Can a BPA exceed its ceiling amount?

[lawyergirl]

Hello: 

One of my colleagues recalls seeing somewhere that a BPA can exceed 20% of its ceiling $ amount.  Has anyone ever heard of this occurring?  If yes, is there a source for this, e.g., the FAR?  Thank you in advance for any guidance!

 

 

[ji20874]

A simplified acquisitions BPA under FAR Part 13?  There is no requirement to have a ceiling on such a BPA.

A BPA against schedule contracts under FAR Subpart 8.4?  There is no requirement to have a ceiling for such a BPA, but only an estimate, and YES, orders may exceed the estimate.

Practitioners who do not understand correct principles will often impose a ceiling on BPAs they establish, but hopefully they will learn correct principles one day and stop imposing ceilings.

[Neil Roberts]

On 2/2/2024 at 12:36 PM, lawyergirl said:

One of my colleagues recalls seeing somewhere that a BPA can exceed 20% of its ceiling $ amount.  Has anyone ever heard of this occurring?  If yes, is there a source for this, e.g., the FAR?  Thank you in advance for any guidance!

 

It may be a good practice to provide for a review and favorable termination terms when when the total cumulative dollar amount ordered exceeds the estimate by a certain amount or % because that could be an indication that perhaps it needs to be re-evaluated as to whether it should be re-competed. 

[ji20874]

Or rather, just try to negotiate  discounts.  Termination seems wholly unnecessary as there is no requirement to use the BPA in the first place.

For schedule BPAs, the FAR calls for an annual review and, if the estimate has been exceeded, further invites the contracting officer to seek discounts for future orders.  

[C Culham]

@lawyergirl @ji20874 @Neil Roberts

My thoughts.

While the FAR does not require a ceiling limitation it implies one could set one.  If one is set when the limitation is accomplished the BPA is considered complete.  FAR 13.303-7.  By my read there is no 20% cushion so to speak.

 

[ji20874]

29 minutes ago, C Culham said:

While the FAR does not require a ceiling limitation it implies one could set one.

This is true.  Unfortunately, too many practitioners (and reviewers) believe that a ceiling MUST be set -- that is error, but it is very commonplace error.

I hope readers here are able to break free from error, misconception, or fallacy.

Everyone, please repeat after me:  BPAs, whether for simplified acquisitions or against schedules, do not require ceilings or maximums.  

I wonder if the OP is still reading?

[Vern Edwards]

On 2/6/2024 at 6:38 AM, ji20874 said:

I wonder if the OP is still reading?

Probably not, and I don't blame her. Here is the OP:

On 2/2/2024 at 1:36 PM, lawyergirl said:

One of my colleagues recalls seeing somewhere that a BPA can exceed 20% of its ceiling $ amount.  Has anyone ever heard of this occurring?  If yes, is there a source for this, e.g., the FAR?  Thank you in advance for any guidance!

I think the question was about an FSS BPA that has a ceiling. The question was not about whether a BPA must have a ceiling.

I checked GAO decisions and found several that described GSA MAS BPAs that had ceilings. So, required or not, some agencies have set ceilings on BPAs, for whatever reasons. An agency might have a legitimate policy reason for setting such a ceiling. It might not be the product of ignorance.

So, if a BPA has a ceiling, can an agency place orders under the BPA in excess of that ceiling?

Could the contractor rightfully refuse to accept such an order?

Might a third party successfully protest such an order?

Or, to put it more broadly, would an FSS BPA ceiling limit the government's ordering rights in any way?

[C Culham]

3 hours ago, Vern Edwards said:

So, if a BPA has a ceiling, can an agency place orders under the BPA in excess of that ceiling?

Could the contractor rightfully refuse to accept such an order?

Might a third party successfully protest such an order?

Or, to put it more broadly, would an FSS BPA ceiling limit the government's ordering rights in any way?

My view -

 

For a BPA issued prusuant to FAR subpart 8.4, sure orders could be placed.  One could imagine a possible protest if the agency did not fulfill its annual obligation to review the BPA.  Reference - FAR 8.405-3(e)  Review of BPAs. (1) The ordering activity contracting officer shall review the BPA and determine in writing, at least once a year (e.g., at option exercise), whether- (i) The schedule contract, upon which the BPA was established, is still in effect; (ii) The BPA still represents the best value (see 8.404(d)); and(iii) Estimated quantities/amounts have been exceeded and additional price reductions can be obtained. (2) The determination shall be included in the BPA file documentation.   Sustainable protest? Who knows. 

Refusal would depend on the wording of the BPA.  Such as is there a expressed unilateral right of the government to issue orders stated in the BPA and what are the sideboards to such right.  

Rights would be fact specific to the guiding principles of the FAR, the agency's actions or lack thereof, and the wording of the BPA itself.   The magic words of Federal contracting - It Depends.   

As to the 20% I have never heard of it, might be fact specific to a particular protest and I find nothing in the FAR that elludes to the caveat. 

[formerfed]

5 hours ago, Vern Edwards said:

Probably not, and I don't blame her. Here is the OP:

I think the question was about an FSS BPA that has a ceiling. The question was not about whether a BPA must have a ceiling.

I checked GAO decisions and found several that described GSA MAS BPAs that had ceilings. So, required or not, some agencies have set ceilings on BPAs, for whatever reasons. An agency might have a legitimate policy reason for setting such a ceiling. It might not be the product of ignorance.

So, if a BPA has a ceiling, can an agency place orders under the BPA in excess of that ceiling?

Could the contractor rightfully refuse to accept such an order?

Might a third party successfully protest such an order?

Or, to put it more broadly, would an FSS BPA ceiling limit the government's ordering rights in any way?

If the BPA is for FSS contracts, ceilings aren’t unusual.  So yes, agencies have reasons for ceilings of which I can think of several.

As far as third party protests, I can see how a party might prevail.   An unsuccessful quoter can claim the BPA exceeded the extent of the competition.   

[ji20874]

In my experience, contracting officers and others routinely believe that ceilings are required for BPAs, both FAR Part 13 BPAs and Subpart 8.4 BPAs.  They are astounded when they learn the truth, and some refuse to accept the truth.  I think most BOA ceilings are imposed because of this error in learning rather than by agency policy or purposeful contracting officer decision -- and if an agency does have a policy, that policy may well exist because of this error in learning rather than a legitimate agency-wide need to impose a ceiling.

That said, where a ceiling is imposed, my practice has been to respect it.

[Vern Edwards]

Suppose that you are an FSS MAS ordering activity CO.

In 2023 you conduct a competition to establish three one-year FSS MAS multiple-award BPAs IAW FAR 8.405-3(a) and (b) under an FSS MAS contract for support services. You announce that each BPA will have a "ceiling/estimate" of $5,000,000. The awardees are A, B, and C. The BPA agreement merely states the "ceiling/estimate," but says nothing else about it.

You begin awarding orders to the BPA holders pursuant to FAR 8.405-3(c)(2). Five months into the BPA period, orders to Company A reach the ceiling. Orders to Companies B and C total $250,000 and $1,500,000, respectively.

You now have a requirement for an order estimated to be worth $700,000, less than 20 percent of the ceiling. The requiring activity wants Company A due to its excellent staff and past performance. You conduct a competition for the order IAW FAR 3.804-3(c)(2)(iii) and select Company A.

Companies B and C submit protests to you stating that A was ineligible due to having previously reached its BPA ceiling.

Questions:

1. What would you decide? Would you "sustain" or deny the protest?

2. If the protests were submitted to the GAO, what do you think would happen?

3. What do you thing the Court of Claims would do?

 

[ji20874]

I think I would want to hear the protest parties make their arguments about whether the "ceiling/estimate" was intended to be (1) a ceiling; or (2) an estimate -- after all, they are two entirely different things. 

Whichever way I decided based on the arguments and evidence, I would probably want to bemoan the sloppiness of the agency's BPA text and to chide the protesters for not inquiring about which term was correct before the BPAs were established. 

A typo such as in a FAR citation is easily overlooked and forgiven, but a contracting officer's use of the terms "ceiling" and "estimate" as synonyms indicates a quality problem with the contracting officer as well as with all of the reviewers and attorneys who let the sloppy text slide through.

[Vern Edwards]

So, what are your answers if the CO had written just "ceiling", but said nothing else about it?

I am not going to contest or critique anyone's answers, and I'm not hiding any case law up my sleeve. To the best of my knowledge the issue has never come up in litigation over an order against a BPA.

[ji20874]

If the evidence suggests the parties had a common understanding at the time of schedule BPA establishment that the BPA had a ceiling (and not an estimate, or a separate lower estimate), I think I would want to respect that understanding and enforce the ceiling as limiting on the agency.  It might be interesting to see how the attorney would make a case that a ceiling and an estimate are the same thing, and that both mean estimate.

I note that we are now talking only about schedule BPAs, not simplified acquisition BPAs.  

 

[Vern Edwards]

46 minutes ago, ji20874 said:

It might be interesting to see how the attorney would make a case that a ceiling and an estimate are the same thing, and that both mean estimate.

She might say that "ceiling" in "ceiling/estimate" referred to a cap on the government's commitment to buy and an estimate of what it would buy under the BPA, not a limit on how much the government is free to buy. It is not the same as an IDIQ maximum.

And she might point out that there is no regulation or policy requiring a limit on how much the government is free to buy under an FSS MAS BPA.

She might say that if the term "ceiling/estimate" is ambiguous it is patently so, and the companies competing for the BPA should have inquired.

She might also point out that even if the term "ceiling" is a limit on the government's freedom to buy under the BPA, the government can still buy from the contractors under the normal terms of the FSS MAS contract.

She might also point out that the only function of an FSS MAS BPA is to free the government from the procedures in FAR 8.405-1 and -2 and allow it to proceed instead under the more streamlined procedures 8.405-3. Moreover, a BPA is not a promise of exclusivity.

I'm struggling a here with my damaged eyesight, so I'm going to leave the scene. I hope this thread has shown how Wifconers can use a topic as a rich basis for inquiry and learning. Lead on!

[C Culham]

11 hours ago, Vern Edwards said:

select Company A.

 

1 hour ago, Vern Edwards said:

She might say

The example leaves out alot of  details that I would want in formulating my CO actions for a specific instant procurement yet based on the general details provided in the example as the CO I would not have selected Company A so I would not have been a protest situation in the first place.  My conclusion is based on the information provided that seems to support C  must have been doing ok work based on the quantity C had been awarded via an order or orders so their staff and performance was okay as well.   

If the program area was still bent on only having A I would walk them through the knot hole of a separte GSA FSS competition outside the BPA, which again does not guarantee A, or as a separate GSA FSS Limited Source order (FAR 8.405-6) outside of the BPA if the program area could support it.   No doubt there is a risk witih regard to a protest for the latter even if I thought the Limited Source Justification was bullet proof.  Oh well.

All considered I will simply borrow, in part, from another post from @ji20874  - If a "ceiling/estimate" is stated it would be only fair to respect it.   As to "estimate" versus "ceiling" I am concluding that the terms mean the same thing.   Afterall FAR 8.405-3(a)(iii) is comfortable in using "estimate".

 

[ji20874]

1 hour ago, C Culham said:

 As to "estimate" versus "ceiling" I am concluding that the terms mean the same thing. 

I see them as different.  The FAR text on schedule BPAs speaks only of estimate (not ceiling), and even allows for orders going beyond the estimate (not ceiling) -- this leads me to believe that estimate (not ceiling) is the correct and intended word.  But I allow others liberty in their practice, and they may impose ceilings if they choose.

[formerfed]

On 2/11/2024 at 9:21 AM, Vern Edwards said:

She might also point out that even if the term "ceiling" is a limit on the government's freedom to buy under the BPA, the government can still buy from the contractors under the normal terms of the FSS MAS contract.

She might also point out that the only function of an FSS MAS BPA is to free the government from the procedures in FAR 8.405-1 and -2 and allow it to proceed instead under the more streamlined procedures 8.405-3. Moreover, a BPA is not a promise of exclusivity.

These are the two key points in my opinion.  

[lawyergirl]

Thanks so much to all for the informative responses!  It is sincerely appreciated!

[Don Mansfield]

FSS contracts have maximums, correct? If so, wouldn't orders under a FSS BPA count against the maximum? If so, wouldn't FSS BPAs be limited to an amount at or below the FSS contract maximum?

[formerfed]

Don,  I’m not in a position to check now but I don’t think the contracts have a maximum.  Or if they do it’s very large.   Even the maximum order limitation just about went away although the contracts contain a threshold where contractors have the option to decline orders.