A report released by the Government Accountability Office (GAO), GAO-17-329, audited a portion of the federal acquisition process per Senate request. Part of the report shows that through the fiscal years of 2011-2015 there was a stable use of indefinite delivery/indefinite quantity (IDIQ) contracts awarded. IDIQ contracts are used when the exact quantities and timing for products or services is not known at the time of award, it provides for the issuance of orders to be used to procure specific products or services during the contractual period. Over $130 billion in government contracts are accounted for by this use, with the Departments of Defense (DOD), Homeland Security, Health and Human Services, and Veterans Affairs using the majority of these IDIQ contracts. Two-thirds of all IDIQ contracts were for services, with the DOD awarding roughly 68% of all IDIQ contracts total.
The Federal Acquisition Regulation (FAR) establishes a preference for awarding multi-award contracts, but approximately 60% were single-award IDIQs. Agencies have the ability to choose the single-award contracts over the multi-award contracts when either only one contractor can satisfy the obligation, or when the expected cost of administering multiple contracts outweighs the benefits of the divided work. Over 70% of single-award and more than 85% multi-award IDIQ obligations were completed upon, with a significant portion not being competed mainly due to the fact that only one contractor could meet the need or urgency was a major factor.
Pricing for the contracts is established at different points, depending on how clear the requirements were at the time of contract award. Essentially, a product that has been acquired before will be priced when awarded, but something with a less tangible price tag, such a research, will be price flexible until the order level.
The report was originally meant for Senator McCaskill (D-Mo.) and the committee on Homeland Security and Governmental Affairs as a part of their push to review the federal acquisition system and its processes. The GAO was requested to examine federal agencies’ use of IDIQ contracts and address the following: use of IDIQ from fiscal years 2011-2015, the role of competition when awarding selected IDIQ contracts, and when and how DOD contracting officers established pricing for the contracts and orders. The GAO evaluated Federal Procurement Data System-Next Generation data on civilian and DOD obligations through 2015 because it is the latest year with complete data available.
This article was written by Joseph Castelli, an intern with Mid-Tier Advocacy, Inc. (MTA). MTA is a 501(c)3 non-profit which represents Mid-Sized and Advanced Small Federal Government Contractors. For more information and membership please visit www.midtier.org.
Mid-Tier Advocacy Intern