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It’s been a while since I was involved in these kind of financial details but I believe the proper action is for the finance/comptroller office to record a contingent liability.  The minimum IDIQ amount is a contingent liability like a lawsuit, personal action pending arbitration, future payroll, or a contractual contractor claim.  It gets recorded in the books/system.  The contingent liability gets backed up when the minimum gets met either an a order meeting some need or ordered specifically for purposes of satisfying the minimum need. 

In this case there’s no need for an actual order covering the minimum to get obligated at time of award.  But the finance people need to be aware of it and record the contingent liability.  It’s an obligation of current year funds.   It’s similar to a contractor submitting a claim under a contract.  It might take years to resolve but the government ends up having to pay and required to record this at time the contingency occurs.

This gets recorded as an obligation of the government and usually is replaced when an order is issued by the CO satisfies the minimum.  

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30 minutes ago, ji20874 said:

Carl,

The document you provided defines "obligation," but does not differentiate between (1) contract actions (such as some indefinite-delivery contracts) that create obligations and cause recordings without providing or citing funds (such as the obligation for the minimum quantity or amount); and (2) contract actions (such as some task or orders under indefinite-delivery contracts) that create obligations and cause recordings while providing or citing funds (such as for a purchase).

 

@ji20874

Enjoy your read of this!  

http://www.wifcon.com/arc/a107.htm

And to help a little more, in my career I worked in budget and finance and actually posted to the "books". I am sorry your description of what we did with the stubby pencil in those day is not accurate.  Here is what we did and shall be done today but folks are sloppy and messy and do not.

IDIQ Award - An obligation was recorded on the books in the amount of the minimum.  A fund citation was needed to do so and was required or the contract was returned to acquistion.

T or D Order - The order amount was recorded on the books in the amount it stated.  Fund citation provided to do this.

IDIQ - A modification (usually it was an administrative one) was required from acquisition to reduce the minimum by the amount of T/D order.  This was required until the minimum was reached ergo there was no longer a obligation on the books for the IDIQs minimum.

Now folks (aqm and finance), erroneously in my view, try all kinds of tricks that makes the process of properly obligating an IDIQ sloppy and messy and in some cases not in accord with required statute and regulation. By my experience the slop and mess came about when multiple award IDIQs became a thing  in an attempt to appease program folks who whined about needing enough money to cover the multiple minimums.

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formerfed,

Your general description is correct.  I don't know if contingent liability is the right word, and I hope others here won't gang up on you if it isn't, but I agree with your general description.

Carl,

I agree that things have been made sloppy, but my recollection is accurate.

Different agencies do things differently.  Many years ago, the Air Force allowed for indefinite-delivery contract awards without funds citations in the contracts and without simultaneous task or delivery orders -- that was (and still is) legal and honorable.  Of course, recordings were made on the books of the agency to comply with the recording statute, even though the funds citations were not printed in the contracts, as formerfed describes.  Then, the Air Force started requiring simultaneous task or delivery orders to cover the minimum with funds citations in the orders -- that is also legal and honorable.  I worked for the Air Force when the change happened.

My current agency and the one I worked for before this (both cabinet departments) allow for indefinite-delivery contract awards without funds citations in the contracts and without simultaneous task or delivery orders -- remember, this is legal and honorable, and recordings are made on the books of the agency even though the funds citations are not printed in the contracts.  The agency can issue task or delivery orders for the minimum at any time during a contract's ordering period.  Many people with an Air Force or DoD background will say this is wrong, but they say so because that is how they learned.  However, as they come to learn correct principles, they will see more broadly.

One must never think that the way they do it in his or her agency is the only right way.

Anyway, I think this thread is beaten to death.  I will bow out now.  If anyone else wants the last word, you may have it.  If there is a desire for further dialogue, maybe someone will open a new thread?

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ji20874 and Carl,

Agencies do this many different ways.  One big reason why many don’t obligate at time of award concerns  when to recognize an obligation and use of annual or expiring appropriations.  If an agency has 30 multiple awards, for example, and those contracts have potentially ten year life’s,  it’s tedious to track.  If there’s only a requirement to buy a minimum over the contract period, when does the obligation occur?

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@ji20874 @formerfed

 

The thread is not beaten when it provides information that is not accurate which has occurred.

What your agency did or does is either not fully understood by either of you or if done as you say is patently in disagreement with OMB and GAO direction.  To support this fact and answer former's question I encourage each of you to go to the current GAO Redbook, Volumn II, Chapter 7 and read pages 7-19 through 7-25.  And then follow up with a read of the "Annual Update of the Third Edition" and refer to the same pages noted above for updates.  

You will find both Volumn II and the annual update here http://www.wifcon.com/bonafidecontents.htm

As always I remain open minded so until either of you can provide qualified references that support your assertions I remain very skeptical.

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From one of Carl's references:

 "Give GAO B-308969 dated 31 May 2007 (http://www.gao.gov/decisions/appro/308969.pdf) a read. It states rather unequivocally: 

"An agency must record an obligation against its appropriation at the time that it incurs a legal liability for payment from that appropriation. B-300480.2, June 6, 2003; B-300480, Apr. 9, 2003; 42 Comp. Gen. 733, 734 (1963)... " (bold added)

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11 hours ago, formerfed said:

ji20874 and Carl,

Agencies do this many different ways.  One big reason why many don’t obligate at time of award concerns  when to recognize an obligation and use of annual or expiring appropriations.  If an agency has 30 multiple awards, for example, and those contracts have potentially ten year life’s,  it’s tedious to track.  If there’s only a requirement to buy a minimum over the contract period, when does the obligation occur?

Well, let me answer formerfed's question...

Each of the 30 IDIQ contracts creates an obligation, even if the contract texts do not provide or cite funds.  These obligations should be recorded on the books of the agency,  and that may be the only place where the obligations are recorded -- this can be done as 30 recordings or a single recording.  The recordings are made against current-year funds.  If an agency has not ordered the minimum by the end of the fiscal year (if annual funds are being used), the recording on the books of the agency has to be carried over into the next fiscal year.

Task or delivery orders make purchases, and they provide or cite funds.  Until the minimums are reached, these order obligations will offset the already-recorded obligations.  After the minimums are reached, each subsequent order's new obligation will require a new recording.

Yes, it is tedious to track.  Some agency comptrollers are not willing to do that work (or don't like the errors that often come with manual ledger entries), or more likely their automated systems are inadequate, so they create rules requiring simultaneous issuance of task or delivery orders to cover the minimums.  That avoids these problems.

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26 minutes ago, ji20874 said:

Well, let me answer formerfed's question...

Each of the 30 IDIQ contracts creates an obligation, even if the contract texts do not provide or cite funds.  These obligations should be recorded on the books of the agency,  and that may be the only place where the obligations are recorded -- this can be done as 30 recordings or a single recording.  The recordings are made against current-year funds.  If an agency has not ordered the minimum by the end of the fiscal year (if annual funds are being used), the recording on the books of the agency has to be carried over into the next fiscal year.

Task or delivery orders make purchases, and they provide or cite funds.  Until the minimums are reached, these order obligations will offset the already-recorded obligations.  After the minimums are reached, each subsequent order's new obligation will require a new recording.

Yes, it is tedious to track.  Some agency comptrollers are not willing to do that work (or don't like the errors that often come with manual ledger entries), or more likely their automated systems are inadequate, so they create rules requiring simultaneous issuance of task or delivery orders to cover the minimums.  That avoids these problems.

Ji20874,

My question was rhetorical and I didn’t make that clear  But you’re exactly right.  That’s the best way to do it.  Sometimes many CS and COs are unaware that happens in the finance and comptroller offices - a financial obligation for the government occurs and it must be recorded.  

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3 hours ago, Jamaal Valentine said:

From one of Carl's references:

 "Give GAO B-308969 dated 31 May 2007 (http://www.gao.gov/decisions/appro/308969.pdf) a read. It states rather unequivocally: 

"An agency must record an obligation against its appropriation at the time that it incurs a legal liability for payment from that appropriation. B-300480.2, June 6, 2003; B-300480, Apr. 9, 2003; 42 Comp. Gen. 733, 734 (1963)... " (bold added)

Jamaal and Carl,

We’re not saying an obligation isn’t recorded at time of award.  Financial managers must recognize all obligations and these are included by CFOs in their annual finance reports.  I think the confusion here is the obligation doesn’t have to be a specific contract modification or task/delivery order at time of award.  However a modification or order needs issues at time the payment is contractually recognized

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@formerfed

You said this "One big reason why many don’t obligate at time of award" now you say this "We’re not saying an obligation isn’t recorded at time of award." 

OMB defines an obligation as this -

"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."

 ji20874 has said this repeatedly Recording need not be the same as funding

So I say once again your sloppy and messy use of terms is at best confusing and at the worst not accurate.  I would also offer that you have yet to provided one reference to show that the “obligation doesn’t have to be a specific contract modification or task/delivery order at time of award.”  If you read the GAO Redbook in the area that I referenced it specifically states at page 7-21 and then page 7-23 ( I have changed the emphasis GAO put in these quotes to emphasize my position but I have not changed the quotes from the Redbook otherwise.”) the following– 

 

“What does all this signify from the perspective of obligating appropriations? As we noted at the outset, the obligational impact of a variable quantity contract depends on exactly what the government has bound itself to do. A fairly simple generalization can be deduced from the decisions: In a variable quantity contract (requirements or indefinite quantity), any required minimum purchase must be obligated when the contract is executed; subsequent obligations occur as work orders or delivery orders are placed, and are chargeable to the fiscal year in which the order is placed. B-302358, Dec. 27, 2004.”

As noted previously, where the precise amount of the government’s liability is defined at the time the government enters into the contract that is the amount to be recorded.”  

And GAO then reinforces its position in the Annual Update with the following –

"Page 7-21 Replace first full paragraph with the following:

What does all this signify from the perspective of obligating appropriations? As we noted at the outset, the obligational impact of a variable quantity contract depends on exactly what the government has bound itself to do. A fairly simple generalization can be deduced from the decisions: In a variable quantity contract (requirements or indefinite-quantity), any required minimum purchase must be obligated when the contract is executed; subsequent obligations occur as work orders or delivery orders are placed, and are chargeable to the fiscal year in which the order is placed. B-308969, May 31, 2007 (agency should have obligated the $1 million required minimum purchase under an IDIQ contract against the appropriation for the fiscal year in which the contract was executed). See also B-302358, Dec. 27, 2004. Of course, the bona fide needs rule applies both at the time the agency enters into the contract (i.e., the agency must have a bona fide need for the guaranteed minimum in the IDIQ contract) and when the agency subsequently places task or work orders. B-318046, July 7, 2009. (For more on the bona fide needs rule, see Chapter 5, section B.)"

And

“Page 7-23 Replace the first full paragraph with the following:

As noted previously, where the precise amount of the government’s liability is defined at the time the government enters into the contract, then that is the amount to be recorded against funds available at the time of contract execution. For example, in the simple firm fixed-price contract, the contract price is the recordable obligation. Statutory authority to record an obligation at the time of contract execution for an amount less than the full amount of the government’s contractual obligation must be explicit. B-322160, Oct. 3, 2011; B-195260, July 11, 1979. For example, the Securities and Exchange Commission (SEC), using no-year appropriations, entered into a multiyear lease for real property. Without authority otherwise, SEC was required to record an obligation at the time it signed the lease for the government’s total liability under the terms of the lease. B-322160. When an agency uses the Federal Acquisition Streamlining Act or other similar authority, that authority may permit the agency to obligate its appropriations differently. We discuss the Federal Acquisition Streamlining Act and other examples of multiyear contracting authorities in section B.9 of Chapter 5.”.

And finally while I am at it, “contingent liability”?  Really? Before you post please read all the references I have provided so that you can be accurate, not sloppy and not messy!   This is the GAO definition of the term (emphasis added) -

Contingent Liability An existing condition, situation, or set of circumstances that poses the possibility of a loss to an agency that will ultimately be resolved when one or more events occur or fail to occur. Contingent liabilities may lead to outlays. Contingent liabilities may arise, for example, with respect to unadjudicated claims, assessments, loan guarantee programs, and federal insurance programs. Contingent liabilities are normally not covered by budget authority in advance. However, credit reform changed the normal budgetary treatment of loans and loan guarantees by establishing that for most programs, loan guarantee commitments cannot be made unless Congress has made appropriations of budget authority to cover the credit subsidy cost in advance in annual appropriations acts. (See also Credit Subsidy Cost under Federal Credit; Liability.) " 

When you find appropriation statute that allows the many agencies to do as you suggest I would be very interested in seeing it.  Until then please be careful, your choice of wording creates confusion in my view.

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16 hours ago, C Culham said:

IDIQ Award - An obligation was recorded on the books in the amount of the minimum.  A fund citation was needed to do so and was required or the contract was returned to acquistion.

Carl, was the fund citation required to be in the IDIQ contract in order for it to be recorded? 

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15 hours ago, ji20874 said:

My current agency and the one I worked for before this (both cabinet departments) allow for indefinite-delivery contract awards without funds citations in the contracts and without simultaneous task or delivery orders -- remember, this is legal and honorable, and recordings are made on the books of the agency even though the funds citations are not printed in the contracts.

There you have it. The logical fallacy known as the appeal to common practice. Not only does ji base his conclusion on past practice, but he concludes that the practice is both legal and honorable based on past practice.

It's remarkable how ji continues to argue without presenting a shred of evidence to support his claims. Not a shred. It's a nonstop cycle of assertion followed by insistence.

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12 minutes ago, Retreadfed said:

Carl, was the fund citation required to be in the IDIQ contract in order for it to be recorded? 

Yes.   With the add on that the IDIQ fund citation might be and was in many cases completely different than the fund citations that appeared on T/D orders.

And I would like to invite you, if you have not already done so, to read the WIFCON discussion I referenced.  Where fund citation is to be was discussed in that thread.   More specifically I am not going to get into a debate like that of - "What authority do I show in block such and such of modification" - to do so avoids the specific that both former and ji are promoting the use of wording and processes that are directly in conflict with the direction of OMB and GAO - period.  Until they provide reference that what they are stating is allowable and done my many I am not convinced and playing games about where a fund citation is to be placed is foolish, has already been addressed in the references I have provided, and makes the whole discussion more messy and sloppy.

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Carl, I have read what you referenced in the Red Book.  I also have read the coverage of this topic in the DoD FMR (Vol. 3 Ch. 8) and I can find no requirement that a fund citation must be included in an IDIQ contract  when the contract is awarded.  Can you point us to what you believe requires this?

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1 hour ago, Retreadfed said:

Carl, I have read what you referenced in the Red Book.  I also have read the coverage of this topic in the DoD FMR (Vol. 3 Ch. 8) and I can find no requirement that a fund citation must be included in an IDIQ contract  when the contract is awarded.  Can you point us to what you believe requires this?

"FAR 4.1005-1

(a) Except as provided in 4.1005-2, each line item or subline item shall include in the schedule (described at 12.303(b)(4), 14.201-2, or 15.204-2, or in a comparable section of the procurement instrument), at a minimum, the following information as separate, distinct data elements:

(1) Line item or subline item number established in accordance with agency procedures.

(2) Description of what is being purchased.

(3) Product or Service Code (PSC).

(4) Accounting classification citation.

(i) Line items or deliverable subline items. If multiple accounting classifications for a single deliverable apply, include the dollar amount for each accounting classification in the schedule (or a comparable section of the procurement instrument).

(ii) Informational subline items. An accounting classification citation is not required. (See 4.1004)"

While 4.1005-2 provides exceptions to IDIQ's it does not except the accounting classification citation.

Additionally consider say Block 25 of the SF 1449.   Now before you go on and on about that the 1449 does require the Accounting and Appropriation Data tell me where there is any instruction that all the blocks prior to block 25 need to filled out.   Its common sense based on OMB and GAO regulation and FAR 4.1005-1(a)(4) that a fund citation must be included in an IDIQ contract - somewhere. 

Finally go here https://www.gao.gov/products/B-318046

Now a request for you.  What is the reference that says that you do not have to identify accounting and appropriation data for an IDIQ minimum.   Better yet please direct me to a reference that says a CO can award a IDIQ and not have an appropriation, apportionment, commitment and a recorded obligation for the minimum.   I will be waiting.

Otherwise for me this specific segment of the discussion is done until you provide me a reference.

PS - As supported by many instances in WIFCON I am always open and will change my position on a topic when provided with adequate and appropriate reference.   In the case of this thread a few have made statements that are in conflict with definitive references not only regarding regulation but their own statements.  And not one has said Oh I get it instead they just disappear!   Frustrating and not what I do was a professional.  I will be waiting. 

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Retreadfed,

You might want to point Carl to FAR 4.1005-2(a)(1), where we read the following as an exception to the rule Carl quoted:

  • “The following required data elements are not known at time of issuance of an indefinite-delivery contract, but shall be provided in each order at the time of issuance: accounting classification, delivery date and destination, or period and place of performance.” (Emphasis added.)

FAR 4.1005-2(a)(1) applies to all indefinite-delivery contracts (including IDIQ contracts).  4.1005-2(a)(2) applies only to IDIQ and requirements contracts.

There it is, in black and white, for all contracting professionals to see.

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12 minutes ago, ji20874 said:

Retreadfed,

You might want to point Carl to FAR 4.1005-2(a)(1), where we read the following as an exception to the rule Carl quoted:

  • “The following required data elements are not known at time of issuance of an indefinite-delivery contract, but shall be provided in each order at the time of issuance: accounting classification, delivery date and destination, or period and place of performance.” (Emphasis added.)

FAR 4.1005-2(a)(1) applies to all indefinite-delivery contracts (including IDIQ contracts).  4.1005-2(a)(2) applies only to IDIQ and requirements contracts.

There it is, in black and white, for all contracting professionals to see.

Thanks ji now you and Retreadfed go chew on this.....................

"DOD Financial Management Regulation, Vol. 3, Ch. 8080404. Open-End Contracts and Option Agreements. When the quantity required

under a contract or agreement is indefinite and is determined by subsequent orders, an order not

requiring acceptance by the contractor shall be recorded as an obligation in the amount of the

price stated in the order upon placement. When the contract or agreement requires acceptance of

the order by the contractor, the amount of the order must be recorded as an obligation upon

acceptance. In the case of indefinite quantity contracts for supplies or services that specify

delivery of minimum quantities during a given period, an obligation must be recorded upon

execution of the contract for the cost of the minimum quantity specified."

Now tell me again how does finance know the accounting information (aka appropriation) that must be recorded?  

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Can we get a recap? Is the question whether or not IDIQ minimum guarantees need to be 'funded'?

Also, are we talking DoD contracts or federal contracts in general?

 

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32 minutes ago, C Culham said:

Now tell me again how does finance know the accounting information (aka appropriation) that must be recorded?  

Well, they don’t have to get it from the contract, because the contracting officer is not required to include it in the contract (see FAR 4.1005-2(a)(1)).  Let’s not move the goal posts.

Don’t you agree that the contracting officer (at the level of federal-wide regulation) is not required to include the accounting citation in an indefinite delivery contract?  You asked for a citation, and now you have it:  FAR 4.1005-2(a)(1).  DoD might supplement the rules for DoD contracting officers, but we expressly are not discussing DoD.

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Jamaal,

My opinion:  If an indefinite delivery contract creates a minimum purchase obligation, then that obligation must be recorded on the books of the agency, amenable to the recording statute.  However, it is not necessary to include an accounting citation in the indefinite delivery contract itself, amenable to FAR 4.1005-2(a)(1).  This is federal-wide policy.  However, it appears that some agencies may require including an accounting citation in the contract.

Others seem to disagree, and would impose their interpretation of their agency’s practice on all of us, notwithstanding the clear text of FAR 4.1005-2(a)(1). 

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26 minutes ago, ji20874 said:

 Dont you agree that the contracting officer (at the level of federal-wide regulation) is not required to include the accounting citation in an indefinite delivery contract?  

Yes but the agency must obligate to specific account and record. 

10 hours ago, ji20874 said:

Each of the 30 IDIQ contracts creates an obligation, even if the contract texts do not provide or cite funds.  These obligations should be recorded on the books of the agency,  and that may be the only place where the obligations are recorded -- this can be done as 30 recordings or a single recording.  

Donot agree with single recording..

 

30 minutes ago, Jamaal Valentine said:

Can we get a recap? Is the question whether or not IDIQ minimum guarantees need to be 'funded'?

Also, are we talking DoD contracts or federal contracts in general?

 

A full read you will see that ji and others brought DoD contracts ("move the goal posts") to the table (example - "Air Force").  .

Obligated and recorded.  I will let others still play with "funded".

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It seems that ji's definition of "funded" means that the contract document has an accounting classification citation. His reference FAR 4.1005-2(a)(1) proves his claim that the citation is not required on indefinite delivery contracts.

How is this relevant in answering the OP's question?

@KingWink,

Are you asking whether you can create an obligation for the minimum before you have funding for the minimum?

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17 hours ago, C Culham said:
17 hours ago, ji20874 said:

 Dont you agree that the contracting officer (at the level of federal-wide regulation) is not required to include the accounting citation in an indefinite delivery contract?  

Yes but the agency must obligate to specific account and record. 

Didya View All Over Again:

http://www.wifcon.com/arc/forum304.htm

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17 hours ago, C Culham said:

Yes but the agency must obligate to specific account and record. 

That has been my point and I believe it is ji's.  An obligation is not created by a fund cite in a contract.  Instead, a binding contract creates the obligation that needs to be recorded.  As for how  finance is to know against which appropriation an obligation is to be recorded, in my experience in DoD, a Procurement Request is submitted to finance who gives contracting a fund cite and enters a commitment for the estimated value of the contract.  When a contract is created, it is sent to finance referencing the PR and finance records the obligation.  In other words, when the contract is awarded, the commitment is converted into a recorded obligation.  Of course, there can be other ways that this is done.

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