HOME  |  CONTENTS  |  DISCUSSIONS  BLOG  |  QUICK-KITs|  STATES

Google

       Search WWW Search wifcon.com

FAR 16.504 (a):  Indefinite quantity contracts - Guaranteed Minimum

Comptroller General - Key Excerpts

There is no "magic number" that the FAR or our decisions set as adequate consideration for a contract; instead, the determination of whether a stated minimum quantity is "nominal" must consider the nature of the acquisition as a whole. Carr's Wild Horse Ctr. , B-285833, Oct. 3, 2000, 2000 CPD 210 at 3; ABF Freight Sys., Inc. , et al. , B-291185, Nov. 8, 2002, 2002 CPD 201 at 4; Sea-Land Serv., Inc. , B-278404, et al. , Feb. 9, 1998, 98-1 CPD 47 at 12. CWGTI argues that the $2,500 guaranteed minimum amount here is unreasonable because it is so far out of line with the $15,000,000 minimum order amount. CWGTI, however, cites no authority for the proposition that a contract's minimum order amount has to have a specific relationship to the required minimum guarantee, or that a minimum order amount forms the floor for a minimum guarantee. In light of the purpose of FAR 16.504(a) to establish a binding minimum--in effect, consideration for the ID/IQ contract--we do not believe that a contract's minimum order establishes the minimum guarantee or serves as a firm target against which the reasonableness of the minimum guarantee must be evaluated. Instead, the minimum guarantee must be evaluated in the context of all of the specific facts and circumstances of the procurement. ABF Freight Sys., Inc. , supra. Our Office requested that the agency and CWGTI provide, for comparison purposes, data regarding average or representative fees for similar travel transactions based on the agency's current contracts and the protester's work as an incumbent on other travel contracts. The agency provided the data from an existing travel contract which "represents the agency's best estimate of the likely costs for transactions under the proposed contract because it is the only contract known to the agency to have a similar pricing scheme." Agency Response to Questions at 2. This contract has transaction fees ranging from $5 to $16 and, thus, the agency contends that the $2,500 guaranteed minimum here could represent up to several hundred transactions. We consider the transaction fees here to be comparable to the actual transactions that formed the basis for the minimum guarantees in our decisions in Aalco Forwarding, Inc. , Sea-Land Services, Inc. , and ABF Freight Systems, Inc. Because the guaranteed minimum amount here potentially represents several hundred potential transactions (for example, at $5 per transaction, the $2,500 guaranteed minimum amount would represent 500 transactions), we cannot conclude that this guaranteed minimum amount is so small as to be nominal, and thus insufficient consideration to bind the parties. (CW Government Travel, Inc., B-295530, March 7, 2005) (pdf)
 

Here, like the situation presented in Aalco Forwarding, Inc. et al., supra, the solicitation provided for multiple awards to transport cargo for each lane and provided for a best-value basis for selecting among the contractors once all the contractors' minimum quantities have been ordered. See also Sea-Land Serv., Inc., supra (award of multiple contracts for same routes or zones affects the amount the government is certain to order from each contractor). Thus, for each lane, the agency may have multiple choices of contractors to perform the transportation services. It is not possible to know, after the minimums are satisfied, whether a given contractor will be used under the best-value scheme for any orders until individual orders arise. For this reason, it is uncertain that a given contractor will carry more than the minimum specified for a lane during the life of the contract. Given this uncertainty and that the minimum quantity on any one contract may not exceed the amount the government is fairly certain to order, see FAR 16.504(a)(2), we find no basis to object to the stated minimum quantities here. We also find here that the minimum quantity guaranteed for each lane, even if it amounts to only a few hundred dollars, is sufficient consideration to form a binding contract. Although it may be true that the guaranteed minimum quantity for certain lanes appears low (particularly as compared to the minimums guaranteed for other lanes), this does not alone demonstrate that the guaranteed quantity is insufficient to support a contract. See Sunbelt Props., Inc., B-249307, Oct. 30, 1992, 92-2 CPD 309 at 3 n.3.  (ABF Freight System, Inc.; Old Dominion Freight Line, Inc.; Overnite, B-291185, November 8, 2002)  (pdf)


Since the prohibition against a nominal minimum quantity is designed to ensure that the intent to form a binding contract is present, the determination whether a stated minimum quantity is nominal must consider the nature of the acquisition as a whole.  The record shows that BLM has a recurring need for animal adoptions and that the 100-animal minimum guarantee is not out of line with the numbers handled at previous adoption events. Here, multiple awards are contemplated and there is no certainty that individual contractors will assist and handle more than the minimum guaranteed quantity of 100 animals. Considering all of the circumstances here and the historical data, we cannot conclude that the stated minimum quantity for the life of the contract represents insufficient consideration to form a binding contract.  (Carr's Wild Horse Center, B-285833, October 3, 2000)


The FAR reflects the rule that, without an obligatory minimum quantity, the government-buyer under an indefinite-quantity contract would be allowed to order nothing, rendering its obligations illusory and, therefore, unenforceable. Rice Lake Contracting, Inc. v. United States, 33 Fed.Cl. 144, 153 (1995); Aalco Forwarding, Inc., et al., B-277241.15, Mar. 11, 1998, 98-1 CPD para. 87 at 6. Since the RFP here contains no stated minimum, it does not meet the test for formation of a valid indefinite-quantity contract.  (Satellite Services, Inc., B-280945; B-280945.2; B-280945.3, December 4, 1998)

Comptroller General - Listing of Decisions

For the Government For the Protester
CW Government Travel, Inc., B-295530, March 7, 2005 (pdf) Satellite Services, Inc., B-280945; B-280945.2; B-280945.3, December 4, 1998
ABF Freight System, Inc.; Old Dominion Freight Line, Inc.; Overnite, B-291185, November 8, 2002  
Carr's Wild Horse Center, B-285833, October 3, 2000  
Legal

Protests

Bona Fide Needs Rule
Public Laws
Legislation
Courts & Boards


Rules & Tools
Workforce
Reading

Small Business
 

   
 
 

ABOUT  l CONTACT