April 28, 1998
PURPOSE: To provide guidance on indefinite-delivery, indefinite-quantity (IDIQ) contracts which are available to satisfy recurring needs of the agency. Particular guidance is provided on the more flexible type of IDIQ contract which can be used to acquire technical, engineering and scientific services (task orders), or supplies (delivery orders).
BACKGROUND: The Federal Acquisition Streamlining Act of 1994 (FASA) provided flexibility to agencies by codifying existing practices regarding the use of task and delivery order contracts. Specifically, FASA permitted the award of a task or delivery order contract with "a statement of work, specification, or other description that reasonably describes the general scope, nature, complexity, and purposes of the services or property to be procured under the contract." The statute then provides that such "a task or delivery order shall include a statement of work that clearly specifies all tasks to be performed or property to be delivered under the order."
In the past, IDIQ contracts have been used to order pre-priced quantities of clearly defined supplies or services stated in the contract. FASA now expands the IDIQ concept to include more flexible IDIQ arrangements. Although, contracting officers can select from a continuum of IDIQ vehicles to satisfy recurring requirements, most of NASA's recurring requirements for technical, engineering and scientific services and supplies will require the award of the more flexible IDIQ contract since the nature of the work cannot be described precisely until a task or delivery order is placed.
The guidance in this PIC explains how the more flexible IDIQ contract should be used to acquire technical, engineering and scientific services and supplies when it is not practical to pre-establish precisely defined and priced services and supplies at contract award.
1. In competitive situations, contracting officers shall evaluate cost or price prior to the award of IDIQ contracts, even though the solicitation may only contain a general statement of work (SOW). The principal method for evaluating cost or price in this situation involves having representative tasks which reflect the major elements of the work which could be ordered under the IDIQ contract. The proposal instructions should require that each offeror describe how it would perform and price the representative task or tasks, supported by any requested information on price or cost. Based on these descriptions, the contracting officer can evaluate each offeror's proposed price or cost. In addition, contracting officers should evaluate closely the offerors' past performance regarding cost. An evaluation of past performance allows the contracting officer to assess the risk or likelihood of each offeror performing resulting orders within the estimated costs for those orders, as agreed to by the parties.
2. The contracting officer shall attempt to obtain as much pricing information to support the placing of subsequent orders as feasible in awarding the basic IDIQ contract. The level of uncertainty in the SOW will dictate the levels and amount of pricing information that reasonably can be obtained in the proposals. The fair opportunity to be considered for an order in the multiple award scenario provides additional pricing information and competition. In most multiple award contracts, the fair opportunity to be considered for an order may represent the best stage to obtain the most meaningful price or cost competition since the contractors have a specific order requirement against which to propose.
3. As a guiding principle, the favorable pricing terms offered in the pre-award environment, to the maximum extent practicable, should be preserved in the resulting contract. This principle is especially important when a single award is contemplated, or in multiple award environments when one of the proposed contractors holds a significant advantage in cost or technical expertise in a particular area such that no real post-award task/delivery order competition in that area is feasible. These pricing terms, depending on the nature of the supplies or services being acquired, may take different forms (e.g. the methodology used by the contractor to price the representative tasks in the proposal). Except when in a multiple award environment where it is known that all orders will be competed, the contract must contain the rate schedule described in 8 below. When practicable, other pricing schedules should be used, even if those schedules are not exact, but approximate; for example, service level agreements, "menu" pricing, etc.
4. Contracting officers may combine definite requirements and IDIQ requirements in a single contract. This is particularly useful when the baseline requirement can be defined at contract award, and is accompanied with an ancillary IDIQ requirement for supporting supplies or services.
5. Contracting officers should use the most "firm" contract type available, for both the definite requirement and for each order, given the nature of the requirement. When using the more flexible type of IDIQ contract, contracting officers shall ensure that the statement of work is sufficiently detailed to provide notice to potential offerors regarding the work that will be included in the resulting orders. Additionally, in certain situations, such as Consolidated Contracting Initiative (CCI) contracts, the general scope of work may need to explain where the work will be performed and for whom.
6. To enable competition to continue for the placement of orders, multiple awards for task and delivery order contracts other than contracts for advisory and assistance services (CAAS) are preferred. Under multiple award task and delivery order contracts, do not designate one of the contract holders as the preferred source for a specific order, or class of orders.
7. Single awards of IDIQ contracts must be justified. (See FAR 16.504 (c)). A CAAS which exceeds three years and $10,000,000 shall be awarded on a multiple award basis, unless an exception in FAR 16.504(c)(2) applies.
8. If the IDIQ contract does not contain firm or Not To Exceed prices for the supplies or services to be ordered, then a mechanism for establishing the price or cost of individual orders must be set forth in the contract at award. In the more flexible type IDIQ contract, establishing a schedule of direct labor rates and corresponding labor categories is one mechanism contracting officers can use to establish a fair price or amount for each order. The labor categories must reflect those which would probably be needed in the performance of the contract, and should range from entry level to the most senior level. In addition to having direct labor rates, the contracting officer should also establish the corresponding indirect rates (e.g., overheads and G&A rates, but not fee or profit) in the schedule. The contract must stipulate that both parties agree to use that schedule, when required by the Government, as the basis for establishing the estimated cost or price of individual orders, together with any other direct costs specific to the order. For multiple awards, the rate schedule should be expressed as "Not To Exceed". This will permit the contractors to offer prices/costs for orders to be placed at lower rates than are listed in the schedule. Do not include an enumeration of labor hours or rates in the orders. Each order shall therefore contain a price (in the case of fixed-price type orders) or an estimated cost (in the case of cost- reimbursement type orders). During performance of the order, it is the contractor's responsibility to determine and adjust, as necessary, the labor mix, and amount of labor needed to perform, since the rates in the schedule are used only for establishing estimated cost for cost-reimbursement type orders, and for establishing price for fixed-price orders. On cost- reimbursement orders, the Government will pay actual costs incurred as specified in the order, in accordance with the Limitation of Costs, or Limitation of Funds clauses.
9. When the cost risks associated with individual orders are expected to vary, contracting officers should consider awarding IDIQ contracts which reflect more than one contract type and have terms and conditions for both firm-fixed-price and cost-reimbursement contracts.
10. An order placed under an IDIQ contract is not subject to the requirement of full and open competition under the Competition in Contracting Act so long as the order does not increase the scope, period, or maximum value of the IDIQ contract under which the order was placed.
11. A fixed-price order should be considered before a cost-reimbursement order. Contracting officers shall place firm-fixed-price orders under IDIQ contracts when the risk involved is minimal or can be predicted with an acceptable degree of uncertainty.
12. It is essential that such IDIQ contracts for technical, engineering, and scientific services and supplies meet the standards established for performance-based contracting, as well as for other procurement procedures.
13. If the order includes a cost performance incentive (either objective incentive fee/profit or award fee) the cost performance shall be measured against the estimated cost or target cost of the order.
SUMMARY: Key elements to remember include:
EFFECTIVE DATE: This PIC is effective as dated and will remain in effect until canceled.
HEADQUARTERS CONTACT: Kenneth A. Sateriale, Code
HK, (202) 358-0491, email: firstname.lastname@example.org.
R. Scott Thompson
Director, Contract Management Division