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Minimum Guarantee on IDIQ


Sam101

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Hello,

Is breaking an IDIQ into a base and options ordering periods done solely for the purposes of obligating less minimum guarantee dollar amount at IDIQ award then the agency would have to obligate if the IDIQ was a straight five-year ordering period and perhaps also to not to worry about having to terminate the IDIQ?

For example, the base and options way:

Base Ordering Period: 12 months -- IGCE portion that is fairly certain to be ordered: $100

Option Ordering Period 1: 12 months  -- IGCE portion that is fairly certain to be ordered: $100

Option Ordering Period 2: 12 months -- IGCE portion that is fairly certain to be ordered: $100

Option Ordering Period 3: 12 months -- IGCE portion that is fairly certain to be ordered: $100

Option Ordering Period 4: 12 months -- IGCE portion that is fairly certain to be ordered: $100

Minimum Guarantee: $100 (the options do not have minimum guarantees), it's a binding contract because the $100 minimum obligated at time of base year award is consideration for the contractor and the option years are just option years as with any contract.

The straight five-year way:

IDIQ Ordering Period: 5 years -- IGCE portion that is fairly certain to be ordered: $500

Minimum Guarantee: $500

Also, is the "obligation of the minimum" requirement a government wide red book thing or just an agency specific thing?

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As a general matter, using your facts, I prefer a five-year ordering period rather than breaking the ordering period into options. I would only want options for ordering periods if I wanted to use options to off-board poor performing or non-bidding contractors.

Recording the contract's minimum obligation is done differently by different agencies.  Some agencies will insist that a task order covering the minimum must be issued simultaneously with the parent IDIQ contract -- I think this is overly simplistic, bordering on stupid, but agencies do make these decisions.  Some agency comptrollers will administratively record the minimum obligation on the books of the agency based on the IDIQ contract, and then reduce or erase this administrative recording as task orders are later issued and recorded -- I prefer this approach.

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Yeah, saying that the first task order is the minimum doesn't make sense to me either since by definition an IDIQ is a vehicle that the agency intends to issue a lot more than just one task order off of, so saying that they are fairly certain that only one task order will be issued is a lie. The easiest thing to do will be to just write a memo to file saying what the minimum is and just writing another memo when that minimum is reached and calling it a day. Plus section G will state the minimum and everyone is happy.

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20 hours ago, Sam101 said:

Is breaking an IDIQ into a base and options ordering periods done solely for the purposes of obligating less minimum guarantee dollar amount at IDIQ award then the agency would have to obligate if the IDIQ was a straight five-year ordering period and perhaps also to not to worry about having to terminate the IDIQ?

Some program areas may be trying to juggle money in some sort of way as most understand the obligation rule for an IDIQs and so request a contracting office to do it a certain way.  Some contracting offices (or contracting officers) may insist on a certain way.  However I believe in truth it is simply a choice but I think often forgotten is implications of FAR 16.501-2 (in part) and 16.504 (in part).   One implication is -The minimum guarantee is limiting the government's obligation on what has to be ordered under the contract.  After achieving the minimum guarantee generally speaking its the government's choice to use the contract or not.  Implication two - Also the minimum should not be nominal and an amount (remember it can be stated as $$$$ or work) that the government is fairly certain they will order.  Here I might say one could argue that in your example you are playing the nominal game because you said nothing about how the minimum is being developed in either of your ways to set the minimum.

Long forgotten in my view is that IDIQ's were originally set up for things.   Much effort went into looking at the minimum so that it might be set at an amount that puts the contractor in a position to deliver under the government's unilateral rights to order all the way to a maximum.   Think of it this way I have an IDIQ for a maximum of 2 million fence posts and delivery is specified in the parent IDIQ for each DO to be 5 days.   But the government set a minimum of 5 fence posts?   Think if the contractor was having to put his/her plant in a manufacturing position to produce the posts will the contract even get close to covering the gear up the contractor has to do to produce potentially 2 millions posts at a moments notice and in 5 days.   Now let your imagination run wild for supplies and then apply the thinking to services and all the what if's under an IDIQ. 

So the answer no NO it should not be for solely the purposes of juggling obligation of monies but it seems it has become the norm.

21 hours ago, Sam101 said:

Also, is the "obligation of the minimum" requirement a government wide red book thing or just an agency specific thing?

Red Book thing or in other words application of Federal appropriation law.  It actually reaches back to the above of sorts as a obligation is to reflect a bona fide need - what the government is fairly certain it will order.   That is the quick of it with my thought that again in reality thinking otherwise has become the norm.

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3 hours ago, C Culham said:

Here I might say one could argue that in your example you are playing the nominal game because you said nothing about how the minimum is being developed in either of your ways to set the minimum.

I used low dollar amounts just for simplicity's sake, the total IGCE for each year to include the "fairly certain to order" amount plus the "maybe we'll order" amount in my example would be $140 every year... I should have included that in my original post to make that point more clear.

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