Is a Unit Priced Contract an Indefinite Quantity Contract?

The title of the thread is "Is a Unit Priced Contract an Indefinite Quantity Contract?"

The answer is "not necessarily." An indefinite quantity contract will likely include unit priced line items. Other contract types may also use unit-priced items.

In response to your below question: "Any thoughts on the meaning of the quoted language from FAR 16.501-2( c )?", if an indefinite delivery contract includes estimated quantities of supplies or services, the cost or pricing arrangement must comply with any appropriate procedures of subpart 16.5. I assume that this would generally refer to Indefinite quantity or requirements contracts. Perhaps a definite quantity contract could contain some unit-priced, estimated quantity line items.

...Additionally, FAR 16.501-2( c ) provides in part, “Cost or pricing arrangements that provide for an estimated quantity of supplies or services (e.g., estimated number of labor hours) must comply with the appropriate procedures of this subpart [FAR Subpart 16.5].” I don’t pretend to know what this means, and can’t reconcile it with, e.g., DFARS Subpart 217.77--Over and Above Work--but I could see how someone might be tempted to read it very broadly.

Any thoughts on the meaning of the quoted language from FAR 16.501-2( c )?

EDIT: Maybe the Over and Above reference isn’t the best example. Another would be a contract options, including multiple-exercise options.

As time passes, I am seeing more insistence that a contract with an estimated quantity MUST be set up under FAR Subpart 16.5 -- even though, as you say, there is long history and inherent authority to have contracts with estimated quantities even if FAR Subpart 16.5 never existed. I want to keep the pre-existing authority alive, but it is hard to do so -- Jacques, if you have a citation from the legislative history of FASA acknowledging the inherent authority to have estimated quantities even before FASA, I would love to read it...

That language has been in FAR since FAC 90-33, 60 FR 49723, September 26, 1995. Neither the FAC nor the proposed rule explain it. The language did not appear in the proposed rule. It appeared without explanation in the final rule.

Since the language is clearly is in the context of "indefinite-delivery" contracts, I think it applies only to FFUP contracts with an estimated quantity and an ordering mechanism, and I think that would be appropriate. On the other hand, I do not see how it could apply to FFUP contracts that stipulate a single job and require the contractor to deliver an estimated quantity of services, with the estimate adjustable under a variation in quantity clause. Without an ordering mechanism, there is not much in 16.5 with which to comply and no need to worry about multiple awards and fair opportunities.

I don't know what the language means specifically, but I wrote something in September 1995 that might explain it. The following appeared in The Nash & Cibinic Report, June 1995 issue, under the title, "The New Rules for Multiple Award Task Order Contracting," under the heading, "The Loophole in the Definition of Task Order Contracting":

Happily for agencies and prospective contractors that find the multiple award policy unattractive, the definition of “task order contract” in the proposed rule provides a giant loophole through which they may escape the clutches of the policymakers. That definition has three components--a task order contract is a contract (1) for services, (2) that does not specify a “firm quantity” of services, and (3) that provides for the issuance of task orders, proposed FAR 16.501-2.

Under the definition, a task order contract does not specify a “firm quantity” of services. Thus, one way to avoid the task order contracting policy is to describe the contractor's performance obligation in terms of a level of effort (i.e., a firm quantity of labor hours, work units, or standard tasks) instead of in terms of minimum and maximum quantities. Such a contract would be a definite-quantity contract--not an indefinite-quantity contract--and would not fall under the task order policy coverage, which only applies to requirements contracts and indefinite-quantity contracts.

​A contract could stipulate a single level of effort for the entire contract and empower the agency to issue orders for whatever labor-hour mix it needs within that level of effort, or it could stipulate a separate level of effort for each labor category, work unit, or standard task. A “Variation in Quantity” clause or partial convenience termination could provide for equitable adjustments to unit prices if the agency finds that it needs to purchase less than the specified level of effort, and the contract could be written to include options for increased quantities of hours in the event the agency wanted to be able to increase the level of effort. However, stipulating a level of effort for units of input (i.e., hours) does not eliminate the labor productivity problem. Thus, the irony of the FASA and proposed FAR definition of “task order contract” is that it excludes a type of indefinite-delivery service contract to which the application of the multiple award preference policy would be theoretically appropriate.

I wrote that almost 20 years ago (!!!), almost three months before the final rule was published. Although I was talking about firm quantities, I think the loophole could have been worked using an estimated quantity. IDIQ contracts today usually don't contain estimated quantities (although they once did). They contain minimum and maximum quantities. The FAR councils didn't want agencies avoiding the statutory multiple award rule by awarding contracts with estimated quantities and an ordering mechanism, leaving out a min and max, claiming that the contracts were not IDIQ contracts, because there were no min and max, and arguing that 16.5 doesn't apply.

Although FAR 16.501-2( c ) does not say so in express terms, it is referring to contracts with estimated quantities and an ordering mechanism. The FFUP flight services contracts that I mentioned in the other thread comply with the rule. They include IDIQ clauses and there are multiple awardees. The unit pricing applies at the task order level.

As time passes, I am seeing more insistence that a contract with an estimated quantity MUST be set up under FAR Subpart 16.5 -- even though, as you say, there is long history and inherent authority to have contracts with estimated quantities even if FAR Subpart 16.5 never existed. I want to keep the pre-existing authority alive, but it is hard to do so -- Jacques, if you have a citation from the legislative history of FASA acknowledging the inherent authority to have estimated quantities even before FASA, I would love to read it...

In another thread, I identified some services that were unit-priced prior to FASA as part of single award service contracts. Is there something in the tail wagging the dog contracting software systems that doesnt allow for fixed-price service contracts with estimated quantities?

Of course, single award construction contracts with estimated quantities have been around since long before the FAR (36.207). And there are indefinite delivery type construction contracts and task orders that may use estimated quanties of unit-priced items..

EDIT: See USAF unit-priced commercial services solicitation for Runway rubber removal services at Luke AFB, AZ: https://www.fbo.gov/?s=opportunity&mode=form&id=af1e6a0940479e0437383b51b4339437&tab=core&_cview=1

Vern,

I appreciate your point. The use of the conjunction "and" instead of "or" is crucial to correct understanding...

16.501-1 Definitions.

As used in this subpart--

Task-order contract means a contract for services that does not procure or specify a firm quantity of services (other than a minimum or maximum quantity) and that provides for the issuance of orders for the performance of tasks during the period of the contract.

A contract for services that procures an estimated quantity of services and does not provide for the issuance of orders for the performance of tasks during the period of the contract is not forbidden anywhere in the FAR -- there is a long-standing history supporting such contracts, including fixed unit price contracts. Anyone errs who supposes that a contract for services that does not procure or specify a firm quantity of services MUST be an indefinite-delivery contract.

ji20874:

Agreed.

You might be interested to know, in light of the concluding posts in the other thread, that I have discovered a GAO decision holding that an FFUP contract for services was an FFP contract for purposes of complying with the requirement to use only FFP contracts when conducting a sealed bid procurement. Even better, I discovered a GAO decision that sustained a protest against a solicitation for housing maintenance services because the agency unreasonably insisted on using an FFP lump sum contract instead of an FFUP contract, deeming the lump sum approach too risky and, therefore, unduly restrictive of competition. I'm writing a blog post now that will discuss both decisions in light of the claim that COs may not use FFUP contracts to buy services.

ji20874,

In the other thread, you wrote:

An approach using the contractor's hours as the payable unit is a labor-hour contract.

Going back to your file maintenance example, what if the deliverable unit were an hour of file maintenance? See below:

---- ------------------------- --- ---- ---------- --------

ITEM DESCRIPTION QTY UNIT UNIT PRICE AMOUNT

---- ------------------------- --- ---- ---------- --------

001 FILE MAINTENANCE 2,000 HR $60 $120,000

. IAW PWS SECTION 4 FOR

. UP TO 5 TRANSACTIONS

. PER HOUR

Are you saying that this approach would make the contract a labor hour contract?

Yes.

Because the payable unit is the contractor's labor hour, not the file maintenance transactions (the work of the contract). As an aside, the contractor is in total control of how much it gets paid because it decides how efficiently it will work -- for five transactions, the contractor could do it all in one hour or could make it last for five hours (one transaction per hour) -- there is no direct relationship between the work of the contract (file maintenance transactions) and the price paid to the contractor.

Where can I apply for that job? From 1-5 transactions per hour at $60/ hour....

Yes.

Because the payable unit is the contractor's labor hour, not the file maintenance transactions (the work of the contract). As an aside, the contractor is in total control of how much it gets paid because it decides how efficiently it will work -- for five transactions, the contractor could do it all in one hour or could make it last for five hours (one transaction per hour) -- there is no direct relationship between the work of the contract (file maintenance transactions) and the price paid to the contractor.

Ok, but wasn't the payable unit in your example a month? I did not think it was the file maintenance transactions. So you don't have to go back and look:

---- ------------------------- --- ---- ---------- --------

ITEM DESCRIPTION QTY UNIT UNIT PRICE AMOUNT

---- ------------------------- --- ---- ---------- --------

001 FILE MAINTENANCE 12 MO $10,000 $120,000

. IAW PWS SECTION 4 FOR

. UP TO 1,200 TRANSACTIONS

. PER MONTH

As you can see, I just took your example and converted the deliverable unit to hours instead of months.

That's not a labor-hour construct. It's also not a fixed-unit-price construct. We will pay the contractor a fixed amount of $10,000 per month for processing uo to 1,200 transactions -- the payable unit is the month, and the payment amount is fixed regardless of whether the contractor provides 30 or 300 labor hours during the month.

Changing the deliverable unit from contractor labor hours to months means we no longer care about contractor labor hours, and it is no longer a labor hour construct.

That's not a labor-hour construct. It's also not a fixed-unit-price construct.

Oh, I thought you had posted that line item as an example of a fixed-unit-price contract. I guess I was wrong.

Actually I can't wait to see Vern’s blog.

In this particular case I hope the blog addresses the following:

I would agree that a contract can have FFUP with in it but I depart when it is stated or illustrated, which it was by a few posters in another thread, that the Units for which the Firm Fixed Price is applicable to can be estimated without further being addressed in a solicitation/contract. It would seem the FAR is explicit about this. By example:

1. For construction when the prescribed variation in quantity clause is used (Ref. 36.207 Pricing fixed-price construction contracts.(a) Generally, firm-fixed-price contracts shall be used to acquire construction. They may be priced—(1) On a lump-sum basis (when a lump sum is paid for the total work or defined parts of the work),(2) On a unit-price basis (when a unit price is paid for a specified quantity of work units), or(3) Using a combination of the two methods and subpart FAR 11.7). In this case the contract becomes a Fixed Priced Contract with a clause that provides for an equitable adjustment due to the variation in estimated quantity.

2. For supplies when the prescribed variation clause is used and in such a case the contract becomes a Fixed Price (supply) Contract (Ref. FAR 11.7).

3. For services when those services are for services that involve the furnishing of supplies and in such a case the contract becomes a Fixed Price (supply) contract. (Ref. FAR 11.7).

4. For commercial item services where the commercial market practice supports that it is done. I conclude here that as such a contract becomes a Fixed Price Contract.

I find nothing in the FAR that states that a contract type in full is defined as a “Firm Fixed Unit Price” contract nor do I find any allowance within the FAR that provides that for services not defined as “commercial item” with estimate quantities can classified as Firm Fixed.

All in all in my view is that if folks want to insist that contracts can be FFUP there are only such if the quantities are specified unless an appropriate FAR or otherwise approved clause is used allowing for "estimated" quantities. Absent the dealings with estimated as provided for in the FAR I would suggest that the contract is a FUP.

It would seem this conclusion is supported by the following quote from this thread –

http://www.wifcon.co...rice#entry18074

" As for terminology, fixed-price contracts based on an estimated number of units with fixed prices and subject to adjustment based on actual unit quantities are still called "firm-fixed-price" (even though they aren't, really). See FAR 36.207."

Carl:

What? Now you say:

I would agree that a contract can have FFUP with in it but I depart when it is stated or illustrated, which it was by a few posters in another thread, that the Units for which the Firm Fixed Price is applicable to can be estimated without further being addressed in a solicitation/contract.

That's not the position you took in the other thread. Here is how that dialogue went, starting with your first post (#22):

So what has me perplexed is that nobody has presented validation that a FFUP contract is allowable except in the procurement of supplies or construction. I would submit that a FFUP contract for services is not allowed by the FAR. Reference FAR Subpart 11.7.

I responded (#24):

See FAR 16.102:

Quote

(a) Contracts resulting from sealed bidding shall be firm-fixed-price contracts or fixed-price contracts with economic price adjustment.

( b ) Contracts negotiated under Part 15 may be of any type or combination of types that will promote the Government’s interest, except as restricted in this part (see 10 U.S.C. 2306(a) and 41 U.S.C. 3901). Contract types not described in this regulation shall not be used, except as a deviation under Subpart 1.4.

FFUP contracts are described in FAR 36.207 as a type of fixed-price contract. Nothing in FAR Part 16 prohibits their use for other acquisitions. See FAR 1.102(d) and 1.102-4(e). Such contracts have been in use in the acquisition of services since at least as far back as the mid-1940s. As far as I'm concerned, failure to mention service contracts in FAR 11.7 is administrative oversight. Anyway, nothing expressly prohibits.

You then said (#26):

Not convincing arguments in my book in Vern's post #25. FAR 36.207 is for construction and now we can stretch to the whole of the FAR?

(My post was actually #24. Don Mansfield posted #25.)

Okay, so this was your position in the other thread: A CO cannot use a firm-fixed-unit-price contract to buy services, because (1) that contract type is mentioned only in FAR 36.207, which addresses construction, not services; (2) FAR Subpart 11.7 provides standard FAR variation in quantity clauses only for contracts for supplies and for construction, not for services; and (3) FAR does not expressly permit the use of FFUP contracts to buy services.

Have I mischaracterized or misrepresented your position at that time? I ask because that argument is unsound and unacceptable. It could be justified only as a rhetorical device to teach trainees how not to interpret the FAR. I presume that you did not intend to make such an argument or to otherwise argue that FAR does not permit a CO to use an FFUP contract to buy services. I must have misunderstood you. Did I?

In your last post you said that your position is:

I would agree that a contract can have FFUP with in it but I depart when it is stated or illustrated, which it was by a few posters in another thread, that the Units for which the Firm Fixed Price is applicable to can be estimated without further being addressed in a solicitation/contract.

I don't know what that means. Whatever it means, can I take your last post to be a retreat from your earlier position that a CO cannot use an FFUP contract to buy services?

(1) Do you now agree that FAR permits a CO to use an FFUP contract to buy services?

(2) Do you agree that it is permissible for a CO to write a variation in quantity clause for such a contract that is similar to the ones FAR prescribes for supply and construction contracts?

If you agree with those two propositions, then I'll let the matter lie without inquiring further into what the heck else you were talking about in your last post.

That's all I need to know, Carl: Do you think (1) that FAR permits a CO to use an FFUP contract to buy services and (2) that a CO may write a variation in quantity clause for a service contract? Yes or no? No need to make a new argument either way, just tell me if the answers are yes or no.

I closed the previous topic that was very similar to this one and I am not pleased to see it back here. The posters need to put an end to this topic quickly--and not force me to close it again.

This is not meant to be critical, but in Carl's last post, he said, in part:

1. For construction when the prescribed variation in quantity clause is used (Ref. 36.207 Pricing fixed-price construction contracts.(a) Generally, firm-fixed-price contracts shall be used to acquire construction. They may be priced(1) On a lump-sum basis (when a lump sum is paid for the total work or defined parts of the work),(2) On a unit-price basis (when a unit price is paid for a specified quantity of work units), or(3) Using a combination of the two methods and subpart FAR 11.7). In this case the contract becomes a Fixed price contract with a clause that provides for an equitable adjustment due to the variation in estimated quantity.

I didn't understand the last sentence. A construction contract that contains estimated quantities of unit priced items is a fixed price contract. The VEQ clause for construction doesn't authorize a variation of the quantities. The contract language will authorize payment for actual quantities of work performed to complete the described scope. Within a range of 85 - 115% of the estimated quantity, the government will pay the contract unit price for the work.

If the actual quantity performed falls outside the range, the government will also pay the contract unit price - unless one or both parties demands an "equitable adjustment to the contract price". The equitable adjustment is only allowed if the contractors's cost increases or decreases solely due to the variation outside the range. In other words, if the unit cost for the work outside the range changes, then an equitable adjustment would be made. However, the work isn't actually "re-priced" based upon actual cost incurred but only adjusted after comparing the contractor's cost per unit inside and outside the range.

For underruns, the contractor will generally not be able to recover all of its fixed costs or mob type costs and might not be able to reach full productivity, so will likely request an adjustment of some sort. However, it can only recover up to 85% of its fixed/mob costs because there wouldn't have been any adjustment had it performed 85% of the work. Productivity adjustment could be allowed if the contractor can show what the productivity would have been at 85% of estimated quantity.

For overruns, unless the actual cost per unit to the contractor for the work outside the range changes one way or the other compared to the unit cost for the work within the range, there would not be any adjustment and the work would be paid for at the same unit price. The government often tries to obtain a price reduction for the work beyond 115%, due to the contractor having recovered all of its mob and set-up costs. Even though the unit price theoretically includes fixed (time related) costs, if the overrun causes an increase in the overall time to complete the contract, the individual unit priced line item might only cover a share of the total job fixed costs per day. Thus the contractor might seek the other portion of the extended overhad type costs ( in addition to a time extension).

There are all sorts of possibilities to consider but my point is that we don't simply throw out the contract unit price and re-price the work outside the 85-115% range based upon actual costs. The VEQ clause doesn't authorize overruns or authorize either party to completely re-price the overrun or underrun work. The adjustment is based upon the "Victory" principle (Victory Construction Co. v. U.S., 510 F.2d 1379 (1975)). This was affirmed in Foley Co. v. U.S., 11 F.3d 1032 (CA Fed, 1993).

I used to deal with such modifications on a regular basis. Dredgers are the only type of contractor who can skillfully and consistently claim that any work outside the range ends up costing them more per unit than the work within the range !😂

Bob:

I cannot understand why you threaten to close the thread. Carl had taken a position with which I strenuously disagree. Now he appears to have changed it. He must have an opportunity to clarify what he believes.

The discussion is not as tough as others you and I have seen. Heck, you can read tougher arguments in Plato. Arguments can get personal. Criticism can get fierce. So what? Read the letters in The New York Review of Books. Tough arguments happen in real life. Have you seen former Vice President Dick Cheney's recent remarks about President Obama on TV? You see much, much worse in comments to The Washington Post. This thread really ought to be allowed to reach a conclusion or simply die through loss of energy. Don and ji20874 had a tough discussion recently, and it was a good one. It died when the participants got bored with it. It was entertaining.

The issue here is how the FAR should be read and interpreted. It's an important issue today, because prominent people are saying that COs are too rule-oriented, too inclined to find reasons to say No, you can't do that, too averse to innovation. We need to explore what constitutes "rules bound" behavior and what constitutes reasonable adherence to regulatory constraint, and that kind of exploration entails thrashing things out. This is the kind of discussion we should be having, instead of being restricted to answering namby-pamby questions about things like exercising options under GSA FSS contracts and other dumb questions from people who won't do their own research. People who want to read boring Q&As can go to Ask A Professor.

I've edited my last post. Carl's light potshots don't offend me -- I'm an old timer and am used to that kind of thing and I can throw a counterpunch, even at 70, half-blind, and with an injured right arm. You have to be tough to be a CO. Now, please, let the thing go on. This kind of fight is the best part of Wifcon Forum as far as I'm concerned. If these kinds of arguments didn't happen from time to time, I would have dropped out long ago.

But it's your site, not mine. Close the thread if you think you must. I'll use my spare time to write a book if you don't want tough debate.

Vern

The issue here is how the FAR should be read and interpreted. It's an important issue today, because prominent people are saying that COs are too rule-oriented, too inclined to find reasons to say No, you can't do that.

I'm also inclined to think that some KO's**are too rule-oriented and won't act unless there is a very specific rule or cookbook instruction to follow and I'm not a prominent person.

For instance, one must read well past the verbiage in 11.702 to understand the basis of any equitable adjustment due to a variation in estimated quantities on a construction contract.

In this case, a "plain reading" of the 1984 clause at 52.211-18 has been interpreted by the courts and by ASBCA, for example, to generally not allow complete re-pricing of quantities outside the 85-115% boundaries. There can be exceptions for negligent establishment of estimated quantities. This interpretation varies from the often used method that I was familiar with as a consulting engineer, where the agreed unit price only bound the parties within some +/- range of 10% or 15% outside the estimated quantity. Heck, the COE's own former board of contract appeals used the latter interpretation of 52.211-18, which was in direct conflict with ASBCA's interpretation. It was finally settled in court that the ASBCA interpretation was correct.

In addition, the construction VEQ clause has nothing to do with authorizing use of estimated quantities or authorizing variations of those quantities, unlike the supply contract versions. Those clauses appear to cover actual variations in the scope. The construction clause isn't intended to be applied to pricing changes to or additions/deletion of the some of actual scope or work or to adjustments for differing site conditions.

[**Our acquisition instructions refer to a contracting officer as the "KO". ]

All:

Under the Terms Of Use there is Rule 1.

1. No personal attacks on another individual user. Personal attacks DO NOT include a disagreement with another poster's views. Users understand that professional disagreement and professional argument are a part of the learning process. Personal attacks include such things as calling a poster ignorant, unprofessional, etc. These posts will be removed as soon as they are seen.

While a personal attack on a user is not acceptable an attack on a poster's position or argument is acceptable. This rule has remained untouched for years and it is intended to allow for professional disagreement and professional argument.

I allow great leeway to keep debate going.

I'm also inclined to think that some KO's**are too rule-oriented and won't act unless there is a very specific rule or cookbook instruction to follow and I'm not a prominent person.

I agree. But there is something worse than being merely rule-oriented. That is the tendency to clap together a far-fetched, nay-say argument using disparate parts of the rules. Such an argument might go something like this:

Premise: FAR Part 16 says you can any contract type of combination of types described in FAR when contracting by negotiation (any process that is not sealed bidding).

Premise: FAR Part 16 does not expressly say that you can use FFUP to buy services.

Premise: FAR Subpart 36.2 describes FFUP contracts, but that subpart applies to construction, and not to services.

Premise: FAR Part 37, which applies to services, says nothing about using FFUP contracts.

Premise: FAR Subpart 11.7 provides standard variation in quantity clauses for supplies and construction, but not for services.

Conclusion: Therefore, you cannot use FFUP contracts to buy services and you cannot use variation in quantity clauses in service contracts.

All of the premises are true, but the conclusion does not follow from the premises. Thus, that is not a valid argument. The argument not being valid, the conclusion cannot be true on those grounds. FAR does not require that it say that something is permissible in order for a CO to be able to do it. In fact, FAR says exactly the opposite. If the rules (including case law) do not say you have to, then you don't. If the rules do not say you cannot, then you can. The only bedrock criterion of sound practice is whether the practice is in the best interest of the government. Obviously, it is not in the best interest to do that which is expressly forbidden or to fail to do that which is expressly required. Otherwise, "sound business judgment" should prevail.

Steve Kelman, Harvard professor and former OFPP administrator, described the phenomenon of the patched together argument in his book, Procurement and Public Management: the fear of discretion and the quality of government performance (1990), American Enterprise Institute for Public Policy Research, Washington, DC, pp. 25 - 26:

The contracting people are the agencies' own in-house leash holders. While there are some exceptions, in general contracting officers often try to reduce the exercise of discretion by the technical or program people, partly through their role as guardians of the regulatory process... The contracts people generally serve as a lobby for allowing less discretion than the regulations do... Indeed, I was repeatedly surprised how many common procurement practices are not mandated by the procurement regulations, but come from a procurement culture that has developed in contracting offices... In government, the source of the unique knowledge and expertise of contracting officers is the regulations. They are evaluated by how few regulatory violations they allow or how few "waves" the4 procurement causes. Because the exercise of discretion generates the congressional investigations and media stories, contracting officers tend to be safe rather than sorry. Given their lack of program responsibility for what is procured, they have little to compensate them for taking risks.

It does not matter whether you believe that is true. What matters is that enough people believe it's true to lower the esteem of the contracting career field. They are not seen as problem solvers; they are seen as problem posers. The patched together nay-say argument doesn't just violate the rules of valid inference. It reduces what is supposed to be a profession to administrative/clerical status.

The nay-sayer who relies on invalid argument is the enemy of our profession.

"The nay-sayer who relies on invalid argument is the enemy of our profession."

That's a true statement insofar as it goes. But it does not go far enough; not nearly far enough.

The supervisors, managers, and SES-level "leaders" who reward risk aversion and punish risk-takers are the enemies. The "leaders" who fix process problems by adding more processes are the enemies. The "leaders" who promote (or appoint) those who lack technical competence are the enemies.

You get the behavior you incentivize. Nothing more or less.

In contrast, Google X's leadership is telling its employees they need to "fail faster".

http://money.cnn.com/2015/03/18/technology/google-x-astro-teller-sxsw/

Vern –

“What?”

A contract should not be called a firm-fixed-unit-price contract (FFUP), because that contract type is not mentioned anywhere in the FAR. A contract can be a firm fixed priced contract and be based on all line items being fixed quantity unit priced basis ( FAR 36.207). The FAR 16.102 at (a) seems to support this when it says “….contract types not described in this regulation shall not be used..”.

When a contract uses a fixed unit price that has an estimated quantity for unit priced item(s) the line item is no longer “firm fixed price” it becomes “fixed priced”. Therefore “FFUP” to describe a line item in a contract where the quantities are “estimated” is not appropriate.

And to your other questions:

“Do you now agree that FAR permits a CO to use an FFUP contract to buy services?”

No.

Why in case others want to know? As stated above the CO would use a FFP contract if the quantities for the unit price items are fixed. The CO would use a FP contract if the quantities were not fixed. I do agree that Line Items can be FFUP or FUP.

“Do you agree that it is permissible for a CO to write a variation in quantity clause for such a contract that is similar to the ones FAR prescribes for supply and construction contracts?”

Cannot provide a Yes or No answer as I am unsure what “such a contract” is.

For others that might allow other than a Yes or No answer here is my thought. A CO would not need to write a variation in quantity clause for a contract (or a line item in a contract) where the quantity is fixed for the unit priced item(s). As to writing a variation in quantity clause for a service, non-commercial item contract where the quantities for the unit priced item are estimated, my answer is actually I do not know and here is why. The FAR has no prescribed clause for a service contract that does not include supplies and based on discussions in threads found elsewhere in Wifcon I have yet to reach a conclusion if a CO can simply write their own clause to add to a contract if that clause is not prescribed and already contained in the FAR.

All - I will admit that I was not explicit enough in my previous posts so it may appear my position is varied. It has not. My overall concern is that we have bastardized the FAR to such a point that terms of art like FFUP as a contract type become common use when by strict interpretation of the FAR there is no such type of contract. Big deal or not? I will let each of you decide but has been discussed inside and outside this forum that use of terms is important in Federal acquisition.

Joel – I apologize for the post that took you off in another direction. I fully understand the operation of the variation in quantity clause.

I still say a fixed-unit-price with an estimated quantity contract is FFP.

Here's why -- FAR 16.202-1 "A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor's cost experience in performing the contract."

It is important to focus on the price of the item or service, not the amount eventually payable to the contractor. So a contract that establishes a line item for file maintenance services with an estimated quantity of 1,200 transactions and a firm-fixed-price of $2.50 per transaction is FFP. Maybe 1,199 transactions generate, and we'll pay 1,199 x $2.50 = $2,997.50. Maybe 1,201 actions generate, and we'll pay 1,201 x $2.50 = $3,002.50. Either way, the price for the transaction is firm and it is fixed. FPDS-NG and FAR Part 16 give us no other category other than FFP for this sort of contract, and that's okay because FFP fits.

Carl:

You wrote:

When a contract uses a fixed unit price that has an estimated quantity for unit priced item(s) the line item is no longer “firm fixed price” it becomes “fixed priced”.

Help me out, Carl. FAR 36.207 says, in pertinent part:

(a) Generally, firm-fixed-price contracts shall be used to acquire construction. They [FFP contracts] may be priced—

(1) On a lump-sum basis (when a lump sum is paid for the total work or defined parts of the work),

(2) On a unit-price basis (when a unit price is paid for a specified quantity of work units), or

(3) Using a combination of the two methods.

( b ) Lump-sum pricing shall be used in preference to unit pricing except when—

(1) Large quantities of work such as grading, paving, building outside utilities, or site preparation are involved;

(2) Quantities of work, such as excavation, cannot be estimated with sufficient confidence to permit a lump-sum offer without a substantial contingency;

(3) Estimated quantities of work required may change significantly during contraction[.]

Now, Carl, that sounds to me like (a) firm-fixed-price contracts can be lump-sum or unit-priced and ( b ) FFP unit-priced contracts can contain estimated quantities. FAR 36.207(a)(2) says "specified" quantity. It does not say "definite" quantity. My dictionary defines specific as "clearly defined or identified." An estimated quantity is a clearly defined or identified quantity. See Maintenance Incorporated and Worldwide Services, Inc. GAO Dec. B-208036, 83-1 CPD ¶ 631 (June 9, 1983), in which the GAO found that a contract for meal services with estimated quantities, unit prices, and a variation in quantity adjustment provision was "firm-fixed-price":

Maintenance protests that the contract to be awarded under the IFB does not meet the requirement of Defense Acquisition Regulation (DAR) § 2–104 (1976 ed.) that a contract awarded after formal advertising be of the firm fixed price type. The protester proffers two reasons for its contention: 1) the amount paid to the contractor per meal will vary with the number of meals actually served between 80 and 120 percent of the Government estimate, and 2) the IFB expressly requires the negotiation of the contractor's price for services where the actual number of meals served varies from the Government estimate by more than 20 percent. We find no merit in the protester's contention…

The regulation at DAR [Defense Acquisition Regulation] § 2–104 does require that contracts awarded after formal advertising be of the firm fixed price type (except that fixed price contracts with economic price adjustment may be used when some flexibility is necessary and feasible). The DAR describes a firm fixed price contract as providing for a price that is not subject to any adjustment by reason of the cost experience of the contractor in the performance of the contract. DAR § 3–404.2.

First, the fact that the rate of payment to the contractor for each meal (between 80 and 120 percent of the Government estimate) may vary with the number of meals served does not run afoul of these requirements, since the rate of payment is fixed by the prices offered in Part A and Part B without regard to the cost experience of the contractor.

Second, concerning the provision for price negotiation for meal services in excess of 120 percent or less than 80 percent of the Government estimate, the DAR provision authorizing the use of requirements contracts recommends that, if feasible, the contract should state the maximum and minimum limits of the contractor's obligation to deliver and the Government's obligation to order. See DAR § 3–409.2(a); 52 Comp. Gen. 732 (1973). Where the Government deviates from these limits the contractor could be entitled to an equitable adjustment, see _Chemical Technology, In_c., ASBCA No. 21768, 78–2 BCA ¶13, 338 (1978), or to some other amount as specifically stated in the contract, see Broken Lance Enterprises, Inc., ASBCA No. 22588, 78–2 BCA ¶13,433 (1978). Such an adjustment, however, does not change the fact that the contract is a firm fixed price requirements contract for the quantities between the stated minimum and maximum. Indeed, DAR § 3–409( c ) recognizes that requirements contracts with stated minimum and maximum quantities may provide for firm fixed prices. See Spaces Services International Corporation, B–207888.4, .5, .6, .7, December 13, 1982, 82–2 CPD 525.

We therefore deny Maintenance's protest that the IFB contemplates other than a firm fixed price contract.

As you see, the specified price can be a range and, as Joel pointed out, the variation in quantity adjustment clause merely provides for an equitable adjustment, which is something available under all FFP contracts and does not convert them from FFP to merely "fixed-price."

In light of FAR 36.207 and the GAO's decision, I don't understand why a unit-priced contract with estimated quantities and a variation in quantity clause is not a "firm-fixed-price" contract under FAR. But we can agree to disagree about that.

You also said:

As stated above the CO would use a FFP contract if the quantities for the unit price items are fixed. The CO would use a FP contract if the quantities were not fixed. I do agree that Line Items can be FFUP or FUP.

So it's my name, "FFUP," that you object to. To you, an FFUP contract would contain unit prices and definite quantities. Is that correct? Okay by me.

And using your terminology, a contract with unit prices and estimated quantities would be "FUP." Is that correct? Well, okay by me. I'll agree to call them whatever you like. FUP it is.

Now let's get down to business. Do you think that a CO can use an FUP contract to buy services? I mean a contract with unit prices, an estimated quantity, and a variation in quantity clause. Yes or no?

Vern and ji are correct in that a construction contract that contains unit priced line items is a FFP contract.

That's not Carl's issue. Carl thinks that a unit-priced contract is FFP if the quantity of units is definite. If the quantity of units is estimated, then the contract is fixed-price, but not firm-fixed-price.

He's wrong for the reasons I gave, but that's what he thinks.

That's not Carl's issue. Carl think that a unit-priced contract is FFP if the quantity of units is definite. If the quantity of units is estimated, then the contract is fixed-price, but not firm-fixed-price.

He's wrong for the reasons I gave, but there it is.

i agree with you. I forgot to include the words "with estimated quantities". Sorry

Vern -

"Do you think that a CO can use an FUP contract to buy services? I mean a contract with unit prices, an estimated quantity, and a variation in quantity clause. Yes or no?"

Fine, if you want to call them FFUP or FUP "contracts" and I will go along with it as well but when I discuss them they will be Firm Fixed Priced or Fixed Price “contracts" with the unit quantities for unit priced items that are not or are estimated.

Specific to your question -

Yes, and as I already stated in a previous thread, for services, commercial item, which allows for the addition of a variation in quantity clause via tailoring when tailoring is applied in the correct manner.

And

Neither Yes or No as I am not sure. Services, non-commercial item, as also already stated, I have not come to a personal conclusion as to whether the CO could contrive their own variation in quantity clause, or not, since by my read of the FAR there is no prescribed variation clause for such a contract.

As I attempted to exemplify in a previous posts in this forum this discussion is not merely semantics. I already pointed to the fact from FBO posts that agencies use a clause prescribed for construction in contracts other than construction. I have also experienced where an agency has attempted to apply the variation in estimated quantity clause for construction to a construction contract’s line items where the quantities were not “estimated”. Am I too hardnosed, I do not think so, but would agree I am too literal however I do not think my personal tendencies for being so have caused me to be other than a good problem solver and hope that my past performance demonstrates so.

Finally, please forgive me that I bring a past thread into this discussion but I remain really confused. You said at one time this in a previous thread- “As for terminology, fixed-price contracts based on an estimated number of units with fixed prices and subject to adjustment based on actual unit quantities are still called "firm-fixed-price" (even though they aren't, really). See FAR 36.207”. Candidly I thought I had learned something and I am trying to say the same thing.

ji – I know I am going to probably cause a whole bunch of new reactions with the following but since I am in the bucket full already here is my thought about 16.202-1. It says “….is not subject to any adjustment on the basis of the contractor's cost experience in performing the contract." The Variation in Estimated Quantity Clause for Construction provides that for any adjustments “….the equitable adjustment shall be based upon any increase or decrease in costs…” . My conclusion by this read is that costs are subject to adjustment based on the contractors cost experience therefore not a firm-fixed-priced contract.

For supply (FAR 52.211-16) I would yield that it might still be a FFP contract as the only allowed variations have to do with “….loading, shipping, or packing, or allowances in manufacturing processes…” and not what the Government actually demands as happens in construction as the variation in estimated quantity for construction is by result of the what the Government demands for performance via the specifications and drawings.

Carl:

You wrote:

Am I too hardnosed, I do not think so, but would agree I am too literal however I do not think my personal tendencies for being so made me a lousy or even stupid CO as a problem solver but for that I will just let my past performance demonstrate.

No one has called you a lousy or even stupid CO. If I saw such a post it would be edited or deleted and I would contact the poster. I've told you that already in a private message.

You also said:

Candidly I thought I had learned something and now my professionalism is questioned when I am trying to say the same thing.

I've quickly scanned the posts and have been unable to find someone questioning your professionalism. If I saw such a post it would be edited or deleted and I would contact the poster. I've told you that already in a private message.

You have one position and Vern and others have another. I have no problem with any of you stating your opinions.

I do not doubt your professionalism and I would not question it. I don't know why anyone else would either. You are helping those who are reading your posts by forming these opinions and defending them--even if they are done vehemently. Those reading your arguments can do further research and decide if they agree with either position presented here.

Thanks Bob and I apologize for reading between the lines. I could point out where but not going to be labor this anymore. My next step will be to edit my post to take out the statements that you have noted.

Carl:

"Do you think that a CO can use an FUP contract to buy services? I mean a contract with unit prices, an estimated quantity, and a variation in quantity clause. Yes or no?"

Yes, and as I already stated in a previous thread, for services, commercial item, which allows for the addition of a variation in quantity clause via tailoring when tailoring is applied in the correct manner.

Services, non-commercial item, as also already stated, I have not come to a personal conclusion as to whether the CO could contrive their own variation in quantity clause, or not, since by my read of the FAR there is no prescribed variation clause for such a contract.

Finally, please forgive me that I bring a past thread into this discussion but I remain really confused. You said at one time this in a previous thread- “As for terminology, fixed-price contracts based on an estimated number of units with fixed prices and subject to adjustment based on actual unit quantities are still called "firm-fixed-price" (even though they aren't, really). See FAR 36.207”. Candidly I thought I had learned something and now my professionalism is questioned when I am trying to say the same thing.

Okay, so you agree that a CO can use a unit-priced contract with estimated quantities and a variation in quantity clause to buy commercial services. You're not sure (or have no opinion) about noncommercial services. Thank you.

As for your question about my statement, I'm not going to forgive you for anything, but I will answer. You have not been trying to say the same thing that I said. My point was that FAR establishes a category of contracts that it misleadingly calls "firm-fixed-price." FAR describes the category as follows:

A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract. This contract type places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the contractor to control costs and perform effectively and imposes a minimum administrative burden upon the contracting parties. The contracting officer may use a firm-fixed-price contract in conjunction with an award-fee incentive (see 16.404) and performance or delivery incentives (see 16.402-2 and 16.402-3) when the award fee or incentive is based solely on factors other than cost. The contract type remains firm-fixed-price when used with these incentives.

Five sentences. The first is entirely misleading, because all FFP contracts include clauses that provide for price adjustment on the basis of the contractor's actual cost experience in performing the contract. So the price may be "fixed" (set?) at the outset of performance, depending on what "fixed" is supposed to mean, but it is not necessarily "firm." My students are frequently confused by that sentence. In light of the truth, the second and third sentences are also misleading. The fourth sentence tells us again that the price might not be either firm or fixed, but the fifth sentence tells us that the contract is to be called "firm-fixed" nonetheless. Unit priced contracts with estimated quantities fix a firm price depending on the actual quantity delivered, but the price is adjustable if the actuals vary too far from the estimates, the adjustment essentially being an equitable adjustment, as Joel tried to explain to you. So they, too, are not really FFP, but they satisfy the FAR definition of FFP, as indicated by FAR 36.207 and the GAO decision from which I quoted in my last post.

The bottom line is that no contract stipulates a price that is firm or fixed unless absolutely nothing happens during performance that the parties did not anticipate when they set the price.

A better name for what we call a FFP contract would be "stipulated price," and a better description would read something as follows:

A stipulated price contract states an amount to be paid for each of the items to be delivered or services to be rendered. The price or prices may be stated as a single lump sum amount for each item or as an amount per unit of item performance. The prices are adjustable under certain conditions, as provided by the contract terms. Unless the Government provides financing in accordance with Part 32 or agrees to pay for acceptable partial performance, the stipulated prices are payable only upon completed performance that is accepted by the Government.

The names in FAR for the contract types are very old, as are the descriptions, most of which long predate the FAR. The names never accurately described the various government contracts ("cost-reimbursement" is also misleading), but they are okay for those who know what's what and understand the limitations of the FAR descriptions.

I hope that clarifies my statement for you.

Since you have clarified your position with respect to contracts for commercial services, and since you appear to have no opinion about contracts for noncommercial services, I see no need to discuss this further with you and I hope that you feel the same about further discussion with me. (Bob -- Take note.)

It is my opinion that contracts which state unit prices and estimated quantities and include a variation in quantity clause, whatever you want to call them, are firm-fixed-price contracts as described by FAR and that they may be used to acquire both commercial and noncommercial services. I rely on long-standing government practice, the guiding principles in FAR 1.102, the definition of "deviation" in FAR 1.401, FAR Part 16, and numerous decisions of the GAO, the boards of contract appeals, and the courts.

I think Carl and Vern are both wrong. Carl is wrong because FAR 16.102 does specify a contract mechanism to acquire services on a unit price basis. Vern is wrong because FFUP process described at FAR 36.207 applies to construction contracts (note the title of FAR 36.207, "Pricing fixed-price construction contracts."). What both parties are describing is an indefinite quantity (IQ) contract line item.

Carl's argument was "[t]he FAR 16.102 at (a) seems to support [a FFUP contract being unallowable] when it says “….contract types not described in this regulation shall not be used.." However, FAR does prescribe a FFUP process for non-construction procurements. Sorry to get back on topic, but I consider a FFUP contract as described by members of this board as an indefinite delivery contract. Per FAR 16.504(a):

"An indefinite-quantity contract provides for an indefinite quantity, within stated limits, of supplies or services during a fixed period. The Government places orders for individual requirements. Quantity limits may be stated as number of units or as dollar values."

Please do not make the argument that the difference between a FFUP and IQ contract is the ordering process in a IQ contract. In placing orders for FFUP services, that order does not necessarily have to be issued on an OF-347. Orders may be issued orally (16.504(a)(4)(vii)), or "using any medium specified in the contract" (FAR 16.505 (a)(6). An oral ordering have equivalent flexibility as afforded in a FFUP contract, and there is no requirement for that order to specify a definite quantity. For example, in Vern's search and rescue example from the previous thread, your oral order could be to take as many flight hours as needed to find the missing person, but not exceeding the maximum.

I think that if you want a FFUP contract for a non-construction contract, slap on that ordering limitation, indefinite quantity, and ordering clauses to create an IQ contract and develop an oral ordering process that explains how to the parties handle variation in quantity.

Otherwise, if you disagree, please explain the material difference between an IQ contract and a FFUP contract.

I disagree.

If FAR Subpart 16.5 (Indefinite-Delivery Contracts) did not exist, I would still be able to award a contract for an estimated quantity at a fixed price per delivered/performed unit -- we were able to do so before the FAR Subpart 16.5 re-write from FASA, and we can do so now. FAR Subpart 16.5 applies only if the contract provides for the issuance of orders for the performance of tasks during the period of the contract -- see FAR 16.501-1. See also FAR 16.501-2( a ):

"The appropriate type of indefinite-delivery contract may be used to acquire supplies and/or services when the exact times and/or exact quantities of future deliveries are not known at time of contract award."

Some people err in mis-reading this as:

"The appropriate type of indefinite-delivery contract shall be used to acquire supplies and/or services when the exact times and/or exact quantities of future deliveries are not known at time of contract award."

Material difference between a FUP and IDIQ contract: the IDIQ contract provides for the issuance of orders for the performance of tasks during the period of the contract.

Note: I am not opposed to IDIQ contracts -- they serve a useful and valid purpose. But sometimes, a standard contract with an estimated quantity and a fixed-unit-price makes good business sense.

metteec:

The fact that FFUP is described only in FAR Subpart 36.2 does not mean that it cannot be used elsewhere. FAR 16.102( b ) prohibits the use of only a type or combination of types "not described in this regulation." It doesn't say "not described in this part." Well, FFUP is described in the regulation -- in 36.207. Moreover, FAR 36.307 does not say that FFUP may not be used in other acquisitions. Your interpretation violates the guiding principles for the Federal Acquisition System. By the way, since lump-sum is also mentioned only in FAR Subpart 36.2, are you prepared to argue that you cannot use a lump-sum contract to buy services?

As for your IDIQ argument, read FAR 16.504(a). A key feature of an IDIQ contract is an ordering clause, the standard one being FAR 52.216-18.

A FFUP contract may include an ordering clause, but not necessarily. For example, I can award a contract telling a contractor to plant enough trees to cover a specified area of land to achieve a specified degree of soil stabilization. That's a service. Each tree is a unit of service. We unit-price the contract, because the terrain is such that we cannot know how many trees will be needed to achieve the desired stabilization. We estimate a quantity and agree to a variation in quantity adjustment provision. The contractor then goes to work. There is no ordering and there is not ordering clause. No ordering, no IDIQ contract.

I can award a contract to serve meals in a field mess hall. The number of meals to be served may vary considerably depending on the pace of military operations and the number of troops off base and in the field. Each meal is a unit, I set a unit price, estimate a quantity of meals, and include a variation in quantity adjustment clause. There is no ordering clause. The contractor is paid for what it actually serves, depending on who shows up. There is no ordering. No ordering, no IDIQ contract.

Do you need more examples? There are plenty of real life examples.

Now, if you want to call an FFUP contract with estimated quantities an FFUPIQ contract, and distinguish it from an IDIQ contract as described in FAR 16.5, be my guest. I'll go for almost any name.

I think Carl and Vern are both wrong. Carl is wrong because FAR 16.102 does specify a contract mechanism to acquire services on a unit price basis. Vern is wrong because FFUP process described at FAR 36.207 applies to construction contracts (note the title of FAR 36.207, "Pricing fixed-price construction contracts."). What both parties are describing is an indefinite quantity (IQ) contract line item.

Carl's argument was "[t]he FAR 16.102 at (a) seems to support [a FFUP contract being unallowable] when it says “….contract types not described in this regulation shall not be used.." However, FAR does prescribe a FFUP process for non-construction procurements. Sorry to get back on topic, but I consider a FFUP contract as described by members of this board as an indefinite delivery contract. Per FAR 16.504(a):

"An indefinite-quantity contract provides for an indefinite quantity, within stated limits, of supplies or services during a fixed period. The Government places orders for individual requirements. Quantity limits may be stated as number of units or as dollar values."

Please do not make the argument that the difference between a FFUP and IQ contract is the ordering process in a IQ contract. In placing orders for FFUP services, that order does not necessarily have to be issued on an OF-347. Orders may be issued orally (16.504(a)(4)(vii)), or "using any medium specified in the contract" (FAR 16.505 (a)(6). An oral ordering have equivalent flexibility as afforded in a FFUP contract, and there is no requirement for that order to specify a definite quantity. For example, in Vern's search and rescue example from the previous thread, your oral order could be to take as many flight hours as needed to find the missing person, but not exceeding the maximum.

I think that if you want a FFUP contract for a non-construction contract, slap on that ordering limitation, indefinite quantity, and ordering clauses to create an IQ contract and develop an oral ordering process that explains how to the parties handle variation in quantity.

Otherwise, if you disagree, please explain the material difference between an IQ contract and a FFUP contract.

metteec,

FFUP describes a pricing arrangement. IDIQ describes a delivery/quantity arrangement. Two different aspects of a contract. Read this blog entry.

Your question is analogous to asking "What's the difference between a red car and a foreign car?"

meteec:

To add to what Don has said, you must remember that the term is not IQ, but IDIQ. Indefinite-delivery is the main category, of which indefinite-quantity is a subcategory. The common feature of all such contracts, requirements, definite-quantity, and indefinite-quantity, is that the buyer does not know when and maybe where it's going to need service, and maybe even the specific service it's going to need. The ordering component is what makes those contracts what they are, more than the quantity component. If you know what you're going to need and when and where you're going to need it, but you're unsure about how much of the service you're going to need, then you can handle your problem without an ordering clause. No ordering clause, no IDIQ.

1. If a construction contract contains unit-priced line items with estimated quantities that cannot be precisely determined and it isnt a "firm fixed price contract" under 26.207 ( a ) or ( b ) or under 16.202, what type of contract under Part 16 is it?

2. The VEQ clause is a method for allocating risk between the parties when the actual quantity of work falls within or outside of an 85-115% band. It doesnt call for complete re-pricing, so both parties would have to live - for the most part - with the bargain they made at contract formation - barring some reason for inapplicability of the clause, such as negligent estimating, differing site condition, directed change to the work, etc. The unit prices are only applicable to the work already required by the contract - not to undefined or new work.

3. For the most part, an adjustment would only be due under the clause where the variation outside the band causes a difference in unit costs for the work outside the band (e.g.,, for underruns, the contractor doesnt recover the set-up and mob costs, etc., for overruns, the contractor has already recovered its set-up or mob costs, the contractor has to bring in more equipment, has to order additional material not originally procured, perhaps more overtime, larger equipment, etc.

4. A "perfect" FFP contract price arrangement would be too risky for the industry and, if they were to accept all risk, it would be frought with contingencies, thus unaffordable.

5. As others have stated, this type of pricing arrangement for construction contracts has been around for years based upon valid needs and has also been used for service contracting based upon valid needs long before there were FAR contracts for "commercial services" or "commercial items" or long before there was a "FAR".

If you have a contract with unit-prices and an estimated quantity with a variation adjustment > +/- 15 percent, then you have a firm-fixed-price contract. The price is "firm" and "fixed" for every contractually possible quantity within the +/- 15 range and there is an agreement for an equitable adjustment for any quantities in excess. Firm-fixed-price does not mean "single" price despite eventualities. That's the message of the GAO's Maintenance Incorporated decision, which I quoted above.

Don, I disagree with your first statement. A FFUP contract, as described by the numerous examples indicated throughout this thread, is both a pricing and a quantity arrangement. The arrangement is closest to “using a combination of the two methods [lump-sum basis and unit-price basis]” per FAR 36.207(a) that provides for a variable quantity at a fixed-unit price. The numerous contract examples have an unstated quantity for performance over an unstated period of time, and at a FFUP.

I agree with your analogy, and did enjoy your blog post. However, I thought that the board would infer that when I described an IDIQ contract (which I reduced to IQ for brevity, and shamefully, I also text “2” instead of “to”), it was using FP line items. I think both Ji and Vern were able to make that inference, but I could have been clearer in my post.

Vern, I do not need additional examples; I understand the concept. I made a distinction that in a construction contract, you could have a FFUP contract as both a pricing and quantity arrangement, but outside of construction, you could create IQ contract with FFUPs, which is an allowable contract type, contrary to Carl’s statement. FFUPIQ contract sounds good to me.

I cannot provide a decent defense against your argument concerning FAR 16.102(b ) and the wording of “regulation” versus “part”; I went back to the 1984 version of the FAR (no change) and I cannot determine the writers’ intent.

Though, keep in mind that I did not say that a FFUP contract could not be used outside of FAR 36.307. What I said was “FFUP process described at FAR 36.207 applies to construction contracts.” I think that you can use a lump-sum contract to buy services, but I would not use FAR 36.207 as my guidance. I would look at what is customary in the marketplace. I think your argument is stronger by saying that you can use FFUP and lump-sum contracts because they are deeply rooted in our history for all types of acquisitions, rather than because it is specified in FAR 36.

A few problems I see with using a FFUP contract for services without IQ clauses are:

• What is the minimum obligation on a FFUP contract?

• Are you in violation of law if you award a FFUP contract for advisory and assistance services that will continue over 3-years and $12.5 million to a single contractor?

Metteec, in your last post are you thinking of a FFUP contract with an undefined or indefinite scope of work??? The type of services that I am thinking of are routine recurring services that vary in frequency depending upon weather conditions, seasonal conditions, usage, etc. there would be a statement of work with both lump sum and unit-priced line items. At least some of the UP line items would involve estimated quantities.

metteec:

In the contract that I refer to as FFUP, you would have a statement of work, one or more units of service, an estimated quantity of units that will be needed to do the job, and unit prices. You would not have an "unstated" quantity, and I'm not familiar with the "numerous contract examples" to which you refer in which there were no quantities, although I believe your testimony.

In a contract with an estimated quantity the government commits to buy that much, obligates funds to cover the estimated quantity, and includes a variation in quantity clause such as the following to adjust unit prices in the event actual quantities vary significantly from the estimate:

VARIATION IN WORKLOAD:

The estimated workloads contained in Technical Exhibit 2 of the Performance Work Statement are subject to variations. When the accumulated increases or decreases exceed 15% of the original total estimated workload specified in Technical Exhibits 2a through 2i, an equitable adjustment in the contract price shall be made upon demand of either party. The equitable adjustment shall be based solely upon that portion of the total net increase or decrease in excess of 15% of the original total estimated workload.

That was an Air Force clause. There are several variations of it, all as badly written.

The strongest leg of my argument is that COs may use FFUP contracts to buy services of all kinds, with or without an ordering clause, is not long-standing practice or what is customary in the marketplace. Rather, it is FAR 16.102( b ), which lets a CO use any contract pricing arrangement described in the FAR. Period. The FFUP contract is encompassed within the description of firm-fixed-price contracts at FAR 16.202-1, and is described specifically in FAR 36.207. I don't need anything else. Never did.

In response to Joel's question, here is an example (derivative of a real life example):

SneakCorp provides independent verification and validation (IV&V) advisory and assistance services for XYZ agency. The Contractor reviews XYZ's major information systems for compliance with the Federal Information Security Management Act (FISMA) FIPS 140-2 information security standards. XYZ has 47 major information systems. For each major information system, SneakCorp will establish rules of engagement and conduct penetration tests to identify security vulnerabilities. Afterwards, SneakCorp will prepare a report detailing its findings and recommendations for remediation. The major information systems for review are static, but the quantity for review change each year, but the agency has estimated 25 reviews per year. While services are not routine, the level of effort for performing these penetration tests is relatively the same for each major information system. XYZ established a FFUP contract over 5 years valued at $20 million, with a FFUP per security assessment on a major information system. Each security assessment includes a penetration test and a final report identifying recommended security remediation efforts. XYZ included its own version of the Variation of Quantity clause.

Is the agency required to comply with FAR 16.504(c )(2) regarding the multiple award preference for IDIQ contracts for advisory and assistance contracts?

Is the agency required to comply with FAR 16.504(c )(2) regarding the multiple award preference for IDIQ contracts for advisory and assistance contracts?

Come on! Get real! There is no way to answer that question based on the information provided in that post.

meteec, your whole IDIQ or IQ thing is off the mark in this thread. Did you read j20874's post about may versus shall?

Vern, the whole point of this thread is not whether FFUP contract is an allowable contract; I know that topic is important to you. However, the question presented in this thread was whether a FFUP contract is an IDIQ.

The contract type that I described is a FFUP contract In the exact same structure to the contracts you described with a SOW, unit of service, estimated quantity of services, and a fixed unit price with a variation in quantity clause; the only difference was that my contract was for advisory and assistance services, had a specific duration and value. FAR 16.5 contains limitations on single award advisory and assistance contracts over 3 years and $12.5 million.

The point of my question in the previous post was that if it is true that a FFUP contract is NOT an IDIQ, then the CO need not worry about the requirement for multiple awards and a FFUP contract may be a way to avoid the multiple award requirements for advisory and assistance services.

metteec:

I've got 4,814 posts to my credit. I don't need you to tell me about the whole point of a thread.

The scenario that preceded your question was badly written. Your question was:

Is the agency required to comply with FAR 16.504(c )(2) regarding the multiple award preference for IDIQ contracts for advisory and assistance contracts?

In order to answer that question, a pro would first have to determine if the arrangement that you described in the scenario would be an IDIQ contract. Here is your scenario. I've stricken out the words that have no bearing on the issue and highlighted in red that ones that might:

SneakCorp provides independent verification and validation (IV&V) advisory and assistance services for XYZ agency. The Contractor reviews XYZ's major information systems for compliance with the Federal Information Security Management Act (FISMA) FIPS 140-2 information security standards. XYZ has 47 major information systems. For each major information system, SneakCorp will establish rules of engagement and conduct penetration tests to identify security vulnerabilities. Afterwards, SneakCorp will prepare a report detailing its findings and recommendations for remediation. The major information systems for review are static, but the quantity for review change each year, but the agency has estimated 25 reviews per year. While services are not routine, the level of effort for performing these penetration tests is relatively the same for each major information system. XYZ established a FFUP contract over 5 years valued at $20 million, with a FFUP per security assessment on a major information system. Each security assessment includes a penetration test and a final report identifying recommended security remediation efforts. XYZ included its own version of the Variation of Quantity clause.

The text in red is the only information that could have any possible bearing on the determination whether the prospective contract is IDiQ and thus subject to FAR 16.504( c )(2), but it is not enough and it is not clear. In order to make the determination, a pro would need some clarity and more info. Please answer the following questions:

First, you said that SneakCorp "provides" the services to XYZ under a contract. Present tense. Why are you asking the question if they are already providing the service under contract? Is the present contract a multiple award? If not, why not?

Okay, let's disregard those questions and chalk them up to a poorly thought out scenario. Let's assume that you meant to ask about a prospective deal, rather than an existing one. Please answer the following:

1. Will the contract contain the clause at FAR 52.216-22?
2. Will the contract contain the clause at FAR 52.216-18?
3. Will the contract stipulate a minimum quantity? If so, what will it be?
4. Will the contract stipulate a maximum quantity? If so, what will it be?
5. What did you mean when you said that the contract will be "valued at" $20 million? What "value" is that? Will it appear in the contract?
6. You described the prospective contract as "over 5 years." What does that mean? Does it mean over a course of 5 years? Does it mean in excess of 5 years? What will be "over 5 years"? The ordering period in FAR 52.216-18(a), the performance period in FAR 52.216-22(d), or some other period?
7. Do any of the circumstances in FAR 16.504( c )(2)(i)(A) - ( C ) or (ii) apply?

Did you already provide that information? Did I miss it?

Don't bother answering the questions. You have already been told that an FFUP contract that has the attributes of an IDIQ contract is an FFUP contract that is an IDIQ contract. Otherwise, it's an FFUP contract that is not an IDIQ contract. In other words, an FFUP contract is an IDIQ contract if it is an IDIQ contract, otherwise it's not. FFUP is a pricing arrangement. IDIQ is an ordering arrangement. The twain may or may not meet. The two are not necessarily one. What don't you understand about that after all that you've been told and been unable to refute?

It isn't rocket science. It seems simple enough to me, and I'm old and stupid. So why are you having so much trouble?

People who don't know the basics should be reticent about saying that other people are "wrong" on the same. Sometimes it's better to ask a question than to make an assertion: Is it possible that both Vern and Carl are wrong?

The answer is no.

metteec asked,

Are you in violation of law if you award a FFUP contract for advisory and assistance services that will continue over 3-years and $12.5 million to a single contractor?

No, for two reasons--

No. FAR 16.504( c )( 2 ) applies only to IDIQ contracts -- there are two key principles that must be understood for effective communication to occur in this matter:

- if the contract is not an IDIQ contract, then FAR 16.504( c )( 2 ) does not apply; and

- a contract is not an IDIQ contract if it does not provide for the issuance of orders for the performance of tasks during the period of the contract.

No. Even if the contract is an IDIQ contract, an IDIQ contract for advisory and assistance services that will continue over 3-years and $12.5 million to a single contractor is not prohibited by FAR 16.504( c )( 2 ). Read subparagraphs ( i )(A), ( i )( B ), ( i )( C ), and ( ii ), which make single awards allowable. FAR 16.504( c )( 2 ) establishes a preference for multiple award IDIQ contracts for advisory and assistance services, but does not prohibit single award contracts.

Sometimes it's better to ask a question than to make an assertion: Is it possible that both Vern and Carl are wrong?

This is great advice here. I should have stated my opinion more tactfully to show respect towards you and Carl as professionals. Sometimes I let my fingers type quicker than I think, but maybe we are both guilty of this? Your implication about not knowing “the basics” does nothing to further your argument; it was a meaningless barb that you added to attack someone that you had a disagreement. While I can take it, I have not been your only target in this thread and others, but thankfully you edited those posts. However, it may be off-putting to others. Acquisition is important but esoteric area of discussion – people that frequent this forum do so because they care about the subject and want to expand their knowledge. I think professionalism and respect are essential in promoting that environment. With that said…

Vern, where I am getting confused with your argument is that on the one hand, a FFUP is a pricing arrangement, but on the other, when described within this thread it has manifested into something more. Post #42 states that “the strongest leg of [your] argument… is FAR 16.102(b ), which lets a CO use any contract pricing arrangement described in the FAR.” However, FAR 16.102(b ) actually states:

“Contracts negotiated under Part 15 may be of any type or combination of types that will promote the Government’s interest, except as restricted in this part (see 10 U.S.C. 2306(a) and 41 U.S.C. 3901). Contract types not described in this regulation shall not be used except as a deviation under Subpart 1.4.”

I cannot see the term “pricing arrangement” in FAR 16.102(b ). Instead, I see contract type, which is a categorization of risk that takes both price and quantity into consideration. If you take a FFUP pricing arrangement, you can include an estimated quantity, then add a VEQ clause to create a FFP contract pursuant to FAR 16.202. The contract type name that I like today is a FFP Estimated Quantity contract. Regardless, FAR 16.102(b ) provides you with authority to use a FFP contract type, but makes no mention about FFUP.

In Post #35, you stated you can use a FFUP in any contract because of the wording of the prohibition in FAR 16.102(b ) – “regulation” instead of “this part.” Per your argument, since FAR 36.207 which allows lump sum and FFUP pricing arrangements, is part of the “regulation,” it is allowable. However, FAR 36.000, Scope, specifies that this part of the FAR applies to contracts for construction and architect-engineer services (and certain other contracts). By that logic, FAR 36.207 is also only applicable to those specific areas, and not applicable for those services that do not fall within the confines of those requirements. Therefore, if FAR 36.207 is not applicable to a services acquisition, it cannot rest as the sole authority to use a FFUP (or Lump Sum) pricing arrangement.

I believe that the authority for a Contracting Officer to enter into a FFUP pricing arrangement rests with the delegation of authority provided in his or her warrant by operation of law. See FAR 1.601(a ):

“Unless specifically prohibited by another provision of law, authority and responsibility to contract for authorized supplies and services are vested in the agency head. The agency head may establish contracting activities and delegate broad authority to manage the agency’s contracting functions to heads of such contracting activities.”

Agency heads delegate many of those authorities to the Contracting Officer, including the authority of executive discretion. Executive discretion is a powerful and longstanding legal doctrine. FAR 16.102(b ) and FAR 36.207 could be removed from the FAR tomorrow, and Contracting Officers could still use FFUP pricing arrangements. Because no rule exists that expressly prohibits a FFUP pricing arrangement, the Contracting Officer is committed to agency discretion by law. The Contracting Officer may exercise that executive discretion provided his or her decision is not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.

In conclusion, FAR 16.102(b ) is irrelevant to the discussion of whether a FFUP pricing arrangement is allowable because it discusses contract type, and FFUP is not a contract type. Furthermore, FAR 36.207 is also not applicable, as it applies to construction and other specific contracts. Instead, the authority to use a FFUP pricing arrangement is deeply rooted in law. The FAR does not prescribe any limitations on using a FFUP pricing arrangement. Consequently, absent of a specific legal or regulatory limitation, a FFUP pricing arrangement is allowable from the principal of executive discretion.

I may have created additional confusion when I brought up the topic of IDIQ contracts. The point which I did not clearly make was that an IDIQ contract and a FFP Estimated Quantity Contract have similarities. In some cases, those similarities may be so significant that the only difference is the inclusion/absence of certain clauses. With limitations on single-award contracts included for certain types of advisory and assistance IDIQ contracts, a FFP Estimated Quantity contract may provide an alternative approach to acquire those services.

You said so many silly things in your last post that I don't know where to begin, but I'll try. I can hardly miss a target.

Your bit about CO authority is way off the mark. FAR 1.601 does not describe CO authority, FAR 1.602 does, and 1.602-1( b ) says COs must obey the rules, which presumably includes the rule in FAR 16.102( b ). Besides, even if 1.601 did describe CO authority, why would you resort to a general statement about CO authority when you have a specific statement that addresses the issue? Goofy.

I cannot see the term “pricing arrangement” in FAR 16.102(b ). Instead, I see contract type, which is a categorization of risk that takes both price and quantity into consideration. If you take a FFUP pricing arrangement, you can include an estimated quantity, then add a VEQ clause to create a FFP contract pursuant to FAR 16.202. The contract type name that I like today is a FFP Estimated Quantity contract. Regardless, FAR 16.102(b ) provides you with authority to use a FFP contract type, but makes no mention about FFUP.

I addressed this in an earlier thread. As shown by FAR 36.207 and the GAO in the decision I quoted at length, FFUP is a subtype of FFP.

Therefore, if FAR 36.207 is not applicable to a services acquisition, it cannot rest as the sole authority to use a FFUP (or Lump Sum) pricing arrangement.

Why tell me that? I never said that it was.

Because no rule exists that expressly prohibits a FFUP pricing arrangement, the Contracting Officer is committed to agency discretion by law. The Contracting Officer may exercise that executive discretion provided his or her decision is not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.

Why tell me that? I already said that there is no prohibition against FFUP. I've said it several times.

In conclusion, FAR 16.102(b ) is irrelevant to the discussion of whether a FFUP pricing arrangement is allowable because it discusses contract type, and FFUP is not a contract type.

That's the icing on your silliness cake. FFUP is a type of FFP, which is a type, and FAR 16.102( b ) is not irrelevant, because, like Everest, it's there.

In your favor, at least you've dropped the IDIQ business.

If you're still confused, you might want to consider reading the two-part monograph that I wrote about contract types and that was published by Thomson Reuters: "Contract Pricing Arrangements: A Primer," Briefing Papers, October 2009 and November 2009, 09-11 and 09-12 Briefing Papers 1 and 2.

metteec:

I want to address another thing you said in your last post that I needed some time to think about:

Vern, where I am getting confused with your argument is that on the one hand, a FFUP is a pricing arrangement, but on the other, when described within this thread it has manifested into something more. Post #42 states that “the strongest leg of [your] argument… is FAR 16.102(b ), which lets a CO use any contract pricing arrangement described in the FAR.” However, FAR 16.102(b ) actually states:

“Contracts negotiated under Part 15 may be of any type or combination of types that will promote the Government’s interest, except as restricted in this part (see 10 U.S.C. 2306(a) and 41 U.S.C. 3901). Contract types not described in this regulation shall not be used except as a deviation under Subpart 1.4.”

I cannot see the term “pricing arrangement” in FAR 16.102(b ). Instead, I see contract type, which is a categorization of risk that takes both price and quantity into consideration. If you take a FFUP pricing arrangement, you can include an estimated quantity, then add a VEQ clause to create a FFP contract pursuant to FAR 16.202. The contract type name that I like today is a FFP Estimated Quantity contract. Regardless, FAR 16.102(b ) provides you with authority to use a FFP contract type, but makes no mention about FFUP.

Part 16 discusses “types” and discusses different categories of types: pricing types: [FFP FP-EPA, FPI(F) and (S), CPFF, T&M, etc.]; delivery types (requirements, indefinite quantity, definite quantity); and an undefinitized type. It also discusses agreements, which aren’t contracts at all.

I use the word “arrangement,” which does not appear in Part 16, in order to show what Part 16 is categorizing into types. One such arrangement concerns pricing, another concerns delivery. If we outlined Part 16 it might look like this, using my terminology:

Contract Types

Contract pricing arrangements

FFP

CPFF

T&M

etc.

Contract delivery arrangements

R

DQ

IQ

Undefinitized contract arrangements

Agreements

You focused on the word "arrangement" and asserted that I call FFUP an arrangement and then try to apply 16.102( b ), which applies to types, not arrangements. You say that an FFUP arrangement is not a type. You then conclude that the FAR authority to use FFUP arrangements is not 16.102( b ), but 1.601.

Now I think that approach is no way to read the FAR and that it is manifestly silly. See the DOD Contract Pricing Reference Guides -- to which FAR 15.404-1(a)(7) refers and provides a link -- Volume 4, Ch. 1, “Establishing and Monitoring Contract Types,” Section 1.1, “Introduction,” the very first sentence of which is:

When used in this chapter, the terms "contract type" and "type of contract" refer to the contract compensation arrangement.

I say “pricing arrangement,” the Reference Guide says “compensation arrangement,” someone else might say "payment arrangement," I say it makes no difference. Type and arrangement are synonymous.

FAR 16.102( b ) directly addresses the issue that Carl raised in the first thread and that has continued into this one: Can COs use an FFUP contract to buy services? You and I appear to agree that they can, and so at long last this thread is out of energy.

At Wifcon I deal with arguments. I will never meet most of the people I encounter here, but I’m pretty sure that I would like almost every one of them were I to meet them personally. I think most people would like me after such an encounter. But at Wifcon I deal with their argument, not them personally, and I judge and react in each instance based on the quality of their argument and on their process. People get irritated in arguments and I don't pay much attention to that, but I get irritated by a persistently silly approach that wastes my time. As for professionalism, I consider it a matter of ability and competence, not manner. I am impatient with nonsense, and I don't mind showing it.

Your manner has been reasonable, but the content in your last couple of posts has been silly, especially the quibbling (“type” versus “arrangement”). Were you to argue like that in a meeting, I would disregard you entirely. I got irritated when you presumed to lecture me about the “whole point” (Jacque’s original point) of this thread, which hasn’t been its whole point at all. My posts since have reflected my irritation over that. I'm sorry.

I use the word “arrangement,” which does not appear in Part 16, in order to show what Part 16 is categorizing into types. One such arrangement concerns pricing, another concerns delivery. If we outlined Part 16 it might look like this, using my terminology:

It actually does. See FAR 16.501-2( c ):

Indefinite-delivery contracts may provide for any appropriate cost or pricing arrangement under Part 16. Cost or pricing arrangements that provide for an estimated quantity of supplies or services (e.g., estimated number of labor hours) must comply with the appropriate procedures of this subpart.

This reinforces your distinction between pricing arrangements and delivery arrangements.

My computer word search was incompetent. I was wrong, thanks, Don! It also reinforces the idea that "type" and "arrangement" are synonymous.