d
Copper Level
Post Number:
9
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 08:32 am:
Folks-
My boss and I are having a difference of opinion... I have
four years in contracting, he has 40. But here goes. (Note:
I have read the WIFCON archives on this matter.)
I believe that when awarding an IDIQ contract, a KO must
obligate the minimum required at the time of award. I base
this assessment on the data below. By boss says that you do
not have to obligate the minimum… but has no supporting
documentation, just lots of experience, oh, and he is the
boss. :-)
Does anyone have any other information that I can provide
him so that I may be able to persuade him?
Thanks!
§ 1501. Documentary evidence requirement for Government
obligations
(a) An amount shall be recorded as an obligation of the
United States Government only when supported by documentary
evidence of—
(1) a binding agreement between an agency and another person
(including an agency) that is—
(A) in writing, in a way and form, and for a purpose
authorized by law; and
(B) executed before the end of the period of availability
for obligation of the appropriation or fund used for
specific goods to be delivered, real property to be bought
or leased, or work or service to be provided;
GAO-06-382SP Appropriations Law—Vol. II Page 7-20
GAO Principles of Federal Appropriations
In a variable quantity contract (requirements or indefinite
quantity), any required minimum purchase must be obligated
when the contract is executed; subsequent obligations occur
as work orders or delivery orders are placed, and are
chargeable to the fiscal year in which the order is placed.
Thus, in a variable quantity contract with no guaranteed
minimum—or any analogous situation in which there is no
liability unless and until an order is placed—there would be
no recordable obligation at the time of award. |
v
Copper Level
Post Number:
79
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 08:59 am:
If you work in DOD, the DOD Financial Management
Regulation, Vol. 3, Ch. 8, Sec. 080504 requires obligation
of the minimum at the time of award:
"In the case of indefinite quantity contracts for supplies
or services that specify delivery of minimum quantities
during a given period, an obligation shall be recorded upon
execution of the contract for the cost of the minimum
quantity specified."
I cannot understand why your boss won't believe what he/she
reads in the GAO Redbook, but it shows that experience is
not the same as knowledge. What your boss does not
understand is that he/she obligated the amount of the
minimum at the time of award. The amount and fund citation
must appear on the contract document in order to record the
obligation. If an obligation has in fact occurred, it is an
obligation even if it has not been properly recorded. |
n
Copper Level
Post Number:
37
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 09:14 am:
V,
Where does it say that "[t]he amount and fund citation must
appear on the contract document in order to record the
obligation"?
I realize the amount is already there, either explicitly if
the guaranteed minimum is stated as a dollar amount, or can
be calculated, if the guaranteed minimum is stated as a
quantity of a priced item, but I can't find anything that
requires identifying the fund citation on the contract
document. |
r
New Poster
Post Number:
2
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 09:41 am:
Not only does the FMR require the minimum to be obligated
at time of award, GAO has repeatedly said it is required.
Interagency Agreements--Obligation of Funds Under an
Indefinite Delivery, Indefinite Quantity Contract, Comp.
Gen. Dec. 308969, May 31, 2007, 2007 CPD 120 (citing cases).
Moreover, I am truly suprised that an agency lawyer let the
lack of obligation of funds pass, if it truly occured |
v
Copper Level
Post Number:
80
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 09:49 am:
Gee, I wonder why all those contract forms (SF 26, SF 33, SF
1447, SF 1449, etc.) have a space for a fund citation
(accounting and appropriation data)? What do you think that
information is for? How can the finance office complete the
recording of the obligation if they don't know what account
the obligation is to be charged to?
In any case, what do mean by "where does it say"? What "it"
are you talking about? The DOD FMR? Are you asking me where
it says that in the DOD FMR? |
t
Copper Level
Post Number:
12
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 10:34 am:
The practice I always used was to issue the initial task
order/delivery order (for the minimum or above the minimum)
concurrent with the award of the basic contract. The
contract itself guaranteed the minimum amount to be received
but did not contain the fund cite or the specific work
requirement of any individual task/delivery order.
Just seemed to make sense to me as well as kept funds
organized, separated and avoided confusion. |
n
Copper Level
Post Number:
38
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 10:45 am:
V,
You constantly demand people cite references/sources for
their statements, and you usually set a good example by
citing references to laws, regulations or cases when you
answer questions here. I merely ask for the source that
supports your statement. If you're relying on the DoD FMR,
fine, but if you're relying on some other source, then
that's what I'm asking. |
v
Copper Level
Username:
vern_edwards
Post Number:
81
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 12:44 pm:
n:
I think the forms speak for themselves, but for DOD, see,
e.g., FAR 14.201-2(g), 15.204-2(g), and DFARS
204.7103-1(a)(4)(i). |
n
Copper Level
Post Number:
39
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 01:03 pm:
FAR 14.201-2(g) and FAR 15.204-2(g) -- Include any required
accounting and appropriation data . . .
Who says any thing is required in this case?
That's the whole point. I accept that if anything is
required, it should go in Section G, notwithstanding there's
a block on the cover sheet (SF 26, SF 33, SF 1447, SF 1449,
etc.) for it.
And with respect to DFARS 204.7103-1(a)(4), I'm not sure I
understand your point. This cite deals with assigning only
one ACRN to each individual CLIN; it doesn't address
including or not including a fund citation. Are you
suggesting that in the initial award of an IDIQ contract, "[e]ach
contract line item shall reference a single accounting
classification citation" [DFARS 204.7103(a)(4)(i)]? |
v
Copper Level
Post Number:
82
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 01:57 pm:
Here's what DFARS 204.7103-1(a)(4)(i) says:
"(a) Contract line items shall have all four of the
following characteristics... (4)(i) Each contract line item
shall reference a single accounting classification citation
except as provided in paragraph (a)(4)(ii) of this
subsection."
ACRNs are discussed in DFARS 204.7107 and PGI .
I'm not "suggesting" anything. I'm saying that DFARS
requires an accounting classification citation (a long
line account number) for each CLIN, which, when read with
the FAR citations answers your question.
Now, just what the hell is your point? Are you merely trying
to trip me up, or do you believe that you don't have to put
a funds citation on an IDIQ contract in order to record an
obligation of a minimum? Do you think that the minimum is
not an oblgation? Do you think that it is, but that you do
not have to record the oblgation? Do you think that you do,
but that a fund citation is not necessary? |
p
New Poster
Post Number:
1
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 02:12 pm: |
|
D et al,
D et al,
Give GAO B-308969 dated 31 May 2007 (http://www.gao.gov/decisions/appro/308969.pdf)
a read. It states rather unequivocally:
"An agency must record an obligation against its
appropriation at the time that it incurs a legal liability
for payment from that appropriation. B-300480.2, June 6,
2003; B-300480, Apr. 9, 2003; 42 Comp. Gen. 733, 734 (1963).
Clearly, an agency can incur a legal liability, that is, a
claim that may be legally enforced against the government,
by signing a contract. B-300480.2, June 6, 2003. We
addressed the question of the proper obligation of an IDIQ
contract in our decision, B-302358, Dec. 27, 2004:
“When an agency executes an indefinite-quantity contract
such as an IDIQ contract, the agency must record an
obligation in the amount of the required minimum purchase. .
. . At the time of award, the government has a fixed
liability for the minimum amount to which it committed
itself. See [Federal Acquisition Regulation] 16.504(a)(1)
(specifying that an IDIQ contract must require the agency to
order a stated minimum quantity). An agency is required to
record an obligation at the time it incurs a legal
liability. 65 Comp. Gen. 4, 6 (1985); B-242974.6, Nov. 26,
1991. Therefore, for an IDIQ contract, an agency must record
an obligation for the minimum amount at the time of contract
execution.
“Further obligations occur as task or delivery orders are
placed and are chargeable to the fiscal year in which the
order is placed.”
Thus, in the case of an IDIQ contract, the government incurs
a legal liability in the amount of the guaranteed minimum at
the time at which it awards the contract.
Contract clause, I.13, entitled “Indefinite Quantity,”[5]
further supports our conclusion that SWB incurred an
obligation at the time of contract award. It provides, in
part (with emphasis added):
“This is an indefinite-quantity contract for the supplies or
services specified, and effective for the period stated, in
the Schedule. . . . The Contractor shall furnish to the
Government, when and if ordered, the supplies or services
specified in the Schedule up to and including the quantity
designated in the Schedule as the ‘maximum’. The Government
shall order at least the quantity of supplies or services
designated in the Schedule as the ‘minimum’.”
By using the words “shall order,” the emphasized sentence
indicates that under the contract the government is liable
to the contractor for the minimum specified in the contract.
It therefore incurs a legal liability for that amount. This
is so whether SWB ever issues a task order to the contractor
or not, and is so immediately upon contract award." |
t
Copper Level
Post Number:
13
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 03:19 pm: |
|
I belive D' initial question of must the minimum
guarantee be obligated with the award of the IDIQ contract
has been answered.
But the open question seems to be "how"? If we use the case
cited in the Interagency Agreements—Obligation of Funds
under an Indefinite Delivery, Indefinite Quantity Contract
GAO report, all sorts of interesting scenarios/questions
begin to develop. First, where was the Interior’s National
Business Center Acquisition Services Division, Southwest
Branch (SWB) going to get $1 M? They were buying for other
agencies/offices who had not yet provided funds.
If SWB had an "extra $1 M" laying around and placed it on
the contract for "to be identified work", with detailed
tasks/orders to be subsequently issued identifying the
actual work to be done, now what? It would appear that
thereafter, each task/delivery order would entail two
actions - one to issue the task/delivery order with the
funds from the requesting office/agency, and then a
modification to the basic contract to deobligate an equal
amount of SWB funds placed on the basic contract. And if
task/delivery orders are issued in small increments, the
buyer gets to double his/her workload every time an order is
issued....(with an order and a fund deobligation contract
mod).
The obvious answer is to decrease the amount of the
guaranteed minimum. But 16.504(a)(2)says:"To ensure that the
contract is binding, the minimum quantity must be more than
a nominal quantity,". Whatever "more than a nominal
quantity" means....
Maybe this decision will slow down the use/abuse of the IDIQ
contracts which have become so fashionable of late. If you
don't have the funds to obligate the minimum upon award, you
can't use this contract type. Or will we see "nominal
quantity" minimums begin to appear???? |
n
Copper Level
Post Number:
40
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 03:20 pm: |
|
V,
My goodness! I know better than to try and trip you up on
anything. And I know better than to take issue with you
because you've always had some definitive reference or
citation to back up your conclusions. I only wanted to know
what the source and basis of your conclusion was.
To answer your closing questions, what I think is that you
don't have to put a funds citation on an IDIQ contract in
order to record an obligation to cover the guaranteed
minimum. I agree that signing such a contract creates an
obligation and the obligation must be recorded on the
agency's official accounting records - you've cited the DOD
FMR Sec. 080504 to support that. Additionally, I recognize
that a copy of the contract document must be provided to the
office responsible for recording the obligation, per Sec.
080301.B. I'm just not convinced that the fund cite needs to
be explicitly included in the contract document. For
example, if the CO sends a copy of the contract to the
office responsible for recording the obligation, identifies
the line of accounting in a cover letter (which likely
should track to a previous requisition/purchase request),
then that should suffice. At that point, who else needs that
info? Not the paying office, since there's no invoice, or
even an authority/reason to submit an invoice. Not the
contractor, for the same reason.
By the time anyone got around to deciding that the
contractor had not received the guaranteed minimum within
the time period specified, and the contractor was going to
invoice for something (what he can invoice for is another
discussion altogether), it would be prudent to revisit what
funds should be charged. Rather than charging a payment to
an appropriation that may have even expired by then, the
paying office should coordinate with the contracting officer
to obtain a fund cite at the time the payment is due.
I apologize for getting your dander up; it was not intended. |
v
Copper Level
Post Number:
83
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 05:16 pm: |
|
The procedure that you suggest--providing the fund cite
in a separate letter--would be administratively pointless
and risky. I cannot imagine contracting and finance offices
going along with it, although anything is possible. I have
never worked in a contracting office that would allow a
procurement contract to be distributed without bearing a
fund citation, nor do I know of any that would. I do not
believe that DFAS would go along with it.
No need to apologize. My dander needs to be gotten up from
time to time. But the question assumed that I had asserted a
regulatory necessity, which I had not. When I think that a
regulation requires or prohibits a course of action I always
cite the regulation. You know that. |
ret
Copper Level
Post Number:
8
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 05:35 pm: |
|
Following T's post 13, let us take the scenario of a
multiple award DoD contract where each offeror is promised a
minimum quanity of work, but the CLINS for the work that can
be ordered can be funded from procurement funds, O&M funds
and R&D funds. What fund citation am I supposed to use for
the minimum quantity that I record as an obligation and show
on each contract? |
v
Copper Level
Post Number:
84
Registered:
09-2007
|
Posted on
Wednesday, October 31, 2007 - 09:52 pm: |
|
The answer is: The citation for whatever funds would be
properly used for whatever work is covered by the minimum.
The acquisition planners have to figure that out.
The award of a contract with a minimum is an obligation of
funds. The promise to buy a minimum is an obligation. The
obligation must be recorded against some account.
Presumably, the account will be the one from which the
administrative commitment was recorded. The contracting
officer must ensure that funds are available before awarding
the contract or condition the award upon the availability of
funds, see FAR 32.702. So when planning the contract the
contracting officer had better figure out where she is going
to get the money for the minimum. If she cannot figure that
out, then she should not proceed with the award. The problem
is that some multiple award contracts are business schemes
concocted by agencies that don't have a need but that are
selling procurement services to other agencies. If they
cannot find funds to cover the minimum then they shouldn't
award the contract.
As for nominal minimums, I know of only one case in which a
court or board found the minimum to be nominal, and that was
in 1954. |
d
Copper Level
Username:
Post Number:
10
Registered:
09-2007
|
Posted on
Thursday, November 01, 2007 - 07:47 am: |
|
I LOVE A HEARTY DISCUSSION. Missed you V.
I am DoD. The exact citation is DOD Financial Management
Regulation, Vol. 3, Ch. 8, Sec. 080404 not 080504... but you
got me there. |
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dw
Copper Level
Username:
Post Number:
11
Registered:
09-2007
|
Posted on
Thursday, November 01, 2007 - 07:48 am: |
|
It has been about a year since I worked in the Civil
Service (DOD), so perhaps my memory is a bit faulty on this.
I seem to remember that DFAS would NOT allow you to obligate
any funding on an IDIQ contract, period. All of the funding
MUST be on a delivery order awarded under the contract. I
remember this because in a previous job in the Civil
Service, we DID award the minimum on the basic contract, and
then deducted it when a delivery order equal or greater than
the minimum amount was awarded. When I did that at my last
duty station, I was forced to modify all of those contracts
to remove the funding as DFAS had a litter of kittens when
it was downloaded to them via the SPS electronic interface.
It would make sense to me to award the minimum at the time
of the award, however DFAS rules may not allow you to award
on the basic contract. That will force you to also award the
first delivery order at the same time with the minimum
amount unless you have a valid purchase requirement equal or
greater to that amount to award at the same time.
That may not be true for every office, or even for all of
DOD. We were dealing with DFAS Orlando at that time, and
they might have been the oddballs of DFAS or something of
that nature. |
v
Copper Level
Username:
Post Number:
87
Registered:
09-2007
|
Posted on
Thursday, November 01, 2007 - 08:29 am: |
|
dw:
That sounds familiar. I, too, used to obligate the minimum
on the contract and then draw down when issuing orders. I
did it that way because I was required to do so. But the
draw-down procedure may be too complicated for the automated
systems in use today. I know that some agencies award the
contract and also issue an order for the minimum at the time
of contract award. That may be why some of them do it.
But we have to be careful with our terminology. A CO does
award the minimum on the contract, whether DFAS likes it or
not, and that award is an obligation. DFAS may not want the
fund citation on the contract for financial system reasons,
preferring to have the fund cite on an order because that's
how they pay.
Dennis: Thanks for the correction. |
d
Copper Level
Username:
Post Number:
11
Registered:
09-2007
|
Posted on
Thursday, November 01, 2007 - 11:11 am: |
|
V: no sweat.
What we ended up doing (or will soon) is awarding the
minimum on the first DO. We could have obligated the minimum
on the contract and then mod'ed the contract pulling the
funds off... but that was deemed a waste of time. Thanks all
for the discussion. |
|