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.

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.

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.

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

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.

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.

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).

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?

Posted on Wednesday, October 31, 2007 - 02:12 pm:

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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."

Posted on Wednesday, October 31, 2007 - 03:19 pm:

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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????

Posted on Wednesday, October 31, 2007 - 03:20 pm:

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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.

Posted on Wednesday, October 31, 2007 - 05:16 pm:

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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.

Posted on Wednesday, October 31, 2007 - 05:35 pm:

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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?

Posted on Wednesday, October 31, 2007 - 09:52 pm:

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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.

Posted on Thursday, November 01, 2007 - 07:47 am:

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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.

Posted on Thursday, November 01, 2007 - 07:48 am:

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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.

Posted on Thursday, November 01, 2007 - 08:29 am:

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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.

Posted on Thursday, November 01, 2007 - 11:11 am:

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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.