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BPA's vs. IDIQ's: What's the difference???


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#21 formerfed

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Posted 14 April 2010 - 12:15 PM

My comment is based on the contractor having poor past performance. Depending on how the ordering process is, that effectively eliminates them. I would be frank is letting the contractor know how they are performing. The company could submit information on how they remedied the situation which may allow them to be a viable competitor again.

#22 Vern Edwards

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Posted 14 April 2010 - 12:37 PM

It is difficult to generalize. Consider this statement you made earlier:

If we are doing our jobs properly, a contractor should know they aren't performing as well as expected. Communications, and lots of it, is a big part of what we do.

While that's certainly true, it assumes that the period of performance of a task order is long enough to permit the parties to communicate and make adjustments while the work progresses. But many tasks are of short duration, and there may be very little communication until after everything is over. The same if true if the agency is not well or effectively staffed.

I believe telling a contractor they won't get any more business until they improve under a multiple year ordering period is just as effective as the threat to not exercise an option.

Maybe, but there is a big difference between "no more business until you improve" and no option. The first is like punishing the contractor with a "time out," while the second is a death sentence. Which is more scary?

#23 PM63A4

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Posted 14 April 2010 - 04:04 PM

Vern-

Thanks again.

I understand the "fair opportunity" requirement for awards of task/delivery orders. You covered that in your "FAR Part 15 Process Model and Process Inefficiency" paper.

As for protests on task orders in excess of $10M, I see what you're saying, but we've had options on ID/IQs long before contractors had the right to protest DO/TO awards in excess of $10 million (which I believe started in 2008, if memory serves). So there are plenty of examples (including all ID/IQs awarded before 2008) in which the risk of protest was not a concern, so you can?t argue "risk of protest" was a reason we had options on ID/IQs prior to 2008. But I fully acknowledge that it has applicability now.

Next, I concur that "options give the agency a chance to drop any of the awardees with which it no longer wants to do business." However, I wonder if we in the government ever take advantage of this. In response to your question:

===
Is it your belief that the government cannot refuse to exercise the option of one MATOC contractor while exercising the options of the others? If so, you are wrong. Each contract stands alone in that regard. If there are multiple awardees, the government is not faced with the choice of exercising the options of all or exercising none.
===

My belief when I wrote that was that, while the government can exercise some but not all of the options on a MATOC, it rarely, if ever, does. I suspect you may have done it, but I don?t know that a lot of other PCOs have. Quite honestly, I thought such an action would be subject to protest, but I was surprised to learn that a firm whose option has not been exercised has little effective legal recourse. I fully understood that an option was a unilateral right of the government, but for some reason I incorrectly believed options on ID/IQs might be viewed differently by the courts/Comptroller General. So you set me straight there.

Couple of questions for you:

After reading your answer and reading Jones, Russotto & Walker, B-283288.2, I now assume there are no court cases in which a contractor successfully protested a CO?s decision to exercise some, but not all, options on a MATOC. However, I noticed that you seem to have said something different about the government acting in bad faith (i.e. "unless" instead of "even if").

Question: Even if the government is determined to have acted in bad faith, does the contractor have **any** legal recourse? If so, what?
NOTE: I suspect the answer might be in B-244741. I searched for "B-244741" on WIFCON and the web, but all I could find was the B-283288.2 case that referenced B-244741, not B-244741 itself. So I don't what B-244741 says.

My next question is academic, but I?d be interested in your thoughts. What if you had a MATOC with only two contractors? The PCO has to document his decision to use a MATOC when awarding the contract IAW FAR Part 16.504. In this case, I would argue a decision to not exercise an option for one of these two contractors effectively (if not legally) turns this multiple-award contract into a single-award contract. I would think that this would call into question the original award (i.e., would undermine the FAR requirement that reads: "The contracting officer must document the decision whether or not to use multiple awards in the acquisition plan or contract file."). Wouldn?t the courts have to entertain a protest under these circumstances (again, since the act of exercising the option for only one contractor would call into question the basis for the original award)?

Again, thanks for the education. You pounded out a little ignorance today. I honestly thought a decision to exercise some but not all options on a MATOC would be riskier for the government than the risk of protest on any given Task Order, but I now see that contractors have little or no recourse when the government elects to not exercise an option (even in the case of a single contractor on a multiple-award ID/IQ). So I can see that options on ID/IQ contracts are not necessarily a bad idea (but I would add that I think we put options on ID/IQ contracts without thinking of all the reasons you outlined in your answer...).

#24 PM63A4

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Posted 14 April 2010 - 04:05 PM

For the benefit of others, as Vern alluded to, the Comptroller General will not even entertain a protest against an agency's decision not to exercise an option, since the Comptroller General considers the decision of whether to exercise an option a matter of contract administration, which is outside of the purview of the Comptroller General's procurement protest review functions. This is true even when the protester alleges that the Government is acting in bad faith.

From Jones, Russotto & Walker, B-283288.2, December 17, 1999:

"FAILURE TO EXERCISE OPTIONS

While Jones styles its protest as a protest against defective specifications, Jones principally challenges the agency's determination to issue a new solicitation rather than exercise the options under the existing contracts. Jones argues that HUD's decision to issue a new solicitation constituted a premature termination of Jones's existing contract which was arbitrary, capricious and without justification. The protester contends that HUD's failure to exercise the options shows bad faith on the part of the agency, and that HUD should set the new solicitation aside until the agency can prepare a sound replacement.

The Federal Acquisition Regulation (FAR) defines an option as a "unilateral right" of the government to elect to purchase additional supplies or services or to extend the term of a contract, and makes clear that a contracting agency is under no requirement to exercise an option (FAR 17.201, 17.207).

Our Office will not consider an incumbent contractor's protest of an agency's refusal to exercise an option under an existing contract since this decision is a matter of contract administration outside the scope of our bid protest function. We will not consider the matter even where, as here, the protester alleges that the agency's decision to not exercise an option in its contract was made in bad faith."

#25 Vern Edwards

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Posted 14 April 2010 - 05:12 PM

My belief... was that, while the government can exercise some but not all of the options on a MATOC, it rarely, if ever, does.

I know that agencies have done it--see the reference to Government Technical Services, Inc. v. U.S below--but I don't know how rare it is and I don't know the basis for your belief. I think your belief is sheer speculation. In any case, if it is rare, so what?

Couple of questions for you:

After reading your answer and reading Jones, Russotto & Walker, B-283288.2, I now assume there are no court cases in which a contractor successfully protested a CO?s decision to exercise some, but not all, options on a MATOC.

Only one court has protest jurisdiction--the U.S. Court of Federal Claims. Like the GAO, that court will not entertain a protest based on the government's failure to exercise an option. See Government Technical Services LLC v. U.S., 90 Fed. Cl. 522 (2009), in which the court refused to entertain a protest concerning the Corps of Engineers? failure to exercise the option of one of the contractors under a MATOC, saying that the matter does not fall within its protest jurisdiction under the Tucker Act. The Court said that such a matter had to be pursued as as a claim under the Contract Disputes Act.

Question: Even if the government is determined to have acted in bad faith, does the contractor have **any** legal recourse? If so, what?

In Bannum, Inc. v. U.S., 80 Fed. Cl. 239 (2008) the Court of Federal Claims held that failure to exercise an option due to bad faith is a breach of contract that entitles the contractor to recover the value of the option. See also Hi-Shear Tech. Corp. v. U.S., 53 Fed. Cl. 420 (2002) and Dangfeng Shen Ho v. U.S., 49 Fed. Cl. 96 (2001). I do not know of a case in which a court or board has found the government guilty of bad faith in refusing to exercise an option, but I haven?t looked.

My next question is academic, but I?d be interested in your thoughts. What if you had a MATOC with only two contractors? The PCO has to document his decision to use a MATOC when awarding the contract IAW FAR Part 16.504. In this case, I would argue a decision to not exercise an option for one of these two contractors effectively (if not legally) turns this multiple-award contract into a single-award contract. I would think that this would call into question the original award (i.e., would undermine the FAR requirement that reads: "The contracting officer must document the decision whether or not to use multiple awards in the acquisition plan or contract file."). Wouldn?t the courts have to entertain a protest under these circumstances (again, since the act of exercising the option for only one contractor would call into question the basis for the original award)?

I don't think refusing to exercise the option of one of the two contractors would turn what had been a multiple award contract into a single award contract. It would not change the fact that there had been multiple awards. The law does not say that an agency must continue to do business with all firms in order to ensure that it has multiple contractors. In any case, only one court has protest authority, the Court of Federal Claims, and as I pointed out above, that court has held that it does not have jurisdiction to handle refusal to exercise an option as a bid protest. The contractor would have to file a claim under the Disputes clause, and I don't see how it would have any contractual basis for arguing that the government should keep at least two contracts in effect.

#26 PM63A4

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Posted 23 April 2010 - 03:32 PM

Thanks again, Vern.

Your response to my previous suggestion that the government can, but rarely does, exercise some but not all of the options on a MATOC, was (essentially):

Yes, agencies have exercised some but not all of the options on a MATOC (Government Technical Services, Inc. v. U.S.). I don't know how rare it is and if it is rare, so what?

This may be getting off topic a bit, but my answer to your (perhaps rhetorical) "So What?" question is that there is a certain amount of inertia within Contracting, perhaps more than any other functional area of expertise within federal procurement. This "inertia" encourages PCOs and buyers to do what has worked in the past. So without precedent (or even few precedents), I have observed that PCOs are less likely to take certain actions. And I would submit that exercising some but not all options on a MATOC is one of these actions.

More to the point, I think an action "being rare" matters a lot in Contracting in 2010. I'll grant you that it shouldn?t, but I think it does. I think with more training and curtailing of redundant contracts, our PCOs will become less task-saturated and will be more able to do what makes sense in a particular case and less likely to do whatever worked last time.

Your thoughts?

#27 JerseyRunner

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Posted 29 July 2010 - 01:39 PM

In general, the textbook answer is that a Blanket Purchase Agreement is not a contract and an Idefinite-Delivery Indefinite-Quanity contract is a contract. However, it is a little more complicated than that.

There are two kinds of BPAs.

First, there is the BPA used for simplified acquisitions, which is described in FAR 13.303. As described therein, a BPA is like a charge account. You should read that FAR section. This kind of BPA is definitely not a contract.

Second, there is the BPA written against a GSA Federal Supply Schedule contract, which is explained in FAR 8.405-3. You should read that FAR subsection. GSA FSS contracts are IDIQ contracts. A BPA awarded against one of them is an ordering agreement under a contract. I maintain that since it is an agreement against a contract it is effectively contractual in nature, but there are many who would disagree with me.

The best way to begin to understand BPAs is to read the FAR references I have given you and to come back here if you still have questions.



#28 Jacques

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Posted 29 July 2010 - 03:13 PM

I have no idea, but allow me to speculate.

Might pricing account for some of the persistence of this approach? If in a competitive acquisition, if I allow offerors to propose different prices for each period of performance, is there a chance that the contractor might include a smaller premium for price risk in the initial periods? Obviously there are lots of alternatives available that help mitigate this concern (e.g., fixed price with economic price adjustment), but might there be some resistance to these alternatives? What if the likelihood of awarding for the latest years is only 51%? Do I want to pay a premium today for the possibility of a (potentially unused) lower price tomorrow?




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