Posted on 10/26/2011 3:22 PM

ARE INDEFINITE CONTRACTS UNFAIR? DEFINITELY!

It’s about time someone called the federal government to task for requirements type contracts and IDIQ ordering contracts, to say nothing of BPA’s. They are patently unfair and they are only available in the government arena where the government makes all the rules. It’s time we contractors organized ourselves and presented a united front to put an end to contractual abuse.

 
There’s even the awful aura of bait and switch afoot. Contractors are inveigled into indefinite delivery contracts with the promise of a fixed price. Sharpen your pencils and join in the reverse auction, the government says. The order is fixed price but now that you’re signed up, we’ll only pay if we really decide to go through with the bargain.
 
We used to think FAR Part 16 was contracts 101. But government buyers are finding sophisticated ways to use contract types to trap the unwary. Requirements contracts were all the rage 40 years ago. Then, because they were so unfair, they went into disuse only to be resurrected and introduced to a new generation of contractors.
 
Requirements type contracts are idiotic and legally illusory. They really are not contracts from a business point of view. Except for off the shelf commercial commodities, they have no counterpart in the real world of commercial commerce. Come price based on estimates but never mind our estimates because we really don’t know how to estimate, says the government. A guaranteed minimum order is not even required under FAR 16.503.
 
IDIQ’s do not fare better, in our opinion. They are requirements contracts with a guaranteed minimum. But that guarantee is so unrealistically low as to be minimal. FAR 16.504 states the minimum must be “more than nominal”. What does that mean? And when have you ever seen a minimum which even approaches a reasonable estimate of a value worth bidding on? This is a call to arms to insist on guaranteed minimums which realistically state what the government expects to order. Don’t expect a fixed price unless we have a solid minimum guarantee!
 
And what is this requirement that contracting officers MUST make multiple awards of IDIQ contracts for the same supplies or services and then re-compete every order? Let’s see, sharpen your pencil and compete once. Oh yes, then sharpen your pencil and compete again. Even when there is no double competition, multiple awards most assuredly result in less than reasonably anticipated work for one of the multiple award contractors.
 
It’s time to quit fooling around with contract types to try to save money at the contractor’s expense. It’s really pretty simple. If the scope of work is well defined, the contract should be straight firm fixed price. Even fixed price incentive could be fair. If the scope of work is ill-defined, cost reimbursement or time and materials is the fair way to go. That’s the way you and I do business in real life. The government’s bait and switch is unfair. Definitely!
 
bill@spriggsconsultingservices.com

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