Many government contractors often wonder how an agency decides the guaranteed minimum in FAR IDIQ procurement contracts. There is somewhat of a national consensus that the IDIQ minimum guarantee is not worth the effort of writing a proposal for government contracts. Nevertheless, when bidders decide to challenge IDIQ guaranteed minimums, they should still be aware of the rules. To establish a binding IDIQ contract for bidding, the FAR requires that there be a stated guaranteed minimum quantity of supplies or services to be ordered under the IDIQ. Specifically, The FAR states that contracting officers “to the maximum extent practicable, give preference to making multiple awards of indefinite-quantity contracts under a single solicitation for the same or similar supplies or services to two or more sources.” FAR 16.504(c).
At Watson & Associates, LLC our government contract small business and bid protest lawyers help clients across the country to make sound decisions and to interpret procurement statutes in a way that adds substance to basic day-to-day business operations.
To define “indefinite”, you must look at the terms and conditions of the IDQ contract itself. Given that the government must continue to use the best value approach to spend taxpayer dollars, the definition of “indefinite” is not taken literally. Generally, FAR IDIQ contracts do not exceed a five-year period. Within the contract terms and conditions, the minimum and maximum amounts are specified.
FAR IDIQ Rules FAR 16.5
GAO has decided that Government contracting agencies may use an IDIQ contract under FAR 16.5 where it cannot predetermine, above a specified minimum, the precise quantity of supplies or services that will be required during the contract period and where it is inadvisable for the government to commit itself to more than a minimum amount. Federal Acquisition Regulation FAR 16.504(b); Aalco Forwarding, Inc., et al., B-277241, B-277241.15, Mar. 11, 1998, 98-1 CPD ¶ 87 at 6.
An IDIQ contract must require the government to order and the contractor to furnish at least a stated minimum quantity of supplies or services, and if ordered, the contractor to furnish any additional quantities, not to exceed the stated maximum. FAR § 16.504(a)(1). To ensure the contract is binding, the minimum quantity must be more than a nominal quantity but, to avoid an unjustified commitment of agency funds, should
Since the multiple awards IDIQ procurement definitions does not specify the precise work that will be provided and is not a requirements contract, the agency applies an explicitly guaranteed minimum in IDIQ contracts, or quantity consideration, to bind the parties.
More Than Nominal Amount in FAR IDIQ Minimum Guarantee Contracts
To ensure that a contract is binding, the IDIQ minimum guarantee must be more than a nominal amount, but should not exceed the amount the agency is fairly certain to order. FAR 16.504(a).
Federal procurement regulations, FAR 16.5 and GAO bid protest decisions have recognized that there is not set number or formula that shows what is a nominally guaranteed minimum for IDIQ contracts. However, the determination of whether a stated minimum quantity is “nominal” must consider the nature of the acquisition as a whole. Carr’s Wild Horse Ctr., B-285833, Oct. 3, 2000, 2000 CPD ¶ 210 at 3. Find out more about the VA’s small business set aside rule of two.
- The minimum guaranteed amount in FAR IDIQ contracts must be evaluated in the context of all of the specific facts and circumstances of the procurement.
- If the government issues a termination for convenience but does not pay the minimum guaranteed amount, it could be found in breach of contract.
The guaranteed minimum in multiple award IDIQ contract vehicles makes some effort to make the government to offer some level of consideration. Otherwise, bidders would use substantial resources when responding to government proposals. Then the government buys nothing. This would not pass the reasonableness test. Also, find out more about claims and adjustments under the Davis Bacon Act wages requirements.
Contact Our FAR IDIQ Contract Protest Lawyers
Companies should seriously consider whether it makes sense to respond to IDIQ contract vehicles with a guaranteed minimum about. One way to make a sound business decision is to see whether the Agency has provided any historical data in the solicitation. This would be the only data to help your decision to bid. Call our bid protest law firm for immediate help with IDIQ minimum guarantee government contracts at 1-866-601-5518.