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Hello all,

I'm curious on your thoughts regarding using illustrative task orders (ITO) to conduct price/cost analysis on proposed IDIQs. I'm sort of torn myself. I remember seeing, though I can't seem to find it now, a GAO decision stating that, in the instance of the protest, the agency couldn't use illustrative task orders to conduct price/cost analysis to determine reasonableness because the price/cost is not binding ont he contractor. This implies that you could use the ITO for the analysis if the prices/costs were binding to the contractor. The question being, how can these ITO's be structured to bind offerors to the prices/costs they propose? I'm curious as to your thoughts on the matter.

PS, If you by chance know the GAO case that I'm referring to, please refresh my memory :)

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Perhaps CW Gov't Travel, Inc.--Recons., et al., B-295530.2 et al, July 25, 2005, 2005 CPD 139.

Thanks! This still leaves the question though, how would you meaningfully evaluate price/cost when the scope of work of the IDIQ provides for a number of different services.

For instance, suppose you have a proposed IDIQ, 1 base with 4 option years, for program management support services. This could cover a numerous amount of specific tasks. Would you be able to utilize a sample task order which had a period of performance the same length of time as the IDIQ and ask the offerors to provide labor rates for the key personnel? Would that meet the GAO's threshold of a reasonable basis of evaluating price/cost and could these proposed costs bind the contractor?

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Are you just evaluating price, LPTA, or will you be trading price against technical, past performance, etc.? Just out of curiousity, is this a new or recurring requirement? Do you intend to put labor categories and rates in the basic, and issue orders where the only variable is hours and mix?

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This would be trade-off. This would also be a new requirement. The question about rates is interesting, if we put rates in the basic, then we wouldn't have a problem because we'd have a price list to evaluate costs. So the answer regarding the labor categories is no, we wouldn't be putting them in the basic.

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Guest Vern Edwards
Hello all,

I'm curious on your thoughts regarding using illustrative task orders (ITO) to conduct price/cost analysis on proposed IDIQs. I'm sort of torn myself. I remember seeing, though I can't seem to find it now, a GAO decision stating that, in the instance of the protest, the agency couldn't use illustrative task orders to conduct price/cost analysis to determine reasonableness because the price/cost is not binding ont he contractor. This implies that you could use the ITO for the analysis if the prices/costs were binding to the contractor. The question being, how can these ITO's be structured to bind offerors to the prices/costs they propose? I'm curious as to your thoughts on the matter.

What you are calling "illustrative" task orders are usually called "sample" task orders or "sample tasks." The GAO has consistently held that sample tasks are a valid way of evaluating cost or price in a source selection for the award of a task order (IDIQ) contract. The CW Government Travel decision says that the use of sample tasks is not valid if the rates used to price the samples are not stipulated in the contract, i.e., if they will not be binding on the contractor. See Nash, Evaluating Price or Cost in Task Order Contracts, 19 N&CR ? 52 (Nov. 2005).

In answer to your question about how to structure, the issue is not so much how to structure the sample tasks as how to structure the contract. The usual procedure is to have offerors propose burdened hourly labor rates for each of some number of specified labor classifications or categories. The offerors also submit proposals for sample tasks showing how they would estimate the classifications and hours that would be needed to complete the sample tasks. The proposed rates are used to price the hours. The sample tasks must be reasonably representative of the kind or kinds of work that will be required. The hourly rates are incorporated in the contract upon award. When the government plans to issue a task order, it asks the contractor to propose a fixed-price or ceiling price (for T&M) based on the hourly rates and the number of hours it estimates that will be required to perform the task. The parties negotiate to agreement and the government then issues the task order. There are variations on that procedure, but that, in outline, is how the government makes the rates binding, which makes the use of sample tasks a valid way to evaluate price or cost.

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Thanks Vern!

Let me expand on this question to see if the same logic would apply. Suppose you're awarding an IDIQ for construction and are using a sample task order. Requesting fully burdened labor rates for certain labor categories that would be commonly used seems standard. However, how would you evaluate the offerors' other "direct costs" such as material, equipment, etc? Given that the GAO protests, S.J. Thomas (B-283192) and Aurora Assoc. (B-215565), were sustained in part because the Government did not evaluate direct costs, would evaluating only the direct labor suffice? If so, great! If not, would we be able to require offerors to propose direct costs, other than labor, in their proposals that would be binding?

PS: About a year ago I saw you had a post which provided a reading list for those new to contracting who wanted to really delve into the profession. I can't seem to find it now. Would you please be able to provide a link to that post?

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Guest Vern Edwards

A sample task for construction would have to contain project specifications and drawings. The sample task response would presumably include a project cost estimate, including estimates of materials costs based on drawing take-offs. You would evaluate materials costs based on the estimate, looking mainly to supplier pricing relationships and estimating methods. Presumably, the cost of items of material would be virtually the same for every offeror, unless an offeror has advantageous price agreement with certain kinds of suppliers (steel, lumber, etc.), which, I suppose is possible.

I'm not going to write instructions about how to do it. The use of sample tasks is not a new thing. Agencies have been doing it for a long time. It's not very hard. Are we to supposed to understand that there is no one in your organization who knows how to do it?

The blog entry was "Recommended Reading - Part I," and it appeared on 25 January 2009. It's still at the blog site. You'll just have to scroll down until you find it.

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I would not expect instructions as I understand it is my responsibility to research and learn how to do this properly. As for people in my organization, there's disagreement between GC and operations (and within GC itself) about how to do this properly and structure these IDIQs so that the evaluated prices/costs are binding on the contractors.

Regarding your explanation, how would the contractor be bound by the proposed material prices given that the project, including drawings, specs, etc, would be only a sample. I understand that you could use these proposed prices to comparatively analyze each of them against the estimates, current market pricing, and historical prices. However, I don't think this would reach the level of binding prices, thus there would be no meaningful way to evaluate cost. I guess you could bind them to the material costs, with the added stipulation of an economic price adjustment to account for market fluctuations.

Quite honestly, the easiest thing to do is to award the IDIQ along with the first task order, which is how we did it back at my old agency. Unfortunately, our program offices here don't necessarily have the money for the first task orders when they want to award the IDIQ, which begs the question as to why you would even need the IDIQ at that particular point in time.

Thanks for the reading reference!

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Guest Vern Edwards

If you are willing to do research, then I suggest that you get a list of the GAO decisions that deal with pricing based on sample tasks and read them. That will show you what is required of an agency using that approach and what other agencies have done. Your legal office should be able to develop the list in a very few minutes using Lexis or Westlaw.

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Thanks Vern!

Let me expand on this question to see if the same logic would apply. Suppose you're awarding an IDIQ for construction and are using a sample task order. Requesting fully burdened labor rates for certain labor categories that would be commonly used seems standard. However, how would you evaluate the offerors' other "direct costs" such as material, equipment, etc? Given that the GAO protests, S.J. Thomas (B-283192) and Aurora Assoc. (B-215565), were sustained in part because the Government did not evaluate direct costs, would evaluating only the direct labor suffice? If so, great! If not, would we be able to require offerors to propose direct costs, other than labor, in their proposals that would be binding?

PS: About a year ago I saw you had a post which provided a reading list for those new to contracting who wanted to really delve into the profession. I can't seem to find it now. Would you please be able to provide a link to that post?

One approach would be to "normalize" the ODCs. This means that you would instruct all offerors to use the same amounts for ODCs. If done correctly, the GAO won't take exception. When you're looking up cases on sample tasks, look up normalizing costs, too.

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A sample task for construction would have to contain project specifications and drawings. The sample task response would presumably include a project cost estimate, including estimates of materials costs based on drawing take-offs. You would evaluate materials costs based on the estimate, looking mainly to supplier pricing relationships and estimating methods. Presumably, the cost of items of material would be virtually the same for every offeror, unless an offeror has advantageous price agreement with certain kinds of suppliers (steel, lumber, etc.), which, I suppose is possible."

Sample tasks seem to me to be of little value for construction. Unless you are doing a lot of repetitive construction work of a very simple nature, I doubt that actual material prices will be the same for each task let alone for each competitor. They don't usually all go down to the Home Depot or Lowes to get their construction materials. Plus materials tend to fluctuate on at least a monthly basis.

While labor unit rates might be able to be fixed, they are virtually meaningless because the labor quantities depend upon productivity and estimated quantities of work activities.

Non-binding estimates are no more useful than that for a cost reimbursement contract.

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Quite honestly, the easiest thing to do is to award the IDIQ along with the first task order, which is how we did it back at my old agency. Unfortunately, our program offices here don't necessarily have the money for the first task orders when they want to award the IDIQ, which begs the question as to why you would even need the IDIQ at that particular point in time.

Thanks for the reading reference!

I agree with you - why not use a seed task order? If your agency doesn't have a project, why do you need to award the base contracts now? My agency is doing billions of dollars worth of construction with Multiple Award ID/IQ (MATOC) contracts. We are using a 2 phase process from FAR 36.3, using a real project for the seed task order in Phase 2. We are inundated with phase 1 proposers (sometimes up to 50).

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Guest Vern Edwards
I remember seeing, though I can't seem to find it now, a GAO decision stating that, in the instance of the protest, the agency couldn't use illustrative task orders to conduct price/cost analysis to determine reasonableness because the price/cost is not binding ont he contractor. This implies that you could use the ITO for the analysis if the prices/costs were binding to the contractor. The question being, how can these ITO's be structured to bind offerors to the prices/costs they propose?

Joel:

The quote above is from the first in the thread. In Post # 7 FSCO said, "There would be no rates in the basic [contract]." That being the case, how would a "seed" task order bind the government to the rates for task orders issued after the seed, since the rates won't be in the basic contract? The GAO said that a CO cannot rely on the evaluation of rates that won't be binding. So how would the evaluation of a seed order solve the pricing problem? What difference does it make to evaluate the rates used to price a real ("seed") task if those rates will not be binding for further tasks? Sample task or seed task, what's the difference with respect to the question that was asked?

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Joel:

The quote above is from the first in the thread. In Post # 7 FSCO said, "There would be no rates in the basic [contract]." That being the case, how would a "seed" task order bind the government to the rates for task orders issued after the seed, since the rates won't be in the basic contract? The GAO said that a CO cannot rely on the evaluation of rates that won't be binding. So how would the evaluation of a seed order solve the pricing problem? What difference does it make to evaluate the rates used to price a real ("seed") task if those rates will not be binding for further tasks? Sample task or seed task, what's the difference with respect to the question that was asked?

Probably none, as far as binding the contract holders to unit pricing of some type. Probably none, as far as binding the contract holders to unit pricing of some type. But for construction, which was one of the examples mentioned, what usefulness is there is trying to bind the contract holders to pricing, which is generally highly variable between task orders, except under fairly limited circumstances. And - if you are going to do repetitive type construction, our experience has shown that the contractors may get better as they repeat projects

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Guest Vern Edwards
Probably none, as far as binding the contract holders to unit pricing of some type.

Thanks. Do you think that FSCO understands that?

Why bind the contract holders to pricing? Because it's the law, if you buy GAO's interpretation of CICA. Contracts must be awarded in compliance with CICA. CICA requires evaluation of price as a significant factor. If proposed prices are not binding, cost or price evaluation does not comply with CICA.

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Thanks. Do you think that FSCO understands that?

Why bind the contract holders to pricing? Because it's the law, if you buy GAO's interpretation of CICA. Contracts must be awarded in compliance with CICA. CICA requires evaluation of price as a significant factor. If proposed prices are not binding, cost or price evaluation does not comply with CICA.

If you remember, last year or the year before last, there was a Court case concerning the use of ID/IQ contracts for construction that a poster to the Forum was the plaintive or protestor. I'll try to find it but I don't remember which venue or the name of the case...

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Guest Vern Edwards
If you remember, last year or the year before last, there was a Court case concerning the use of ID/IQ contracts for construction that a poster to the Forum was the plaintive or protestor. I'll try to find it but I don't remember which venue or the name of the case...

Are you saying that there was a court decision which held that IDIQ contracts for construction do not have to contain binding prices/rates? I don't remember any such decision.

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Guest Vern Edwards

See, here's something that's bothering me. You wrote: "Sample tasks seem to me to be of little value for construction." You explained as follows:

Unless you are doing a lot of repetitive construction work of a very simple nature, I doubt that actual material prices will be the same for each task let alone for each competitor. They don't usually all go down to the Home Depot or Lowes to get their construction materials. Plus materials tend to fluctuate on at least a monthly basis.

Now, those comments would be equally true of many services, yet sample tasks are commonly and successfully used to evaluate prices in source selections for IDIQ service contracts. Moreover, the use of a "seed" task order would still constitute the use of a "sample" task. Samples can be real or imaginary.

What point have you been trying to make, and what does it have to do with the original question?

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Are you saying that there was a court decision which held that IDIQ contracts for construction do not have to contain binding prices/rates? I don't remember any such decision.

No, not necessarily. It was a challenge to the use of ID/IQ for construction. I don't remember all the details or if it mentioned the pricing arrangement being used.

Years ago, we wrote some MATOC's which fixed labor rates, overheads, markups on subs and salaries but the problem was that that this doesn't take total labor or labor mix, which depends upon numerous variables for each project.

The Army's Job Order Contracting program and the Air Force's SABRE Contracts (these are both forms of SATOC's) use unit-price books with contractually established adjustment factors (multipliers), which were competed. For a job (task) order on these contracts, the government still has to perform take-offs and negotiate quantities with the contractor or use estimated quantities, then measure up all the actuals.

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Guest Vern Edwards

Joel:

I have to say that I'm having trouble following your line of thinking. Why did you bring up the mystery court decision?

You seem distracted. Nothing you just wrote seems to be addressed to the problem at hand. What's going on?

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See, here's something that's bothering me. You wrote: "Sample tasks seem to me to be of little value for construction." You explained as follows:

Now, those comments would be equally true of many services, yet sample tasks are commonly and successfully used to evaluate prices in source selections for IDIQ service contracts. Moreover, the use of a "seed" task order would still constitute the use of a "sample" task. Samples can be real or imaginary.

What point have you been trying to make, and what does it have to do with the original question?

FSCO doesn't like sample tasks unless you can bind the firms to their pricing. FSCO wanted to know how to bind the firms to pricing. FSCO went on to inquire about construction sample tasks and there was some discussion about capturing or evaluating fifferent costs. Someone mentioned material costs may be somewhat stable and equal to the various contractors. I disagree. In fact, for construction, especially where task orders will be issued for jobs in more than one local area, it is challenging to tie down a whole lot of pricing without locking in stuff that we want to be able to take advantage of competitive market pricing during actual subsequent tasks. The construction market is very volatile and has been for several years. There are chronic (legal) labor shortages, material fluctuations, subcontractor and prime contractor availabilities and specialized capabilities, etc. Right now, there is tremendous competition with a lot of firms pricing jobs just to survive.

Our organization is doing a lot of design-build construction using ID/IQ contracts (several billion $). Many of those are for standardized facility types that Army is building for BRAC, Army Transformation, Grow the Army, etc. It isn't really practical to use individual c-type construction contracts due to the volume of projects that must be awarded. Task orders offer streamlined competition procedures. The idea is that we are looking for firms highly qualified in similar type building construction. Even though each project is distinct from another with respect to climate, architecture, and other local conditions , the basic floor plan and technical criteria is the same, just adapted for different sites and different locations.

We have adapted the 2 phase D-B method to select base contract holders due to the expected numbers of proposers. In some cases, we've had upwards of 50 proposers. The short-listed firms are those evaluated to be most highly qualified. They compete for the award of the base ID/IQ contracts and for the first task order. We evaluate the quality of the designs, project specific performance capability and price for a real project that the firms would actually have to perform if awarded the first task. There is is REAL risk to the proposers in their seed task order pricing, not hypothetical pricing. One firm wins the task order and base contract, some of the others are also awarded base contracts. The base contract holders compete for the follow-on tasks.

I believe that this contract model for construction has been court tested and there have been GAO protests. Apparently it passed the tests for price competition for award.

My comments are limited to construction. Service contracting is different than construction. Don't relate my comments to service contract ID/IQ's.

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Thank you Don, Joel, and Vern.

As for sample vs seed task orders, I believe that there is a difference with regards to using them to evaluate IDIQ offerors' prices. In the seed TO, offerors are going to be bound to the prices they propose since the task order is awarded along with the IDIQ. This provides for a meaningful basis to evaluate the cost to the Government, which is what GAO is looking for. GAO never stated that the prices need to be binding throughout the IDIQ, only that the evaluation of cost must be done on prices that bind the contractor. The seed task order would satisfy that requirement.

As for normalizing, that sounds like an interesting idea and I'll add it to my research list =)

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