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Anti-Deficiency Act and Minimum Order on IDIQ

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Scenario: A CO is preparing to execute a single-award IDIQ contract in September 2010. However, the period of performance begins, and the contract effective date, is 1 October 2010. I am well aware of the requirement that funds at least equal to the minimum guarantee need to be obligated when signing an IDIQ in order to not violate the anti-deficiency act. However, in this case, the PoP is solely in FY2011, even though the contract will be signed in FY2010. Clearly, FY2011 funds are not available yet for obligation. If FY2010 funds were to be used to meet the minimum order, it would be a violation of the Bona Fide needs rule. Thus, as I see it, the CO would either be anti-deficient or be violating the bona fide needs rule. Would making the award Subject to the Availability of Funds resolve this? Is there some better solution?

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Subject to the availability of funds, if it qualifies. If the requirement is for operation and maintenance and continuing services necessary for normal operations, you may want to take a look at FAR clause 52.232-18, described at FAR 32.703-2(a) and prescribed at 32.705-1(a). The clause provides:

Funds are not presently available for this contract. The Government's obligation under this contract is contingent upon the availability of appropriated funds from which payment for contract purposes can be made. No legal liability on the part of the Government for any payment may arise until funds are made available to the Contracting Officer for this contract and until the Contractor receives notice of such availability, to be confirmed in writing by the Contracting Officer.

I don't see anything in the FAR suggesting 52.232-18 can't be used with ID/IQ contracts. Obviously, the government needs to be careful about the contractor performing at risk, and certainly cannot accept anything performed at risk, but I don't see anything in your question to suggest that's your goal.

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woop85,

Don't quite know what you mean when you say "apply SAF funds," as "subject to the availability of funds" aren't funds. In any case, is it really that wide open? Can I award any old contract "subject to availability of funds," or does the FAR restrict my ability to do that? I'm thinking of FAR 32.702, which says in part, "Before executing any contract, the contracting officer shall -- (a) Obtain written assurance from responsible fiscal authority that adequate funds are available or (B) Expressly condition the contract upon availability of funds in accordance with 32.703-2." (emphasis added).

Obviously there are lots of other circumstances where the government incurs obligations subject to the availability of funds (e.g., see Cray Research, Inc. v. United States, 44 Fed.Cl. 327 (1999), where the court found that the use of options not violate the ADA where each renewal option is (1) contingent on future congressional appropriations, and (2) exercised only by the government‟s affirmative action). When awarding a new contract, I think FAR 32.702 provides the rule.

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The "better solution" would be to award it subject to availability of FY 11 funds, then all you have to worry about is whether you suffer and permit performance to begin if an appropriation is not enacted in a timely manner

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Stan said it better than I did. I assume the minimum guarantee language has something in it about when that would be paid out if an order not received. Since POP doesn't start until FY11, assuming earliest payout would be in FY11 and therefore using a FY11 Line of accounting that is subject to availability allows you to make your award

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FAR 32.702(B) limits when a CO can award a contract subject to the availability of funds to the circumstance described in FAR 32.703-2, to wit:

This authority may be used only for operation and maintenance and continuing services (e.g., rentals, utilities, and supply items not financed by stock funds) --

(1) necessary for normal operations and

(2) For which Congress previously had consistently appropriated funds, unless specific statutory authority exists permitting applicability to other requirements.

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Since POP doesn't start until FY11, assuming earliest payout would be in FY11 and therefore using a FY11 Line of accounting that is subject to availability allows you to make your award

My understanding is you can't award the contract subject to the availability of funds. You can initiate a contract action though permitting you to get up to award. I'm bringing this up as I've seen a lot of of people award with this language and basically tell the contractor, "you can work but you are doing so at risk as there is no guarantee you'll get paid" so you end up with a contract saying, "Contractor do X and Y and we'll pay you Z if we ever get money and if not you get paid nothing."

It looks like, in this thread, there is a practice of signing the contract but not permitting performance to begin until funds are available then you sort of pull the trigger (I'm not sure why you don't just hold off signing until funds are available though).

I always thought that awarding subject to the availability of funds was improper ,as does our Office of General Counsel, but it seemed such a common practice I've always wondered if I was just missing something or if it was just being misused.

I'd sincerely appreciate it if someone could shed some light on this issue for me.

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The contract in question is for services. Dgm, why do you think you can't award the contract subject to the availability of funds? That's the primary purpose of the clause. There is no government-wide requirement that funds are available when you release a solicitation.

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dgm, the reason for the rule (or at least one such reason) was stated clearly enough in DAR 1-318(a), the predecessor to 32.702 & .703 back in the day: "To effect procurements promptly upon the beginning of a new fiscal year, it may at times be necessary to initiate a procurement properly chargeable to funds of the new fiscal year prior to the availability of such funds." If performance is to begin 1 Oct (or as close to 1 Oct as possible consistent with the availability of funds), it may be unreasonable to award 1 Oct.

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Scenario: A CO is preparing to execute a single-award IDIQ contract in September 2010. However, the period of performance begins, and the contract effective date, is 1 October 2010. I am well aware of the requirement that funds at least equal to the minimum guarantee need to be obligated when signing an IDIQ in order to not violate the anti-deficiency act. However, in this case, the PoP is solely in FY2011, even though the contract will be signed in FY2010. Clearly, FY2011 funds are not available yet for obligation. If FY2010 funds were to be used to meet the minimum order, it would be a violation of the Bona Fide needs rule. Thus, as I see it, the CO would either be anti-deficient or be violating the bona fide needs rule. Would making the award Subject to the Availability of Funds resolve this? Is there some better solution?

Why is the CO planning to sign the contract in September 2010 if it will be funded with FY2011 funds? Why not wait until funds are available? Why must the contract be signed in September? The only thing that will start on October 1 is the ordering period. There will be no "period of performance" until an order has been issued. Why does the ordering period have to start on October 1? Do you have to issue an order on October 1?

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The reason here being that the contract provides for mission critical services and there is a desire to get it awarded so that the protest clock can be started as soon as possible.

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civ_1102,

You wrote, "I am well aware of the requirement that funds at least equal to the minimum guarantee need to be obligated when signing an IDIQ in order to not violate the anti-deficiency act." I don't believe this is a FAR-level requirement, but is probably more of an agency matter. I routinely award IDIQ contracts without simultaneously issuing task orders to obligate the contract minimums. In my agency (Forest Service), I have the entire life of the contract to do meet the minimum.

In my agency, I would have no problem awarding an IDIQ contract today (in September of 2010, FY2010) with no task order award until October of 2010 (FY2011).

Your own agency regulations requiring task order obligation of the contract minimum simultaneously with the contract award might be putting in the position you are in.

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jj20874, you might want to take a look at the Red Book (GAO's Principles of Federal Appropriations Law) at 5-43 (2004 Update):

When an agency executes an indefinite-quantity contract such as an IDIQ contract, the agency must record an obligation in the amount of the required minimum purchase. At the time of award, the government commits itself to purchase only a minimum amount of supplies or services and has a fixed liability for the amount to which it committed itself. See 48 C.F.R. ?? 16.501-2(B)(3) and 16.504(a)(1). The agency has no liability beyond its minimum commitment unless and until it places additional orders. An agency is required to record an obligation at the time it incurs a legal liability. 65 Comp. Gen. 4, 6 (1985); B-242974.6, Nov. 26, 1991. Therefore, for an IDIQ contract, an agency must record an obligation for the minimum amount at the time of contract execution.

The Red Book references the appropriations decision, Bureau of Customs and Border Protection - Automated Commercial Environment Contract, B-302358, Dec. 27, 2004.

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Jacques,

Please note that I wrote, "I don't believe this is a FAR-level requirement" but suggested it might be captured in the acquisition regulations of some agencies.

I've seen that Red Book statement before, but I wasn't talking about the Red Book. The Red Book gives guidance to agency heads, and doesn't pretend to act as an agency acquisition regulation dispositive on individual contracting officers -- after all, contracting officers follow their own agency regulations. Isn't it odd that the requirement for task order issuance simultaneous with IDIQ contract award to meet the contract minimum has never worked itself into the FAR, after all these years? If the only possible interpretation of the Red Book guidance was simultaneous contract and task order issuance, and if the Red Book guidance is dispositive on executive branch agencies, then one might reasonably suppose these instructions would have been worked into the FAR. I know these instructions have worked themselves into the acquisition regulations of some agencies, but not all. If the Red Book guidance is dispositive on all federal agencies in the same way, it seems to me it would be better to deal with the implementation language at the FAR level rather than haphazardly and differently in each agency's own acquisition regulations.

"Therefore, for an IDIQ contract, an agency must record an obligation for the minimum amount at the time of contract execution." Perhaps some agencies have ways of meeting this Red Book requirement without simultaneous issuance of a task order with the IDIQ contract. Or maybe my agency chooses not to implement the Red Book guidance for some reason? I don't know, just wondering...

But I'll stand by my statement that I believe the notion we're discussing is not a FAR-level requirement.

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I guess you're arguing that B-302358 is not authoritative. Do you have an argument as to why you believe it was wrongly decided? Perhaps more importantly, does your agency?

Of course, I'll let Vern speak for himself, but in Obligating Funds for Services Under IDIQ Contracts that Cross Fiscal Years: What Are the Rules?, 21 N&CR ? 42 (August 2007), discussing B-308969, May 31, 2007, he writes, "Moreover, there was nothing new about the rule that an obligation must be recorded in the amount of the minimum at the time of contract award. That is a rule of long standing, and the NBC's failure to comply is inexplicable."

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Jacques,

I'm merely relating a fact that the notion that a task order obligation to satisfy the contract minimum must be issued simultaneously with the IDIQ contract is not a requirement of the FAR. Some agencies have made it a requirement in their internal agency regulations. Some have not. I cannot explain the why not.

GAO decision B-302358 is not authoritative on my agency, and I haven't posited that it was wrongly decided. This decision involved the Bureau of Customs and Border Protection, but it really isn't even authoritative for that agency. To wit, the final words of that decision: "we [the GAO] recommend that Customs take the necessary steps to ensure timely obligation of the minimum financial liability represented by IDIQ contracts" (my emphasis on the word "recommend").

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jj20874, I thought you were suggesting the requirement to record the obligation was discretionary (when you said, "I routinely award IDIQ contracts without simultaneously issuing task orders to obligate the contract minimums."). Upon review, it seems you're pointing out that issuing a task order in conjunction with the award of an IDIQ is discretionary. I agree with the second. The Recording Statute, 31 USC 1501, does not require the issuance of a task order. It requires the recording of an obligation. Agencies have some discretion in how to meet the requirement to record the obligation. For instance, the Air Force encourages issuing the task order. It provides, "Recording and subsequently reporting the required obligation using anything other than a delivery or task order will result in the action not being reported in FPDS-NG." AFFARS MP5316.504(a)(2).

Thanks.

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Jacques,

I'm merely relating a fact that the notion that a task order obligation to satisfy the contract minimum must be issued simultaneously with the IDIQ contract is not a requirement of the FAR. Some agencies have made it a requirement in their internal agency regulations. Some have not. I cannot explain the why not.

GAO decision B-302358 is not authoritative on my agency, and I haven't posited that it was wrongly decided. This decision involved the Bureau of Customs and Border Protection, but it really isn't even authoritative for that agency. To wit, the final words of that decision: "we [the GAO] recommend that Customs take the necessary steps to ensure timely obligation of the minimum financial liability represented by IDIQ contracts" (my emphasis on the word "recommend").

ji20874,

It's true that a task order for the contract minimum need not be issued simultaneously with the award of an IDIQ contract. However, if you don't do this, then you must record an obligation for the contract minimum on the IDIQ contract itself.

When an IDIQ contract is awarded, an obligation is created for the amount of the contract minimum. It doesn't matter if the obligation does not get recorded--the obligation still exists. By law, an agency is required to record its obligations in its books. Contract obligations are typically communicated to an agency's accounting folks by providing a copy of the contractual document that cites an appropriation and states the amount of the obligation that has been created.

If you award an IDIQ contract and do not record an obligation for the contract minimum (either on a task order or on the IDIQ contract), then the result will be that your agency will underrecord its obligations.

Lastly, it's foolish to rely solely on acquisition regulations when it comes to matters of fiscal law.

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Don,

Let me re-write a couple of your paragraphs...

It's true that a task order for the contract minimum need not be issued simultaneously with the award of an IDIQ contract. However, if you don't do this, then [your agency] must record an obligation for the contract minimum on the IDIQ contract itself.

If you award an IDIQ contract and [your agency] do[es] not record an obligation for the contract minimum (either on a task order or on the IDIQ contract), then the result will be that your agency will underrecord its obligations.

I agree with these two paragraphs as re-written, changing "you" to "your agency."

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Here's what NITAAC at NIH did when they awarded CIO-SP2. Award was made in Dec to the 40+ vendors. They entered Records of Call (ROCs - their funding documents) into the system, one for each vendor, in the amount of the minimum guarantee. Min guarantee language stated that it would be paid out within the FY of the contract award. They did not complete the approval process on the ROCs. When a prime received an award from Jan - Sep of that year, they deleted the ROC in the system. On 30 Sept, around 5PM, they approved the remaining minimum guarantee ROCs for those primes that had not yet received a Task Order award. Would that work in your agency?

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Guest carl r culham

Civ - You have started an interesting discussion regarding fiscal law regarding IDIQ's however reading the thread in total I do have two questions. Why do you need to award to start the protest clock? Could you not simply formally announce to the interested parties that you are going to award the contract on date such and such to Contractor X to start the protest clock?

I will not be around to field your response but thought I would throw these questions into the mix.

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Scenario: A CO is preparing to execute a single-award IDIQ contract in September 2010. However, the period of performance begins, and the contract effective date, is 1 October 2010.

I don't understand the problem. If the effective date of the contract is October 1, 2010 you sign it now and its an FY 11 obligation. The period of performance doesn't begin until the effective date of the contract.

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