Delivery Orders Not Binding? Huh?

I read something that I found remarkable in the recently published GAO decision Master Lock Company, LLC, B-309982.2, June 24, 2008. Bob posted the decision on the Wifcon home page. The protester argued that the agency's evaluation of the awardee's past performance should have taken into account the fact that they had declined a delivery order under a different IDIQ contract. In response, the agency argued that a delivery order was not binding and the GAO agreed. Here's an excerpt:

"During the course of this protest, Master Lock also argued that the agency?s evaluation of Evergreen?s past performance was unreasonable. As discussed above, Evergreen declined to accept order No. 2745, which was issued under a different contract. DLA acknowledges that it did not consider these events in its evaluation of Evergreen?s past performance. AR at 8. The agency contends, however, that it was not required to do so because the submission of a quote by a vendor under an ID/IQ contract does not result in a binding obligation. Thus, the agency argues, because Evergreen did not accept the order, there was no contract performance for the agency to evaluate.

The agency

is correct

that neither the submission of a quote by a vendor

nor the issuance of an order

by an agency results in a binding contractual obligation. Rather, the government?s order represents an offer that the vendor may accept either through performance or by a formal acceptance document. M. Braun, Inc., B-298935.2, May 21, 2007, 2007 CPD ? 96 at 3."

[italics added].

However, the case that the GAO cited as support for their position did not deal with a task or delivery order under an IDIQ contract--it was a purchase order using simplified acquisition procedures. There's a big difference. FAR 16.506 requires the inclusion of the clauses at FAR 52.216-18, Ordering, 52.216-19, Order Limitations, and 52.216-22, Indefinite Quantity, in an IDIQ contract. Here's what the Indefinite Quantity clause says regarding the contractor's obligation to perform:

"Delivery or performance shall be made only as authorized by orders issued in accordance with the Ordering clause.

The Contractor shall furnish to the Government, when and if ordered, the supplies or services specified in the Schedule up to and including the quantity designated in the Schedule as the 'maximum.'

The Government shall order at least the quantity of supplies or services designated in the Schedule as the 'minimum.'"

[bold added].

Now, what in this required FAR clause would give the contractor the right to decline an order, provided that the order complies with the Ordering and Order Limitations clauses? I don?t see it.

The decision includes the following statements further on in an attempt to clarify:

"Although the work required under any task or delivery order will only become a binding obligation on the parties if the vendor accepts the order, the underlying ID/IQ contract may itself have obligations. For example, a contract may require a vendor to accept orders placed by the agency within certain parameters.?

This is conceptually incorrect. IDIQ contracts do require (not ?may?) the contractor to accept orders placed by the agency within certain parameters (stated in the Ordering and Order Limitations clauses). The only instance where a contractor?s acceptance of a task or delivery order would matter would be if the agency?s order was not within the stated parameters in the Ordering and Order Limitations clauses. Furthermore, an arrangement where the Government was required to order a minimum quantity and the contractor would not be required to perform would arguably lack consideration and, thus, not be an enforceable contract.

The main problem with this decision is that it characterizes the exception to the rule (i.e., situations where the contractor may decline a task or delivery order under an IDIQ contract) as the rule itself. It also fails to recognize the distinction between purchase orders made in the open market and task and delivery orders under IDIQ contracts.