IDIQ Contracting NCMA Luncheon

1. IDIQ Contracting NCMA Luncheon 16 April 2008 Mark Schweer

2. Why discuss IDIQ Contracting? • Most of DoD’s services needs are acquired on IDIQ contracts • Multiple award IDIQs follow unique rules for competition and award • Many San Diego contractors have SeaPort task orders. SeaPort is a multiple award IDIQ

3. Overview • Contract Types • IDIQs in General • Multiple-Award IDIQs • Funding Issues • Fee Issue on SeaPort IDIQ • Other IDIQ Issues • Q&A

4. Contract Types • How to identify an Indefinite Delivery contract: • N00039-08-D-9999 • “D-type” contracts are indefinite delivery • Types of Indefinite Delivery contracts: • Definite Quantity; FAR 52.216-20 • Requirements; FAR 52.216-21 • Indefinite Quantity; FAR 52.216-22

5. Contract Types Types of Indefinite Delivery contracts: • Definite Quantity • Provides for delivery of a definite quantity of specific supplies or services for a fixed period, with deliveries or performance to be scheduled at designated locations upon order (FAR 16.502) • Requirements • Provides for filling all actual purchase requirements of designated Gov’t activities for supplies or services…. (FAR 16.503)

6. IDIQs – In General Indefinite Delivery, Indefinite Quantity: • Description • Provides for an indefinite quantity, within stated limits, of supplies or services during a fixed period. (FAR 16.504) • Characteristics • Minimum guarantee (more than nominal) • Stated maximum quantity • Description of work (SOW, PWS, etc.) • Authorized ordering activities/individuals • Identified ordering period and procedures

7. IDIQ Ordering – In General • TOs vs. DOs • Orders not synopsized • Max practicable use of PBA • Work described sufficiently to price • Mandatory information included • Date • Contract/order number • CLIN/Qty/Price etc. • Delivery Schedule • Place of Delivery • Funding/payment information

8. Multiple Award IDIQs • Is the preferred method for IDIQs • Not appropriate if; • Only one source is capable • More favorable terms if single award • Cost of admin exceeds benefits • Orders are integrally related • Contract below SAP threshold • Not in the Govt's best interests • Special rules apply for advisory and assistance services

9. Multiple Award Ordering • Gov’t must provide ‘fair opportunity’ for each awardee to be considered unless an exception applies. (See next slide) • Streamlined procedures/evaluation • Orders not protestable, except: • Scope • PoP FAR 16.505(a)(9) • Max Amount • Exceeds $10M • Ombudsman

10. FAIR OPPORTUNITY EXCEPTIONS • Agency's need is of such unusual urgency that providing an opportunity to all awardees would result in unacceptable delays • Only one source is capable of responding due to the unique or specialized nature of the work • The new work is a logical follow-on to an existing task order where contractors were given a fair opportunity to be considered • The order must be placed with a particular contractor in order to satisfy a minimum guarantee. • There is a statute that authorizes or requires purchase from a particular source.

11. Funding Issues

12. Funding Issues • ‘Color of Money’ Issues • Alignment with PWS/SOW paragraphs • PoP implications; extensions • OMN crossing FYs • Prior years cost growth funded by ‘then current’ money • Full vs. Incremental funding (OPN)

13. Funding Issues • If the order is fully funded at award, 52.232-20, Limitation of Cost clause applies. • If the order is incrementally funded at award, 52.232-22, Limitation of Funds clause applies. • 75% within 60 days ‘LOF’ notification • Gov’t not obligated to pay costs incurred in excess of funding provided • Contractor not obligated to continue performance beyond funded amount • Only Contracting Officer can commit the Gov’t to an increase in funds allotted. (apparent authority and ‘at risk’ situations) • Fee proportionate to work funded

14. HANG IN THERE…HALFWAY!!

15. Fixed Fee Issue on SeaPort-e IDIQ extracts fromJon Wester Brief – May 2007

16. Fee Issue • CPFF IDIQ Contract Types • Completion: full fee (and no more) if work completed regardless of cost/hours expended • Level of Effort (Term): fee only on labor delivered. Methods to calculate interim payment of fixed fee: • Percentage of Costs Incurred. • Percentage of Hours Expended.

17. Fee Issue • Scenario - CPFF Level of Effort TO on SeaPort-e expends less LOE than negotiated. • Possible Causes • Government: Partial Incremental Funding • Contractor: Delivering more expensive labor categories than originally proposed. • Example: • Original cost estimate of $25,000 • $25 per hour at 1,000 hours • Actual performance: • $50 per hour • Expends $25,000 ceiling with only 500 hours • Result: 500 fewer hours expended than negotiated, but all estimated costs expended.

18. Fee Issue • What happens with fixed fee if the negotiated Level of Effort (LOE) is not expended? • SeaPort contracts/orders have included a clause to handle a proportionate reduction in fixed fee: SEA 5252.216-9122 (g) If the total level of effort is not provided by the contractor during the period of the task order, the contracting officer shall reduce the fee as follows: Reduced Fee = (Required LOE - Expended LOE)/Required LOE e.g. If the contractor expended 80% of the LOE, the contractor will receive 80% of the fixed fee.

19. Fee Issue • On SPAWAR orders issued through May 2007, interim payment of fixed fee was made to the contractor equal to X (negotiated rate) percent of the incurred costs invoiced. • At Close Out: • Any balance of fixed fee due the contractor shall be paid to the contractor. • Any overpayment of fixed fee shall be repaid to the Government by the contractor at the time of final payment. • Final payment of fixed fee is made on the basis of labor hours expended/delivered.

20. Fee Issue- Problem • If the interim fee payment is based on costs incurred and the final fee payment is based on hours expended, then this inconsistency can lead to a significant overpayment of fee to the contractor. • Recoupment of overpaid fee may occur long after performance is over.

21. Example of Problem

22. Fee Issue - Solution • Since May 2007, SPAWAR has used a new Section B clause (B-2) in new TOs and urged PCOs to modify existing TOs to include this clause, which makes the interim fee payment formula consistent with final fee payment formula. • Payment of Fee: • The Government shall pay fixed fee to the contractor on each direct labor hour performed by the contractor or subcontractor, at the rate of $X.XX per labor hour invoiced by the contractor. • Computation of Interim Fee: • The fee per direct labor hour is computed by dividing the fixed fee amount shown in Section B by the number of estimated hours proposed.

23. Example of Solution

24. Other IDIQ Issues • Small Business Implications • (For LB primes) Subcontracting Goals: scored at contract level rather than TO level [unless a separate subcontracting plan is negotiated at the TO level] • (For SB primes) Limitations on Subcontracting: scored at the contract level, not the TO level

25. Other IDIQ Issues • Ordering Period • Orders can be issued until the last day of the ordering period • PoP of order near end of ordering period dependent on ‘clean-up’ period (See 52.216-22 or on SPAWAR contracts F-303) • Ex. Order placed on last day of ordering period. Clean-up period is 180 days. PoP of order can be no longer than 181 days.

26. Other IDIQ Issues • Maximum Quantity (Ceiling) Management • Straight forward if single-award IDIQ • Multiple-award IDIQs: • Acq Plan (AP) authorizes ceiling (ex. $100M) • If 3 awardees; the max ceiling of the procurement is not $300M, but remains $100M per the AP • Section B of each contract may show max ceiling ($100M) because TO awardees not known • Ceiling management must aggregate TOs of all awardees, i.e. ceiling may be reached well before any of the 3 contracts reaches $100M

27. Congratulations! You have now achieved the degree of “Very Dangerous” in IDIQ Contracting!

28. QUESTIONS/COMMENTS Mark Schweer mark.schweer@navy.mil 619-524-7165