J&A Increasing Ceiling on Multiple Award IDIQ Contracts

anon_ said:

The question came up as to whether we could exceed the current threshold of $7M afforded under FAR Subpart 13.5 since we awarded the contracts using FAR Subpart 13.5.

That threshold ($7M or $13M) concerns the anticipated value at contract award. You said you have already awarded the contract(s).

anon_ said:

Is there a prohibition against using FAR Part 6 as our authority and moving out of FAR Part 13 during contract administration?

PepeTheFrog suggests you read FAR 13.501, and wonders if you should be asking about a "sole source justification" rather than a "J&A."

Just because you can do something doesn't mean you should do something. Why would you not want to use FAR Part 13?

ji20874 agrees with PepeTheFrog.

Yes, we have already awarded the contracts.  Although the value was below the the $7M (FAR 13.500(c) is N/A to this requirement so the $13M is moot) at the time of award, should we really be continuing to use FAR Part 13 when the value would be increased to an amount greater than that $7M (especially given the historical info that I see shows we really should have used FAR Part 15 and had a ceiling around $17.5M)?

No, I did mean J&A since the question that came up involved using FAR Part 6 and not FAR Subpart 13.5.

Maybe you should award a new suite of contracts that more accurately reflects your real needs.

Your current shared ceiling is $5 Million.  Your new desired shared ceiling is $17.5 Million.  Thus, your sole-source amount is $12.5 Million.  Yes, you need a J&A.

But if I was your agency's competition advocate, I would want to disapprove the J&A and tell you to award a new suite of contracts that more accurately reflects your real needs.

Even so, there is no prohibition on awarding a contract under $7 Million using FAR Subpart 13.5 and later modifying the contract to an amount over $7 Million.

But still, maybe you should award a new suite of contracts that more accurately reflects your real needs.

Thanks and I agree with awarding a new suite of contracts.  My opinion is that we should increase the ceiling for enough time to get new contracts in place.  We cannot be without them as there's risk to life and property involved.

If I understood the opening post correctly, the contracts "shared" a single "ceiling" (maximum quantity) of $5M. Why? Why not give each contract a maximum of $5M?

Good question, Vern.  I don't know why the CO chose to write the contracts with a single shared ceiling (max quantity) of $5M.

I bet I know. You awarded a "suite" of MATOCs. Let's say four. And you proceeded under FAR 13.5. I bet the CO thought that if each had a max of $5M it would put the acquisition over the FAR 13.5 dollar threshold. (In applying dollar thresholds IDIQ contracts you apply it against the max, not the min.)

The question is: Should the dollar threshold be applied to the sum of the four contract maximums or to the maximum for each contract? In other words, was there one acquisition of $15M or were four simultaneous but separate ones of $5M each?

I know of nothing in the FAR and of no GAO, COFC or authoritative policy decision that has ruled on that question. Maybe someone else does.

Which do you think is right? One or three?

Vern Edwards said:

Which do you think is right? One or three?

I believe it should be based on what is stated in the contract (assuming that it is).  If the contract clearly states that the maximum quantity/dollars to be ordered is the shared value of all multiple award contracts, then I think it would be one shared value. 

The clause 52.216-22, Indefinite Quantity, refers to the quantity designated in the schedule as the maximum.  FAR 15.504(a)(1) and (a)(4)(ii) requires the CO to also specify a total maximum.  If the contract clearly stated the maximum as the shared value of all orders against the multiple award contracts, then I'm not sure how one could successfully argue that the maximum applies to each contract separately.  Maybe they could.  I only took a quick look and I also could not find any GAO decisions or COFC opinions on the matter.  Nor, could I find any board of appeals opinions (i.e. if the contractor had a dispute with the CO over the interpretation of a shared contract maximum).   it would be interesting to find out if and how this issue has been ruled on.

Previous to this discussion I had never thought about multiple award contracts having a shared value.  If I solicited and awarded multiple award contracts, each had its own value and the sum of those estimated maximum values was the total value of the procurement.  I did a search and found a DOD press release which included what appear to be multiple contracts sharing a total value. http://www.defense.gov/News/Contracts/Contract-View/Article/630619

I also believe it is best to use the dollar value of each awarded contract, not the shared total, when looking at thresholds for approval purposes.  However, there are others who insist on the total acquisition value, with acquisition meaning all the possible awarded contracts.

Thus, if I issue one solicitation with a potential for four contract awards, each with a value of $3 Million, I want to use $3 Million for all review and approval threshold purposes -- but others will insist on reviews and approvals based on $12 Million.  In my last agency, we did it my way.  In my current agency, we don't.

Vern Edwards said:

I bet I know. You awarded a "suite" of MATOCs. Let's say four. And you proceeded under FAR 13.5. I bet the CO thought that if each had a max of $5M it would put the acquisition over the FAR 13.5 dollar threshold. (In applying dollar thresholds IDIQ contracts you apply it against the max, not the min.)

The question is: Should the dollar threshold be applied to the sum of the four contract maximums or to the maximum for each contract? In other words, was there one acquisition of $15M or were four simultaneous but separate ones of $5M each?

I know of nothing in the FAR and of no GAO, COFC or authoritative policy decision that has ruled on that question. Maybe someone else does.

Which do you think is right? One or three?

I think the limiting factor is the scope of the competition. I think the Government would have the contractual right to order up to $5 million on each contract, but the question would be whether offerors could have reasonably anticipated that the total amount of orders against the "suite" of MATOCs would exceed $5 million.

Vern, you stated "In applying dollar thresholds IDIQ contracts you apply it against the max, not the min."  This has always been an interesting point for me in regard to multiple award IDIQ contracts.  Consider this fact scenario.  The government anticipates that it will have a need for an estimated $5M of work.  The government decides to satisfy this need by awarding four IDIQ contracts.  Each contract states that the minimum the government will order under that contract is $25K and states that the maximum amount that will be ordered for the entire project is the $5M.  Because of the minimum amount contained in each contract, no contractor will receive the entire $5M of work.  Further, because of the fair opportunity requirement for awarding orders under multiple award IDIQ contracts, no contractor or the government can reasonably anticipate that any specific contractor will receive orders that exceed the minimum amount stated in each contract.  In this case, how would you apply FAR 1.108 to determine the anticipated value of each contract?

Hi Retread:

Good question.

FAR 1.108 was added by final rule in 2000, 65 FR 36015, June 6, 2000, FAC 97-18, "to enhance a common understanding of how the Federal Acquisition Regulation is drafted." The proposed rule appeared in 65 FR 4346, January 26, 2000. Paragraph (c) read then as it reads now. I don't think that the councils thought about the MATOC maximum problem. Neither the proposed nor the final rule makes any mention of how to handle thresholds when you make multiple awards. They don't appear to have received any comments on paragraph (c).  Paragraph (c) uses the word "action," not acquisition. The terms action and contract action are not defined in FAR Part 2 and so have no FAR-wide definition.

If I were a CO or chief of the contracting office today and proceeding under the SAT or the FAR Subpart 13.5 threshold to award MATOCs, I would set a separate maximum for each contract, but all the maximums would be the same. I would consider each prospective award to be a separate action, even though it is the result of a single acquisition. When applying the dollar threshold in accordance with FAR 1.108(c), I would use the maximum--which I would treat as the most that I would buy under any one or combination of the contracts--unless I knew that I intended or was likely to buy more than the maximum. I would consider anything else to be splitting requirements in order to get below the applicable threshold.

Did I answer satisfactorily?

Vern Edwards said:

FAR 1.108 was added by final rule in 2000, 65 FR 36015, June 6, 2000, FAC 97-18

Hi Vern,

I'm somewhat familiar with the rule making process and issuance of FACs.  If I understand correctly, each subject on a FAC usually references a case number that usually ties back to a FR publication.  How do you look up a reference like you did here (FAR 1.108) and know what FAC (in this case one from 16 years ago) added or revised a section and what FR publication it was in?  Thank you in advance.

In determining contract values I've had success reviewing contract clearance request amounts as indicative of the originators intent. If the clearance documents requested and authorized $5M I'd presume $5M is the shared value of the suite of contracts.

Todd Davis said:

Hi Vern,

I'm somewhat familiar with the rule making process and issuance of FACs.  If I understand correctly, each subject on a FAC usually references a case number that usually ties back to a FR publication.  How do you look up a reference like you did here (FAR 1.108) and know what FAC (in this case one from 16 years ago) added or revised a section and what FR publication it was in?  Thank you in advance.

Todd:

I go either to Westlaw or to the official CFR site and look up FAR 1.108 (48 CFR § 1.108). At the end of the section they list the historical sources of the section in the Federal Register by citation, going back to the original FAR. I then go to Westlaw or to the official Federal Register site and find that volume and page number and read the final rule. The final rule provides the FAC number. The final rule also cites the proposed rule by Federal Register citation, and then I can go to the proposed rule and read it. It takes just a few moments once you get the hang of it, unless the rule is old and has been subject to many changes, in which case it might take a while to find what you're looking for. Before I retired from teaching I taught my students how to do that. It's a useful skill.

Vern

Vern:

Thanks for sharing ...

Vern, thank you for your response.  That seems like a reasonable approach from the government's perspective.  In many cases, the contractor probably will not have a problem with it either.  However, there may be circumstances where a contractor may have a different view, such as if the "action" would put the contractor over the $50M threshold for being subject to full CAS coverage.

Quote

If I were a CO or chief of the contracting office today and proceeding under the SAT or the FAR Subpart 13.5 threshold to award MATOCs, I would set a separate maximum for each contract, but all the maximums would be the same. I would consider each prospective award to be a separate action, even though it is the result of a single acquisition.

I'm trying to understand how it could be any other way than as described in Vern's quote.  

MACS are kind of an artificial construct created by the contracting office who awarded them, in that they are MACS because the CO said they expect to 'award X number of contracts as a result of the solicitation'; otherwise, they have no defining characteristics on their face to distinguish them from single-award.  That is why many times you can only spot a MAC "in the wild" by noting X IDIQ's with sequential numbering, all with the same ceiling. 

So why in the world would anyone ever not set a ceiling for each vehicle?  As amply demonstrated by this example, you run the risk of losing the bubble on your ceiling if you're trying to track the combined ceiling on X vehicles which are otherwise independent in their administration.  The mess you are in seemed entirely predictable....contracting is complicated enough without going out of your way to make it more so...

REA'n Maker, what is the maximum you would set in each contract in the circumstances I identified in my hypo yesterday, a government budget of $5M, 4 awards with a $25,000 minimum for each award?

Retread:

I guess I never answered your question from yesterday. Sorry.

$5M budget. Four contractors. $25K minimum for each. A purely mathematical answer would be a maximum of $4.25M for each of the four contracts. (If my math is right.) You'd have to deduct the $25K minimum for the other three offerors from the budget in order to set a maximum for each. Of course, it's possible (but unlikely) that you would terminate the other three for convenience (or default) before you have to pay their minimums.

Vern, thank you.

On Wednesday, April 27, 2016 at 8:37 AM, Vern Edwards said:

I go either to Westlaw or to the official CFR site and look up FAR 1.108 (48 CFR § 1.108). At the end of the section they list the historical sources of the section in the Federal Register by citation, going back to the original FAR.

Vern:

The e-CFR site doesn't include the Air Force FAR Supplement text - it shows as "RESERVED" and has for years.

Any ideas on how to research the AFFARS history, without Westlaw or Lexis?

NOTE: "[Reserved]" is a term used as a place holder within the Code of Federal Regulations. An agency uses "[Reserved]" to simply indicate that it may insert regulatory information into this location some time in the future. Occasionally "[Reserved]" is used to indicate that a portion of the CFR was intentionally left empty and not accidentally dropped due to a printing or computer error.

~e-CFR website FAQs

To ask a follow-up question regarding contract maximums on multiple award contracts:

Suppose our office followed Vern's advice and awarded a multiple award ID/IQ to two vendors with separate maximums for each contract, but all the maximums are the same. It's year 2 of the contract and Vendor A has been awarded enough task orders that their contract maximum has been met. Vendor B is still well below their contract maximum. Both vendors were given fair opportunity on all orders placed.

Can we continue to use Vendor B's contract and basically treat it as a single award ID/IQ? Since none of the exceptions to fair opportunity in FAR 16.505(b)(2) apply, what documentation should be written to justify the continued use of Vendor B's contract?

On July 19, 2016 at 6:17 AM, EHorner said:

Can we continue to use Vendor B's contract and basically treat it as a single award ID/IQ? Since none of the exceptions to fair opportunity in FAR 16.505(b)(2) apply, what documentation should be written to justify the continued use of Vendor B's contract?

For multiple award contracts, FAR 16.505(b)(1)(i) requires that contracting officers to provide each awardee fair opportunity to be considered for each order exceeding $3,500 (unless exempted by FAR 16.505(b) - to which you point out is not applicable) and FAR 16.505(b)(1)(iii) requires orders in excess of the SAT be placed on a competitive basis.  I'd argue that the fact that a contractor has reached their ceiling does not relieve the contracting officer of the requirements of FAR 16.505(b)(1)(i) & FAR 16.505(b)(1)(iii), it just makes the requirements impossible to fulfill (because a contractor that has reached their ceiling cannot be fairly considered for the award of any more orders).  If the preceding analysis is correct, it would be improper to just use Vendor B's contract and treat it as a single award ID/IQ.

Does anyone else have any thoughts on this issue?

Is there an authoritative definition for considered?

What is a fair opportunity to be considered for each order? Can a contract's ceiling or max (quantity or dollars) be used in consideration? We know the competition requirements in Part 6 and the policies in subpart 15.3 do not apply to the ordering process.

It would seem that you would have a defacto single source or "single award" scenario if one of the two multiple awardees reaches a hard ceiling order limitation that would contractually prevent making additional orders to that firm. You would definitely want to have ordering procedures which would allow a negotiated task order process. The government wouldn't have to award a task order at an unreasonably high price that would otherwise be competitive in the market. 

Surely there are readers here that have experienced a similar scenario where some or all other of the pool members have reached the ceiling limitation. What say ye?

If the pool is four contractors and one reaches the ceiling, then there are still three players to provide adequate competition.

We simply need to plan a little better.

If the plan is for only two contractors, then make the ceiling high enough so that both contractors can compete on all your requirements.

Or, change the plan and allow for four or five contractors.

Sometimes, we need to do a new competition sooner than we planned.  If our planning doesn't match reality, we need to adapt -- that might mean doing a new competition sooner than we planned.

A multiple-award IDIQ contract DOES NOT turn into a single-award IDIQ contract.

Jamaal Valentine said:

Is there an authoritative definition for considered?

Jamaal,

I wish there was a FAR definition for "fair opportunity to be considered for..." but there isn't.  Under the common definition though (https://ahdictionary.com/word/search.html?q=consider&submit.x=46&submit.y=26), I think a contracting officer would be unable to "consider" a contractor for an order if the contractor has reached the ceiling of their contract.

joel hoffman said:

It would seem that you would have a defacto single source or "single award" scenario if one of the two multiple awardees reaches a hard ceiling order limitation that would contractually prevent making additional orders to that firm. You would definitely want to have ordering procedures which would allow a negotiated task order process. The government wouldn't have to award a task order at an unreasonably high price that would otherwise be competitive in the market. 

Surely there are readers here that have experienced a similar scenario where some or all other of the pool members have reached the ceiling limitation. What say ye?

Joel, the ordering procedures might provide more specifics, but I don't know that they would/could change the nature of the situation because any ordering procedures for a multiple award contract must comply with FAR 16.505(b).  

From what I've read, I don't believe and cannot find anything stating that a multiple award contract can become a single award IDIQ when only one contractor has ceiling remaining.

So, the contracts are over when there is no more possibility of competition ( assuming that all pool members have met the minimum orders)?  Okay with me.  Certainly could prematurely finish off the use of an ID/IQ if one of the two firms wins most of the orders.

This also should make it clear that it would been foolish to divide the total value of anticipated orders between the pool in establishing the maximum contract limit, as in the initial question.

On 4/28/2016 at 5:04 PM, Retreadfed said:

REA'n Maker, what is the maximum you would set in each contract in the circumstances I identified in my hypo yesterday, a government budget of $5M, 4 awards with a $25,000 minimum for each award?

Why not $5M each?    Surveillance over 4 contracts with $1.25M ceilings is no different than surveilling 4 contracts with $5M ceilings.   Fair Opportunity doesn't prohibit awarding every single TO to the same contractor, so why hem yourself in by trying to guess the ultimate award value on each?

On 8/11/2016 at 1:19 PM, REA'n Maker said:

Why not $5M each?    Surveillance over 4 contracts with $1.25M ceilings is no different than surveilling 4 contracts with $5M ceilings.   Fair Opportunity doesn't prohibit awarding every single TO to the same contractor, so why hem yourself in by trying to guess the ultimate award value on each?

"Why not $5 million?"  Assuming that one pool member wins all orders, there is a maximum of $4.925 million available in the budget for total orders to any single firm after meeting the $25k minimum for the other 3 pool members (EDIT: see Vern Edwards' earlier, 4/28/2016 response along the same lines, except for a math error). But you are on the right track.

As noted in the Wenesday, July 10 discussions, splitting the overall program budget or scope of funding level between the individual pool members would be foolish and might lead to the unintended result that you prematurely eliminate competition as individual firms reach their contract ceilings before you are able to award the full program.

Splitting the overall limit effectively assumes that awards will be evenly distributed among the pool members. How often would that otherwise happen under competitive conditions, absent deliberate distribution of awards?

It also has the unintended effect of early elimination of the most competitive firms, leaving the remainder of the program to those less competitive.

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EDIT: What happens if you select less than your originally estimated number pool members during the initial ID/IQ competition?

If you set the individual contract limits at or near an announced overall scope limit, the firms should be smart enough to know that they probably won't win all the orders. Bottom line would seem to be clear - don't split the overall contract maximum limit among individual pool members.