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Guaranteed Minimum in Option Years


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#1 toofargone

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Posted 31 August 2011 - 11:22 AM

If an agency wants to make a guaranteed minimum for an IDIQ contract in the option years as well as the base year, must that guaranteed minimum quantity be more than nominal?

#2 joel hoffman

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Posted 31 August 2011 - 11:49 AM

If an agency wants to make a guaranteed minimum for an IDIQ contract in the option years as well as the base year, must that guaranteed minimum quantity be more than nominal?

Since there is no need to make a guaranteed minimum for an IDIQ contract in the option years, why would such minimums have to be more than nominal? Why would an agency risk paying taxpayers' dollars for option year minimum guarantees that aren't required?

Or are you also asking if the base year minimum guarantee must be more than nominal? Please clarify. Thanks.

#3 Vern Edwards

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Posted 31 August 2011 - 11:59 AM

It depends on why you want to agree to a guaranteed minimum.

Ordinarily, the purpose of a guaranteed minimum in an IDIQ contract is to serve as consideration in the formation of the contract. Consideration is not necessary for each option year. The guaranteed minimum for the basic year is sufficient to bind the contractor to the options as long as it is more than a nominal (slight, insufficient) amount. If the minimum for the basic year is adequate consideration there should be no issue with respect to the adequacy of a guaranteed minimum for option years, since none is needed.

If you want to set a guaranteed minimum for business purposes -- say, to make the contract more attractive to prospective contractors, then the issue is not whether the minimum is nominal, but whether it is sufficiently attractive. That is a different matter entirely.




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