Law Offices of Clinton D. Hubbard

2007

 

 

 

Overview Of Federal ID/IQ Awards; and Protest Limitations

 

Since the enactment of the Federal Acquisition Streamlining Act of 1994 (“FASA”), task and delivery order contracts have become an increasingly popular vehicle for federal acquisitions.  They are commonly known as ID/IQ contracts (indefinite-delivery/indefinite-quantity).  This article provides an overview and a brief description of the limitations with respect to protests of individual task orders under these contracts.

 

 

ID/IQ Contracts

 

FASA has been implemented by a series of regulations including FAR subpart 16.5, which prescribe policies and procedures for making awards of indefinite delivery contracts.  Such contracts are bilateral instruments wherein the government reserves the right, after the basic contract is issued, to issue task orders for specific services or supplies over a 1-year period (often lengthened 2 or 4 more years per option provisions).  The exact dollar amount is indefinite (within upper and lower bounds) and the quantities and timing of task orders are also unknown at the time of the contract award.  Often there is a unit price or labor rate schedule from which the government can order goods or services.  However, in the case of per task service contracts it will often be unclear exactly how many units of labor will be required to perform a future  task.  In such instances, the contractor is compensated on either a time-and- materials basis off that schedule; or is paid pursuant to a pre-negotiated fixed price for a future task based upon an estimated quantity of labor and materials (the estimate is generated after the task description is issued).

 

Although the terms "requirements contract" and "indefinite-quantity contract" are sometimes used interchangeably, there is an important legal and practical distinction.   Under a requirements contract the contractor must fill all actual purchase requirements of the designated governmental command for the subject supplies or services during the contract period, and the government must fill those needs only from that contractor and not from other sources. (FAR 16.503).  In contrast, under an indefinite-quantity contract the government is not obligated to purchase its requirements from the contractor (although there may be a small minimum purchase requirement) and can, essentially, ignore the contract if it so chooses. (FAR 16.504)

 

The main benefits to the government for an ID/IQ purchase of goods contract

are that it may avoid the stocking of inventory, have “just in time” delivery, and order direct shipment to the specific user locations.  And for both the sale of goods and rendering of services, the government saves procurement time and effort by issuing a single contract against which orders are placed.   Of course, in order to enter into the initial ID/IQ contract in the first place the government must comply with the full competitive procurement procedures of the Competition in Contracting Act.  The streamlining advantage arises in issuing individual task orders thereunder.  ID/IQs have become one of the most preferred contract instruments during the last two decades, accounting for about half of the Department of Defense major contract actions in recent years.

 

 

Multiple Award Contracts

 

In order to maintain competition the code and regulations establish a preference for multiple awards under a single ID/IQ contract:  to the maximum extent practicable the government shall issue awards of ID/IQ contracts under a single solicitation to two or more contractors for the same supplies or services.  FAR 16.504(c). 

 

Under a multiple award contract (“MAC”), where there may be 2 or more contractors simultaneously eligible to fill task orders (usually 2 to 4), the questions often arise as to the basis for selecting one over another of these contractors for a particular order under the MAC.  FAR 16.505(b) provides general guidelines for distributing work among the MAC contractors.  While the contracting officer may exercise broad discretion in developing appropriate order placement procedures, it must provide a “fair opportunity” to each contractor.  The contracting officer may consider past performance on earlier orders under the current MAC, including quality, timeliness, and cost control, among other things.  Further, the contracting officer must document in the contract file the rationale for the price and placement of each order, including the rationale for any trade-offs among cost, price, and non-cost considerations (e.g., performance matters).   However, traditionally these guidelines have not provided a legal remedy for an aggrieved or disappointed contractor.

 

 

Protest Rights

 

The regulations governing indefinite-quantity contracts are structured to head off most bid protests concerning the award of task orders.  Subsection (a)(9) of FAR 16.505 provides: "No protest under Subpart 33.1 is authorized in connection with the issuance or proposed issuance of an order under a task-order contract or delivery-order contract, except for – “(A) A protest on the grounds that the order increases the scope, period, or maximum value of the contract."   This provision implements 10 USC 2304c(d) and 41 USC 253j(d.).  [NOTE: Effective September 17, 2008, a large value exception has been made to this limitation – see recent article on this site for update.]  The theory here is that the MAC contracts are meant to avoid the cumbersome formalities of formal solicitations and related GAO protest rights.  The contractor has recourse to complain to an ombudsman, but the ombudsman cannot compel compliance.   Nevertheless, a disappointed bidder may still protest to the GAO regarding irregularities in awarding the original ID/IQ “master” contract.  But after the ID/IQ is awarded, protest rights over task orders issued thereunder are severely limited.

 

Substantial GAO case law addresses the limited basis for protest available here: what constitutes an increase in the "scope, period, or maximum value" of the contract.  The exception exists to prevent the indefinite-quantity contract from growing beyond its initial essential form and thereby circumventing the requirement for “full and open competition through the use of competitive procedures” per CICA.  10 USC 2304(a)(1)(A).

 

Except for the three listed potential violations (the order increases the scope, period, or maximum value of the contract), a party is barred from protesting any task award decision regardless of what other statutes or regulations that decision might appear to violate.  The GAO tends to interpret the scope provision of the ID/IQ fairly broadly so as to not invalidate task orders for being outside the scope of the original contract.  See, e.g., Specialty Marine, Inc., B-293871, B-293871.2, June 17, 2004, 2004 CPD P130, denying a protest that agency improperly obtained ship repair services outside scope of the MAC ID/IQ.  The protestor complained that the MAC scope and intent was to cover only large navy vessels and not small utility vessels; and that the objectionable task order pertained to a small utility vessel.  The GAO found that the original solicitation put offerors on notice that task orders potentially could be issued for the smaller vessels as well, focusing on language in one portion of the statement of work: “U. S. Navy Strategic Sealift and other military ships."   The test adopted by GAO is what scope a reasonable bidder should be on notice of, rather than a subjective standard.