Changing Contract from Indefinite Delivery Requirements Contract to IDIQ

[rochellekings]

A 5-year Indefinite Delivery Requirements Contract was awarded September 2008. This contract has experienced delays and operational issues with the deliverable. The inital delivery order was for seven items, the agency inspections and acceptance has occured on the first six items however the items have not been able to operate successfully in the field unit. The seventh item is still in the manufacturer's facility and has neared completion and while an order for an eighth item was placed a stop work order was issued for both the seventh and eighth item. Our engineers have determined that they no longer want anymore of these items and now the contracting office is looking for the best way to severe ties with the manufacturer.

One of the dilemma is since the original contract is a requirements contract and the government is to purchase ALL requirements from this vendor, can we change the contract to an IDIQ, since the initial minimum of seven has been fulfilled there are no more obligations. Is this possible to do?

[Boof]

Assuming the Government was not to blame for the units not working (e.g. bad specs) this seems to be a termination for default of the entire contract. You cannot convert Requirements to IDIQ unless you can negotiate the contractor into a bilateral agreement by letting him off the hook for bad performance. But then you aren't helping your fellow COs get a bad apple out of the barrel.

[joel hoffman]

A 5-year Indefinite Delivery Requirements Contract was awarded September 2008. This contract has experienced delays and operational issues with the deliverable. The inital delivery order was for seven items, the agency inspections and acceptance has occured on the first six items however the items have not been able to operate successfully in the field unit. The seventh item is still in the manufacturer's facility and has neared completion and while an order for an eighth item was placed a stop work order was issued for both the seventh and eighth item. Our engineers have determined that they no longer want anymore of these items and now the contracting office is looking for the best way to severe ties with the manufacturer.

One of the dilemma is since the original contract is a requirements contract and the government is to purchase ALL requirements from this vendor, can we change the contract to an IDIQ, since the initial minimum of seven has been fulfilled there are no more obligations. Is this possible to do?

I am assuming that the contract either doesn't contain a maximum estimated ordering quantity or you haven't reach any such max order limit beyond which neither party is obligated to continue to provide or order.

Since you don't "want any more of these items", someone appears to want to change the contract type to an Indefinite quantity type. In reality do you just want to be free from the obligation to purchase any more of these (dud?) items from the (dud?) manufacturer? If you really don't intend to purchase any more of this type or similar item, you don't have to do anything, since you met the minimum order quantity, right?

If you really intend to purchase more items or want to have the right to purchase more from someone else, it appears to me that you probably would be better to terminate the contract than change to a sham arrangement, wouldn't it?

To terminate for default (no further government obligation ito purchase similar items from this firm), you'd have to show that the Contractor is in default of its obligations. If you can establish default conditions (contractor breach), the government would be in a position to offer to revise the contract type in lieu of TFD, or offer a no cost TFC agreement to the contractor as an alternative to TFD.

From reviewing the discussion of requirements contracts in Nash and Cibinic's 3rd Edition of Formation of Government Contracts, absent a contractor breach for non-performance of valid technical requirements, I'd say that the government probably can't unilaterally revise the contract type and can't breach its obligation to the contractor without being liable for the breach. It also appears that the government can't just issue a TFC, then order essentially the same product from other sources, without relief to the current requirements contractor, based upon the refereced decisions in N&C.

Questions:

1) Did the Contractor comply with all material terms of the orders?

2) Do the items meet the contract requirements?

3) Is this a problem with the government's specifications or requirements rather than the contractor's performance?

4) If the Contractor isn't performing in accordance with the contract, can you terminate for default or offer the above deals in lieu of default?

5) Does the government really intend to purchase more of the same or similar type item during the effective ordering period of the requirements contract?

6) Do you have legal counsel that you can discuss this with?

[rochellekings]

The Government is trying to find a "clean" way as possible to get out of this contract without leaving a bad stain all around especially for this "very" small business. The thought is if a T4D or T4C is carried out it may ruin the prospects of the small business from receiving any future work in the Government since this market is very small. Now I know this should not at all factor in to the Government's decision but the Government feels that converting the Requirements contract to an IDIQ and not ordering any more since the minimum has been fufilled will save everyone the long ardous process of a T4D or C.

[Don Mansfield]

Our engineers have determined that they no longer want anymore of these items and now the contracting office is looking for the best way to severe ties with the manufacturer.

Do you mean that the Government no longer needs these items or that the engineers want to get the items from another contractor?

[Guest Vern Edwards]

[T]he Government feels that converting the Requirements contract to an IDIQ and not ordering any more since the minimum has been fufilled will save everyone the long ardous process of a T4D or C.

Oh, for Pete's sake! Just do a no-cost T for C. How can that be harder than doing a supplemental agreement to change the contract type just so you can leave the contract lying around without using it?.

Criminy.

[formerfed]

The Government is trying to find a "clean" way as possible to get out of this contract without leaving a bad stain all around especially for this "very" small business. The thought is if a T4D or T4C is carried out it may ruin the prospects of the small business from receiving any future work in the Government since this market is very small. Now I know this should not at all factor in to the Government's decision but the Government feels that converting the Requirements contract to an IDIQ and not ordering any more since the minimum has been fufilled will save everyone the long ardous process of a T4D or C.

You are too worried about giving this small company a "bad stain." Sure a T4D hurts but a T4C shouldn't or at least the potential impact is minimal.

You said

converting the Requirements contract to an IDIQ and not ordering any more since the minimum has been fufilled will save everyone the long ardous process of a T4D or C.

Joel suggested offering the contractor a no cost termination for agreement. That takes a couple days and certainly isn't a long ardous process.

[joel hoffman]

You are too worried about giving this small company a "bad stain." Sure a T4D hurts but a T4C shouldn't or at least the potential impact is minimal.

You said Joel suggested offering the contractor a no cost termination for agreement. That takes a couple days and certainly isn't a long ardous process.

A no cost TFC takes a couple of hours to process, assuming both parties agree. It certainly is easier or no more work than changing the contract type. It appears that you have the negotiating position to make it happen. Call the guy up, offer the solution and then do it.

[formerfed]

A no cost TFC takes a couple of hours to process, assuming both parties agree. It certainly is easier or no more work than changing the contract type. It appears that you have the negotiating position to make it happen. Call the guy up, offer the solution and then do it.

I know it only takes a couple hours. I went to two days in case there's a review/approval chain or legal review.

[Guest Vern Edwards]

A no cost TFC takes a couple of hours to process, assuming both parties agree. It certainly is easier or no more work than changing the contract type. It appears that you have the negotiating position to make it happen. Call the guy up, offer the solution and then do it.

A no cost termination is easy, but it takes more than two hours to "process," even if both parties agree. You have to write it, get it through legal, further process it as required by local procedure, get it signed by the other party, report it, etc. You have to do closeout, too. You'll lose all credibility if you exaggerate.

[joel hoffman]

A no cost termination is easy, but it takes more than two hours to "process," even if both parties agree. You have to write it, get it through legal, further process it as required by local procedure, get it signed by the other party, report it, etc. You have to do closeout, too. You'll lose all credibility if you exaggerate.

Yes, you are right, Vern. However, the actual effort to negotiate and write up the Mod and supporting paperwork shouldn't take more than a couple of hours, based upon personal experience. I should have been more specific. The whole thing, including processing the various reviews, etc. certainly shouldn't take longer than rochellekings' proposal to change the contract from a requirements contract to an IDIQ. In addition, they would still have to closeout the IDIQ contract at some point.