A reminder of different contract vehicles and types and common terms in the business. A refresher for those in the industry or primer for those new to contracting.
We thought this would be an excellent opportunity to note a few questions we routinely see in our practice concerning contracts and subcontract administration.
What are IDIQs and BOAS and What is the Difference Between Them?
We are often asked about the difference between an IDIQ and a BOA. An IDIQ is an acronym for an Indefinite Delivery, Indefinite Quantity contract. It's a good way to secure supplies or goods for one supplier. The buyer generally knows that they will need the supplies or services, but they're unsure of the value or the quantity of how much they will need.
- You can issue it with a basic statement of work covering a general scope.
- You then issue task orders against your IDIQ for your more definitive scope of work or supplies.
- You can negotiate labor rates in advance for your labor categories, and as long as you document that those prices are fair and reasonable, you can issue task orders underneath them.
- Each task order is in your separate standalone contract.
- You know you will need it but don't have an established value yet.
That's the purpose of the IDIQ.
Now, the difference between the IDIQ and the BOA is that BOA is an acronym for Blanket Ordering Agreement.
- The BOA is not a subcontract, as there's no value or consideration.
- You can negotiate the terms and conditions of your agreement, and it's your mechanism for ordering.
- Orders placed are individual subcontracts.
- You can award multiple number of contracts across multiple programs.
That's one of the good, easy ways to use a BOA. We get asked a lot about different contract types, when to use them, and what type of contract is appropriate.
Firm- Fixed Price (FFP) Contracts
The first question is when would be a good time for me to issue a firm-fixed price contract. When your requirement is clearly defined. Your seller is prepared to deliver within the agreed time.
A good example of this would be 10 boxes. I'm buying from ABC company, and I want 10 boxes. I describe the exact specifications in my statement of work for the dimensions of the boxes and what I need for those boxes as far as their materials to be made of. So, the seller who will supply me with those boxes should know exactly how much time it will take them to build those boxes and the requirements to do that.
This type of contract puts a lot of risk on the seller because there's no price adjustment based on the seller's cost. There are different types of firm-fixed price contracts, but if the seller is falling behind or the material prices for them to deliver go up or down, there's no adjustment to that firm-fixed price. This also is a good way for a seller to make a good profit margin. If they're very efficient and can do the job quickly, they can move on to other projects, and they're still going to capture the firm-fixed price.
What is a Contractor Purchasing System Review (CPSR)?
We get asked a lot about CPSR, what it is, and how it affects a company's organization. A CPSR is an acronym for Contractor Purchasing System Review. It's conducted by DCMA and performed when a seller expects to exceed $50 million in sales in a 12-month period to the government. It's an evaluation of a contractor's purchasing material services subcontract management through their lifecycle and performance. So essentially, they will review the policies and procedures the organization follows and uses to conduct procurements.
They're going to audit files. Are those policies and procedures working? Are the buyers following them, and do they meet the criteria established by DCMA?
Do I Need to be Registered in SAM.gov to Do Business with the Government?
SAM is an acronym for System for Award Management and is a government website. A lot of contractors ask if they need to be registered in SAM. If you want to do business with the federal government, you should be registered with SAM. Contractors update their SAM registration yearly.
You must have a DUNS (Dun & Bradstreet) number to register for SAM. This also is a catalyst for establishing a CAGE code. A CAGE code is issued by the Defense Logistics Agency (DLA). They issue commercial CAGE codes to government contractors, which are specific by the DUNS number. This is also site-specific.
You update your SAM registration every year, but your CAGE code is valid for five years. The SAM registration includes many representations that a contractor makes regarding what types of products and services they're selling and where they want to do business. They identify the NAICS codes of those products and services that they supply.
The SAM registration also includes consent to tax disclosures. It doesn't take very long to do, but it has to be a thorough, complete, and accurate registration. If a situation in your organization causes a change to any of the representations and certifications in SAM, the contractor should update those as necessary.
What is a NAICS Code, and Why is it Important?
NAICS is an acronym for North American Industry Classification. It's done by industry and establishes codes for those specific types of industries for products and services.
The government uses NAICS codes when they are issuing RFPs or when they're establishing contracts. It identifies the specific supplies and services to potential bidders. It also is very important relative to the Small Business Administration.
The SBA has size standards specific to each NAICS code, which are based on the company's threshold value and the number of employees. The government will issue set-asides for small businesses and those NAICS codes, and those thresholds are drivers for that. So, in closing, those are just a couple of the questions that I see from time to time on my side of the practice.
Redstone Government Consulting provides government contractors with a whole host of services relative to accounting, contract administration, human resources issues, policies and procedures in the industry. Whether you need assistance in understanding your contract or you need assistance in preparing policies and procedures, we can help contractors in those areas. Please give us a call or contact us if you need any assistance, and we'll be happy to see if we can assist you.
