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FAR 16.503:  Requirements contracts - consideration

Comptroller General - Key Excerpts

The agency issued the solicitation on May 20, 2009, contemplating the award of a firm-fixed-price requirements-type contract with a base period of one year and four option years. The solicitation states in relevant part as follows:

It is the intent of the government to make a single award for the services required in this solicitation (Dental Assistants (4) and Pharmacy Technicians (2)). However, the government reserves the right to make two (2) awards for the requested services if advantageous to the government. If two awardees are selected, it will result in separate indefinite delivery/requirements type contracts for each service (e.g. one award to a sole provider for the provision of Dental Assistant Services, and one award to a sole provider for the provision of Pharmacy Technician Services).

Solicitation, Amendment 3, at 1.

A requirements contract provides for filling all actual purchase requirements of designated government activities for supplies or services during a specified contract period, with deliveries or performance to be scheduled by placing orders with the contractor. Federal Acquisition Regulation (FAR) sect. 16.503(a). A requirements contract is formed when the seller has the exclusive right and legal obligation to fill all of the buyer's needs for the goods or services described in the contract. Modern Sys. Tech. Corp. v. United States, 979 F.2d 200, 205 (Fed. Cir. 1992). The promise by the buyer to purchase the subject matter of the contract exclusively from the seller is an essential element of a requirements contract. Id. A solicitation will not result in the award of an enforceable requirements contract where a solicitation provision disclaims the government's obligation to order its requirements from the contractor and therefore renders illusory the consideration necessary to enforce the contract. See Sea-Land Serv., Inc., B-266238, Feb. 8, 1996, 96-1 CPD para. 49 at 5.

The solicitation challenged in this case in no way disclaims the government's obligation to order its requirements from the eventual awardee or awardees, whose contract, or contracts, will quite clearly provide the consideration required for enforceability. Specifically, should the agency determine that it is in the best interest of the government to award two requirements contracts pursuant to this solicitation, one requirements contract for dental assistant services and one requirements contract for pharmacy technician services, the requisite consideration will be provided in each case by the agency's promise to purchase all of the subject matter of each contract solely from the respective contract holder.  (JRS Management, B-401524.2, January 12, 2010)  (pdf)


The promise by the buyer to purchase the subject matter of the contract exclusively from the seller is an essential element of a requirements contract. Modern Sys. Tech. Corp. v. United States, 979 F.2d 200, 205 (Fed. Cir. 1992). A solicitation will not result in the award of an enforceable requirements contract where a solicitation provision disclaims the government's obligation to order its requirements from the contractor and therefore renders illusory the consideration necessary to enforce the contract. See Sea-Land Serv., Inc., B-266238, Feb. 8, 1996, 96-1 CPD para. 49 at 5.  

With regard to any individual contractor, however, there is no obligation to procure all of the agency's needs from that contractor, or to procure all of its needs within a designated price range or at a designated location from that contractor, or even to order any work at all from the contractor. Further, the agency's obligations to the contractors as a whole are limited by the RFP provisions allowing the contracting officer to exclude "unique" projects--and, more important, allowing the contracting officer to deny the task order contractors the right to compete--the very right that the agency argues they have bargained for--"when otherwise determined to be in the best interest of the Government." A party may not by such means reserve to itself a method of unlimited exculpation without rendering the promises illusory and the contract void. Torncello v. United States, 681 F.2d 756, 760 (Ct. Cl. 1982). As the court stated in Torncello, it is specious to argue that the agency's power to avoid its obligations is limited by requiring that it can only do so in the best interest of the government or in the exercise of its discretion. Id. at 770 ("it seems hardly sufficient for the government to promise not to do anything that would be against its own interest. This merely is promising only to do whatever suits it.").  

In other words, an obligation that is avoidable in the government's discretion, or whenever it is in the government's interest, is no limit on the agency's actions. Where the agency has such discretion, it is impossible to ascertain any definite amount of work to which a contractor is entitled, no guidance for a court or board to determine if and when a breach has occurred, and no means of enforcing the contract against the government. See Modern Sys. Tech. Corp. v. United States, supra, at 206.  (Satellite Services, Inc., B-280945; B-280945.2; B-280945.3, December 4, 1998)

Comptroller General - Listing of Decisions

For the Government For the Protester
JRS Management, B-401524.2, January 12, 2010  (pdf) Satellite Services, Inc., B-280945; B-280945.2; B-280945.3, December 4, 1998
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