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"Commonly Understood"? I Think Not.

Posted by Don Mansfield, 20 May 2010 · 3,468 views

I was recently perusing some of the recent final rules issued by the FAR Council when I came across a statement that I found interesting. In responding to a comment concerning the applicability of TINA to task and delivery orders, the FAR Councils stated that TINA applicability is to be determined when negotiating a basic IDIQ contract, as well as when negotiating subsequent orders under the contract. A description of the comment that they received read as follows:

QUOTE
The respondent also highlighted the example of an indefinite delivery-indefinite quantity (IDIQ) contract where orders are issued and inquired whether ``at the time of contract award'' related to issuance of the IDIQ contract or individual orders placed under this IDIQ contract.


The Councils' response was as follows:

QUOTE
In the case of IDIQ contracts, it is commonly understood that it is the estimated total value of orders for the specified period at the time of contract award, as well as the individual value of any subsequent discrete orders, to which the TINA thresholds apply.


(See FAR Case 2008-012, Clarification of Submission of Cost or Pricing Data on Non-Commercial Modifications of Commercial Items (75 FR 13414)).

My initial reaction was "Good, they got it right." However, I was not satisfied with the complete lack of explanation other than that this information was "commonly understood." "It is commonly understood?" is the equivalent to saying "Well, everybody knows?", which is not an answer that I would accept from a student nor is it one that the public should be accepting from the FAR Councils. Further, the FAR Councils' use of "commonly understood" raises the question: Commonly understood by whom? Based on my experience, "commonly debated" would be a more apt description.

Task and Delivery Orders are "Contracts"

By stating that TINA applicability determinations must be made at the task and delivery order level, the FAR Councils have, perhaps unwittingly, admitted that task and delivery orders are "contracts" as defined at FAR 2.101. Consider the requirements for obtaining cost or pricing data at FAR 15.403-4(a)(1):

QUOTE
?Unless an exception applies, cost or pricing data are required before accomplishing any of the following actions expected to exceed the current threshold or, for existing contracts, the threshold specified in the contract:

(i) The award of any negotiated contract (except for undefinitized actions such as letter contracts).
(ii) The award of a subcontract at any tier, if the contractor and each higher-tier subcontractor were required to submit cost or pricing data (but see waivers at 15.403-1( c )(4)).
(iii) The modification of any sealed bid or negotiated contract (whether or not cost or pricing data were initially required) or any subcontract covered by paragraph (a)(1)(ii) of this subsection.


If TINA applies to task and delivery orders, then task and delivery orders must fall into one of the three enumerated categories. A task or delivery order issued by the Government is certainly not a subcontract, so (ii) is out. A task or delivery order under a contract is not a "written change in the terms of a contract", so they do not meet the definition of "contract modification", thereby eliminating (iii). Thus, task and delivery orders must be "contracts."

However, one cannot reasonably describe this information as "commonly understood" either. Consider the following statements made in FEATURE COMMENT: Contesting Task And Delivery Order Awards At The COFC--Policy Implications Of A Choice Federal Courts May Soon Have To Make (51 NO. 20 Gov't Contractor ? 174). In discussing the automatic stay provisions of CICA, the author writes:

QUOTE
The first time period, from the date of contract award to 10 days after contract award, is irrelevant to protesting task orders, since such orders are not "contracts" in themselves. See definitions of "task order" and "delivery order" under FAR 2.101.


The author, seemingly indecisive, also writes:

QUOTE
As for the CICA stay--the stay of a contract award decision that automatically comes into play when that contract award decision is challenged before GAO-- this stay may simply be unavailable in the context of task orders because such orders may not be "contracts." The FAR councils could probably resolve the CICA stay issue by redefining the term "contract" under FAR 2.101 to include task orders, but given the serious nature of the controversy and its likely impact on other aspects of the multiple-award IDIQ contracting system, that sort of redefinition appears unlikely because treating task orders as "contracts" could trigger other procedural obligations.


This author is not alone. In FEATURE COMMENT: Acquisition Reform Revisited--Section 843 Protests Against Task And Delivery Order Awards At GAO (50 NO. 9 Gov't Contractor ? 75) the authors put forth the following argument:

QUOTE
However, CICA does not explicitly define the term "contract award." One could argue that protesters of task or delivery orders are not entitled to an automatic suspension of performance because of the definitions of "contract," "task order" and "delivery order" found in the FAR. FAR 2.101 defines "contract" as "a mutually binding legal relationship obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them. It includes all types of commitments that obligate the government to an expenditure of approved funds ...." On the other hand, the terms "delivery order" and "task order" are defined as orders "placed against an established contract" and, thus, arguably do not constitute "contracts" under the FAR.

Consistent with the FAR's distinction between contracts and task or delivery orders issued under contracts, GAO, in Advanced Tech. Sys., Inc., Comp. Gen. Dec. B-296493.6, 2006 CPD ? 151, concluded that it was unnecessary for an agency to conduct a responsibility determination before awarding an order under a General Services Administration Federal Supply Schedule contract because that determination was made when the underlying "contract" was awarded.


I agree with the first author's assessment of the potential controversy that would ensue if the FAR Councils were to redefine "contract" to include task and delivery orders. If the FAR Councils were to propose such a rule, I would estimate that they would receive no less than 100 public comments.

Where's the Cost or Pricing Data Clause for Task and Delivery Orders?

If it's "commonly understood" that TINA applies to task and delivery orders, why isn't there a standard FAR clause for use in task and delivery order contracts that compels the submission of cost or pricing with a task or delivery order proposal when applicable? There's a standard FAR provision at FAR 52.215-20, Requirements for Cost or Pricing Data or Information Other Than Cost or Pricing Data (Oct 1997), that can be used to compel offerors to submit cost or pricing data when submitting offers for a basic IDIQ contract. There's also a standard FAR clause at FAR 52.215-21, Requirements for Cost or Pricing Data or Information Other Than Cost or Pricing Data?Modifications (Oct 1997), that compels submission of cost or pricing data when pricing contract modifications (if applicable). Where is "Requirements for Cost or Pricing Data or Information Other Than Cost or Pricing Data?Task and Delivery Orders"? Why not have offerors agree to submit cost or pricing data (if applicable) with subsequent task and delivery order proposals?

TINA Yes, CAS No

The Councils' response in the publication of this rule reminded me of an earlier response pertaining to the applicability of CAS to task and delivery orders accompanying a final rule on CAS (70 FR 11743-01). In that response, the Councils reached the opposite conclusion. The exchange was as follows:

QUOTE
Task Order Contracts

31. Comment: One respondent stated that one of the many situations that greatly affect the cost accumulation calculation that is not addressed in the proposal is the trend toward task order contracts that may have both fixed fee and incentive fee tasks, as well as CAS covered and non-CAS covered tasks.

Councils' response: Nonconcur. The Councils believe that this situation is adequately covered by the language at FAR 30.605(h)(5), and the definition of "Affected CAS-covered contracts" at FAR 30.001.

[?]

As for the issue of CAS-covered versus non-CAS-covered tasks, a contract cannot contain both CAS-covered and non-CAS-covered tasks. In order for CAS-coverage to differ between tasks, each task would have to be a separate contract. In such cases, the definition of affected CAS-covered contracts would exclude the non-CAS covered tasks from the computation of the cost-impact.


Thus, a determination of CAS applicability is made only when placing the basic IDIQ contract. If an IDIQ contract is subject to CAS, all orders under the contract are subject to CAS. If an IDIQ contract is not subject to CAS, none of the orders under the contract are subject to CAS.

So, according to the FAR Councils, a contracting officer must determine applicability of TINA when awarding a basic IDIQ contract and issuing any subsequent orders, but need only determine the applicability of CAS once?when awarding a basic IDIQ contract.

This raises another yet another question?how is a CO supposed to know this? Consider the rules for determining CAS applicability at 48 CFR 9903.201-1:

QUOTE
9903.201-1 CAS applicability.
(a) This subsection describes the rules for determining whether a proposed contract or subcontract is exempt from CAS. (See 9904 or 9905, as applicable.) Negotiated contracts not exempt in accordance with 9903.201?1(B) shall be subject to CAS. A CAS-covered contract may be subject to full, modified or other types of CAS coverage. The rules for determining the applicable type of CAS coverage are in 9903.201?2.

(B) The following categories of contracts and subcontracts are exempt from all CAS requirements:
(1) Sealed bid contracts.
(2) Negotiated contracts and subcontracts not in excess of $650,000. For purposes of this paragraph (B)(2) an order issued by one segment to another segment shall be treated as a subcontract.
(3) Contracts and subcontracts with small businesses.
(4) Contracts and subcontracts with foreign governments or their agents or instrumentalities or, insofar as the requirements of CAS other than 9904.401 and 9904.402 are concerned, any contract or subcontract awarded to a foreign concern.
(5) Contracts and subcontracts in which the price is set by law or regulation.
(6) Firm fixed-priced, fixed-priced with economic price adjustment (provided that price adjustment is not based on actual costs incurred), time-and-materials, and labor-hour contracts and subcontracts for the acquisition of commercial items.
(7) Contracts or subcontracts of less than $7.5 million, provided that, at the time of award, the business unit of the contractor or subcontractor is not currently performing any CAS-covered contracts or subcontracts valued at $7.5 million or greater.
(8)?(12) [Reserved]
(13) Subcontractors under the NATO PHM Ship program to be performed outside the United States by a foreign concern.
(14) Contracts and subcontracts to be executed and performed entirely outside the United States, its territories, and possessions.
(15) Firm-fixed-price contracts or subcontracts awarded on the basis of adequate price competition without submission of cost or pricing data.


By asserting that CAS determinations are not made at the task or delivery order level, the FAR Councils must be using a definition of "contract" that is different than what appears at FAR 2.101. What definition are they using and why does that definition exclude task and delivery orders? I don't get it.

Recommendation

If the FAR Councils believe that task and delivery orders are "contracts" as defined at FAR 2.101, then they can clear up a considerable amount of confusion by including these types of orders in that definition. If they do that, why not add a standard FAR clause compelling submission of cost or pricing data (when applicable) with task or delivery order proposals? While they're at it, how about an explicit statement in the FAR stating that TINA applicability determinations are made at the task and delivery order level and another statement that CAS applicability determinations are not? Probably too much to ask.





Mr. Acquisition,

The second sentence of the definition of contract in FAR 2.101 says, "It [i.e., the term contract] includes all types of commitments that obligate the Government to an expenditure of appropriated funds."

That pretty clearly and unambiguously encompasses task and delivery orders. I think the authors of the articles in The Government Contractor that you quoted are simply confused. Task and delivery orders are contracts as defined in FAR, and when the FAR any rules "contracts" those rules apply to task and delivery orders. Don't you agree? Why do the FAR Councils need to make that any clearer. It seems to me that the only people who are confused are those who do not check the FAR definitions. Changing the definition of contract will not help those people. As for requiring cost or pricing data for task and delivery orders, isn't that already covered by FAR 16.505(cool.gif(3)? Couldn't the CO simply write a Section H clause that requires the submission and certification of cost or pricing data prior to the issuance of an order for which the price was not established at the time of contract award?
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Hi, Seeker,

I agree that the definition of "contract" at FAR 2.101 encompasses task and delivery orders. It's clear to me, but that doesn't mean it's clear enough. The authors in the cited articles were reading the FAR definitions. The problem is that they were arriving at the wrong conclusion. They are not alone. Every so often there are debates in the Wifcon forum on this subject. If I polled a random sample of 1102s I think that many would say that task and delivery orders were not contracts even after reading the definition. The level of confusion is high enough to warrant a revised definition, in my opinion.

I don't know if FAR 16.505(B)(3) alone adequately communicates that cost or pricing data are required for task or delivery orders. It apparently hasn't prevented the FAR Council from receiving questions about the applicability of TINA when pricing task and delivery orders. Yes, I suppose that a CO could write the type of Section H clause that you described. But why the inconsistency? If there's a standard FAR clause that requires submission of cost or pricing data when pricing modifications, why not one for task and delivery orders?

Thanks for writing.
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Don,

This is one of your better blog posts. The FAR Councils need to clear up confusion, in terms of both TINA and CAS administration. In particular, what is the contract award value of an ID/IQ with respect to CAS administration? The DCAA says it's the ID/IQ ceiling value but that's a puerile position, particularly when there are multiple ID/IQ awards being made. Will you be submitting a request to open a FAR Case?
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Don,

Why not add a subpagraph (iv) to FAR 15.403-4(a)(1) something similar to:

"?Unless an exception applies, cost or pricing data are required before accomplishing any of the following actions expected to exceed the current threshold or, for existing contracts, the threshold specified in the contract:

"(iv) The issance of a task or delivery order under an indefinite-delivery, indefinite quantity contract, where the price is negotiated."


Or better yet, add the clarification to (i):

"(i) The award of any negotiated contract, including task or delivery orders under indefinite-delivery/indefinite-quantity contracts (except for undefinitized actions such as letter contracts)."

I realize that the existing language may be based upon the TINA statutory language, but why can't the FAR council add clarifying language, assuming that the courts and boards "commonly understand" that task and delivery orders are considered to be contracts for this specific purpose?

I dont think that it would be wise to simply directly add task and delivery orders to the definition of a "contract" at 2.101, because there are instances where the base contract already covers or complies with certain FAR requirements applicable to "contracts", that dont have to be repeated each time a task or delivery order is issued.
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QUOTE (here_2_help @ May 23 2010, 05:09 PM)
Don,

This is one of your better blog posts. The FAR Councils need to clear up confusion, in terms of both TINA and CAS administration. In particular, what is the contract award value of an ID/IQ with respect to CAS administration? The DCAA says it's the ID/IQ ceiling value but that's a puerile position, particularly when there are multiple ID/IQ awards being made. Will you be submitting a request to open a FAR Case?

here_2_help,

I didn't intend to submit a request to open a FAR Case. That's not typically something a DAU professor does. However, I am going to write the POC for the final rule I referenced and ask why TINA applicability must be determined at the task/delivery order level, but CAS applicability doesn't.
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QUOTE (joel hoffman @ May 24 2010, 06:28 AM)
Don,

Why not add a subpagraph (iv) to FAR 15.403-4(a)(1) something similar to:

"?Unless an exception applies, cost or pricing data are required before accomplishing any of the following actions expected to exceed the current threshold or, for existing contracts, the threshold specified in the contract:

"(iv) The issance of a task or delivery order under an indefinite-delivery, indefinite quantity contract, where the price is negotiated."
Or better yet, add the clarification to (i):

"(i) The award of any negotiated contract, including task or delivery orders under indefinite-delivery/indefinite-quantity contracts (except for undefinitized actions such as letter contracts)."

I realize that the existing language may be based upon the TINA statutory language, but why can't the FAR council add clarifying language, assuming that the courts and boards "commonly understand" that task and delivery orders are considered to be contracts for this specific purpose?

I dont think that it would be wise to simply directly add task and delivery orders to the definition of a "contract" at 2.101, because there are instances where the base contract already covers or complies with certain FAR requirements applicable to "contracts", that dont have to be repeated each time a task or delivery order is issued.

That would clear up the TINA issue. However, there are other instances in the FAR where some find it unclear whether "contract" includes task and delivery orders. For example, the authors of the Government Contractor articles that I referenced didn't think that the automatic stay provision of CICA applied to protests of task and delivery orders because FAR 33.104 just mentions "contracts." There are probably other instances in the FAR that cause similar confusion.

If not a new definition, perhaps a new reading convention at FAR 1.108 that states that, unless otherwise specified, a requirement that applies to the award of a basic indefinite delivery contract applies (or alternatively, "does not apply") to subsequent task and delivery orders issued thereunder. As it is now, we are being left to guess which requirements apply to task and delivery orders and which do not.
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