whose perspective are we looking in regard to what can be anticipated?  If it is the contractor, the contractor cannot be said to have an anticipation of receiving anything more than the minimum under an IDIQ contract.   See, for example Travel Centre v. Barram, CAFC No. 00-1054, 00-1126, (Jan. 4, 2001) ( Travel Centre could not have had a reasonable expectation that any of the government's needs beyond the minimum contract price would necessarily be satisfied under this contract.1)  Similarly, if the anticipation must be mutual, because a contractor would not have an expectation of receiving anything more than the minimum, the mutual expectation (anticipation) could not exceed the minimum.  Thus, that brings us to the third possibility that it is the government's anticipation that must be considered.  Simply reading the text of 1.108 does not provide an answer to this question.

Next 1.108 says "If the action establishes a maximum quantity of supplies or services to be acquired."  It does not say a maximum quantity that "may" be acquired.  Thus, in an IDIQ contract we need to ask what is the maximum quantity of supplies or services that are to be acquired.  The answer to this is clearly the minimum.  Any amount above that minimum quantity "may" be acquired.

Alternatively, 1.108 states that if the action "establishes a ceiling price or establishes the final price to be based on future events, the final anticipated dollar value must be the highest final priced alternative to the Government, including the dollar value of all options."  Here what we need to establish is what is the "highest final priced alternative to the Government."  For options, making that determination is fairly easy.  However, for an IDIQ contract that may not be readily determined.  I would not say that the maximum amount that can be ordered is the same as the "highest final priced alternative to the Government."  In many cases, a price is not established until an order is issued. 

Based on this, it is not clear to me how 1.108 applies to an IDIQ contract.  This would be even more interesting if we are talking about multiple award IDIQ contracts. 

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It ought to be obvious the a KO with a One dollar warrant is essentially useless. Can’t provide oversight to real KO’s; isn’t trustworthy enough to have a higher warrant; their judgement on whom to award Base IDIQ contracts to would be suspect in my mind; they can’t administer the contracts as a PCO, etc., etc. 

Please tell me that the government hasn’t stooped to issuing such fake warrants these days .  Arrrrrrrrgh!!

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42 minutes ago, joel hoffman said:

It ought to be obvious the a KO with a One dollar warrant is essentially useless.

The $1 warrant was obviously for illustration purposes only.

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42 minutes ago, joel hoffman said:

Can’t provide oversight to real KO’s; isn’t trustworthy enough to have a higher warrant; their judgement on whom to award Base IDIQ contracts to would be suspect in my mind; they can’t administer the contracts as a PCO, etc., etc. 

Please tell me that the government hasn’t stooped to issuing such fake warrants these days .

What’s a “real KO”?

 

Just because someone’s warrant is low doesn’t mean they’re untrustworthy or lack judgment.  Responsible agencies issue warrants on an “as needed” basis not an “as capable” basis.

 

Who cares if a PCO of an IDIQ can’t administer their own contract?  As long as the agency has alternative means, who cares?

 

Just because it’s not customary doesn’t make it fake nor invalid.

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32 minutes ago, jwomack said:

What’s a “real KO”?

 

Just because someone’s warrant is low doesn’t mean they’re untrustworthy or lack judgment.  Responsible agencies issue warrants on an “as needed” basis not an “as capable” basis.

 

Who cares if a PCO of an IDIQ can’t administer their own contract?  As long as the agency has alternative means, who cares?

 

Just because it’s not customary doesn’t make it fake nor invalid.

If they have alternative means, then get the alternative means to award the contract.

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12 hours ago, jwomack said:

Responsible agencies issue warrants on an “as needed” basis not an “as capable” basis. 

I am glad the Air Force DAS(C) doesn't share your opinion.

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14 hours ago, Retreadfed said:

I learned a long time ago that laws, regulations and contracts mean what the appeals boards and courts say they mean.  That is why I asked if you had any decisions to support your statement.

There are no cases directly citing FAR 1.108(c), in my opinion because the language clearly and unambiguously applies to IDIQ contracts and the contract maximum should be used as the anticipated value when applying dollar thresholds.  My guess is that if you search for cases involving IDIQ contracts where the value of the contract is at issue for the purpose of applying a threshold the GAO, Boards, or Courts will have applied the contract maximum without even bothering to reference FAR 1.108.

For example, while decided before FAR 1.108(c) was added to the FAR, the protest of Nations Inc. is an example.  In it the GAO states,

Quote

If all of the estimated requirements quantities are ordered, the value of the contract will exceed $ 10 million.  The protester maintains that the services under the requirements portion of the RFP are "advisory  and assistance" services, and that Federal Acquisition  Regulation (FAR) § 16.503(d) (FAC 90-41) precludes the use of a requirements type contract for the purchase of such services where, as here, the agency has not made a written determination that the services in question are so unique or highly specialized  that it is not practicable  to make multiple IDIQ contract awards. Nations concludes that the RFP should be amended accordingly.  The agency does not dispute that the contract will exceed the duration and dollar value thresholds,  but maintains that the services in question do not fall within the definition of advisory  and assistance services, and that an IDIQ contract thus is not required.

I don't have time to do a more exhaustive search, so I'll have to leave it to someone else to either prove me right or wrong.

In the absence of an explicit FAR definition or case law, we fall back on another FAR convention in the same FAR Section, “Undefined words retain their common dictionary meaning.” FAR 1.108(a).

Alternative means “one of two or more things.”  The “more things” to choose from in an IDIQ contract are the amount of supplies or services to be ordered.  And, in an IDIQ contract, your options range from the guaranteed minimum to the contract maximum.  FAR 1.108(c) tells us that the “final anticipated dollar value must be” (emphasis added) the highest price within that range of options, i.e., “the highest final priced alternative…” 

Your interpretation defines “highest final priced alternative” to mean the minimum amount that the Government is required to buy.  While ordering the minimum guaranteed amount is one of the alternatives available to the government, there is no reasonable interpretation that will support the minimum guarantee being the highest final priced alternative. It is literally the opposite of that.

14 hours ago, Retreadfed said:

First, from whose perspective are we looking in regard to what can be anticipated?  If it is the contractor, the contractor cannot be said to have an anticipation of receiving anything more than the minimum under an IDIQ contract.   See, for example Travel Centre v. Barram...

The Travel Centre case you cite stands for the proposition that "when an IDIQ contract between a contracting party and the government clearly indicates that the contracting party is guaranteed no more than a non-nominal minimum amount of sales, purchases exceeding that minimum amount satisfy the government's legal obligation under the contract."  It has nothing to do with how to calculate the final anticipated value of a contract for the purposes of applying thresholds.

You are reading way too much into this.  FAR 1.108(a) tells you that “the final anticipated dollar value must be the highest final priced alternative to the Government…”  You don’t have to look into anybody’s perspective, you do what the FAR instructs and apply the “highest final priced alternative to the Government.” 

14 hours ago, Retreadfed said:

I would not say that the maximum amount that can be ordered is the same as the "highest final priced alternative to the Government."  In many cases, a price is not established until an order is issued. 

The price of an order is not established until it is issued, but the contract maximum amount is absolutely established by the time of contract award.  “A solicitation and contract for an indefinite quantity must … (ii) Specify the total minimum and maximum quantity of supplies or services the Government will acquire under the contract…”  FAR 16.504(a)(4).  Further, " Quantity limits may be stated as number of units or as dollar values." FAR 16.504(a).  So, either the contract maximum is stated as a dollar amount in which case we know the maximum price.  Or, the maximum is stated as numbers of units which can then be multiplied by the awarded unit price and a dollar amount calculated.

Just apply this line of thinking to actual thresholds in the FAR and tell me what makes sense. Do you think a contracting officer with a $1 warrant can make a direct award of a contract with a $1 guaranteed minimum and a $100M maximum to a vendor using Micro Purchase authority?  Unless an exception applies, FAR 16.504(c)(2) provides that “if an indefinite-quantity contract for advisory and assistance services exceeds 3 years and $13.5 million, including all options, the contracting officer must make multiple awards…”  Are you suggesting that this restriction only applies to IDIQ’s with a minimum guaranteed amount of that exceeds $13.5M?

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In this scenario, there is no binding contract. The nominal amount of $1 “minimum obligation” **is not legally sufficient consideration*** to form a binding contract for up to $100 million of goods or services. It doesn’t represent the minimum amount that the agency could order. 

[**$1 is 1/100,000,000 of the maximum contract amount and there is little probability of any order being made at the amount. Thus it is a meaningless obligation. It doesn’t matter whether the amount is “only for illustrative purposes”. That is the amount stated in the original question. ]

[***As GAO explained in the below Decision, “...to provide adequate consideration for a binding IDIQ contract, an agency must establish a guaranteed minimum that is more than a nominal amount and reflects the amount the agency is fairly certain to order.”]

See B-318046, Library of Congress—Obligation of Guaranteed Minimums for Indefinite-Delivery, Indefinite-Quantity Contracts under the FEDLINK Program, July 7, 2009

 

“Matter of: Library of Congress—Obligation of Guaranteed Minimums for Indefinite-Delivery, Indefinite-Quantity Contracts under the FEDLINK Program

File: B-318046

Date: July 7, 2009

DIGEST

The Library of Congress uses indefinite-delivery, indefinite-quantity (IDIQ) contracts, against which agencies place orders for library and information products and services, in support of its Federal Library and Information Network (FEDLINK). FEDLINK is a voluntary program, and the Library states that it cannot accurately anticipate use of an IDIQ contract. The Library proposes using a standard amount of $500 as the guaranteed minimum for these contracts regardless of the maximum ordering limitations or total contract value, which amount would be obligated at the time it awards the IDIQ contract. To provide adequate consideration for a binding IDIQ contract, an agency must establish a guaranteed minimum that is more than a nominal amount and reflects the amount the agency is fairly certain to order.”

Read the Decision at https://www.gao.gov/decisions/appro/318046.htm

The conclusion in this thread ought to be fairly obvious, based upon a reading of the above cited GAO Decision. There is no binding contract here. 

“No” is the answer to the original question. It isn’t a binding contract. I answered the question last week, on 21 November.

The other reasons cited here are likely valid, too. But consideration, being one of the necesssary elements of a valid contract, is missing here. We often read in protest decisions where the jurisdiction didn’t need to decide other issues, where one issue provides the basis for the decision. 

We know that at least a few attorney Forum members read the WIFCON Forum. I am not an attorney. I don’t have access to Westlaw or other online resources and wasn’t trained in legal research. I don’t know if the above cited decision is current. 

 I am disappointed that licensed(?) government or non-government attornies don’t offer many opinions or input on threads like this one. 

Im pretty sure that the elements of a legal contract are part of one of the early classes required for law degrees.  I remember this being included the the Business Law class that I took in night school at then Mississippi University for Women in circa 1982. 

 

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2 hours ago, Jamaal Valentine said:

I am glad the Air Force DAS(C) doesn't share your opinion.

I suppose my comment could be read as a negative thing.  But I meant it as there’s no need for agencies to issue something like an unlimited warrant when a $100k warrant would get the job done.  Issuing warrants above what’s necessary increases risk to the agency.

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14 hours ago, joel hoffman said:

If they have alternative means, then get the alternative means to award the contract.

What if the alternative means doesn't have the time/skillset/mission to award contracts?  Maybe DCMA should close its doors?

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42 minutes ago, jwomack said:

What if the alternative means doesn't have the time/skillset/mission to award contracts?  Maybe DCMA should close its doors?

Then don’t award $100 million dollar contracts. 

Anyway, that is a side issue. The example contract here isn’t legally valid. It doesn’t even pass the common sense test in my opinion.  

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Is DCMA awarding $1 contracts? Do they have warranted KO’s with a $1 authority limit?

And one of my earlier comments concerned the qualifications of someone who only is trusted to obligate the government for $1. The FAR as well as GAO and Court Decisions have numerous requirements that the PCO making the source selection exercise their judgement, independently of the recommendations of others involved in the selection. 

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3 hours ago, joel hoffman said:

[**$1 is 1/100,000,000 of the maximum contract amount and there is little probability of any order being made at the amount. Thus it is a meaningless obligation. It doesn’t matter whether the amount is “only for illustrative purposes”. That is the amount stated in the original question. ]

I am not debating your conclusions but advise caution in using a math equation with regard to "nominal" to support them.  I note this with direct reference to the decision you noted which says essentially that math does not matter facts and circumstances do.

"The determination of whether a stated minimum quantity is nominal must consider the nature of the acquisition as a whole. For example, in a case involving IDIQ contracts for an agency's travel agent services, GAO concluded that a $2,500 guaranteed minimum provided adequate consideration. B‑295530, Mar. 7, 2005, reconsideration denied, B-295530.2 et al., July 25, 2005. The solicitation had specified that while the guaranteed minimum would be $2,500, the estimated minimum order would be $15,000,000 and the maximum order would be $150,000,000. We stated that "[t]here is no 'magic number' that the FAR or our decisions set as adequate consideration for a contract." Id. at 2. The agency established the $2,500 minimum based on its review of minimums in other travel-related contracts which had transaction fees ranging from $5 to $16, so the $2,500 guaranteed minimum here could represent up to several hundred transactions. We stated also that a contract's guaranteed minimum need not have a specific relationship to the estimated minimum order amount; rather, the guaranteed minimum must be evaluated in the context of all the specific facts and circumstances of the procurement. Id. In this case, the $2,500, representing the amount to which the government was willing to commit itself, was sufficient consideration to bind the parties to the contract. Id. See also B‑299255, Mar. 19, 2007 (guaranteed minimum of $1,000 for multiple IDIQ contracts for health marketing training and consultation services was reasonable where the agency at the time of contract award could not determine how much work would go to any particular contractor)."

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@Sunstrider Is it true that your question is about the warrant authority, not the validity of a $1 IDIQ contract award? If so, can the question change to:

"Can a CO with a $10,000 warrant award an IDIQ contract with a minimum of $5,000 and a maximum of $100,000,000?"

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