Indefinite Delivery Indefinite Quantity (IDIQ) contracts often look like a big money opportunity for contractors – but looks can be deceiving. Many IDIQs are multi-awards, meaning you are just one of many contractors that may get task orders awarded under the contract. On top of that, the required minimum the Government must buy under the IDIQ is, in most cases, very low. So, it turns out that millions of dollars of anticipated business fizzles down to $2,500 – which may have a shocking impact to your return on investment.
March 16, 2023; the Armed Services Board of Contract Appeals (ASBCA) found that the Government is only required to issue orders up to the minimum stated in the IDIQ contract.
ESA South, Inc., 23-1 BCA ¶38,335, (Mar. 16, 2023)
This case involved ESA South and the Army Corp of Engineers contracting for emergency roof repairs. The board found that “an IDIQ contract provides that the government will purchase an indefinite quantity of supplies or services from a contractor during a fixed period of time; [however] it requires the government to order only a stated minimum quantity of supplies or services.” The Board goes on to state “[u]nder an IDIQ contract, the government is required to purchase the minimum quantity stated in the contract, but when the government makes that purchase its legal obligation under the contract is satisfied.”
Our Takeaway
The pricing of an IDIQ contract needs to consider the significant swings in the level of potential work that may be awarded under this type of contract. The problem is that most of these IDIQs are competitions, and the Government is expecting you to price based on the maximum potential award – I wish I could have my cake and to eat it too, but I am not the all-powerful Federal Government. For a scope of work that requires significant up-front investment (e.g., new capital assets), it may be reasonable to request the minimum be increased to reduce the risk. That said, when the big bad Federal Government knows there are numerous interested parties, they are not likely going to be very flexible – I am sorry to say, remember it is their cake they think you are after.
Again – Know what you are getting yourself into and be prepared for the worst and hope for the best.
Redstone GCI assists government contractors, everywhere, with understanding the Government’s compliance expectations. We often see the mishaps that can occur for a contractor when awarded an IDIQ that is either underpriced or incorporates additional layers of cost compliance due to the award size. Let us help you navigate and understand the potential impacts IDIQ awards can have on your business.
John is a Director with Redstone Government Consulting, Inc. providing government contract consulting services to our clients primarily related to the DFARS business systems, CAS Disclosure Statements, and DCAA/DCMA compliance preparation, advisory, and defense. Prior to joining Redstone Government Consulting, John served in a number of capacities with DCAA/DCMA for more than 30 years. Upon his retirement, he was based in Texas as an SES-level Corporate Audit Director for DCAA, managing a staff of 300 auditors at one of the largest DOD programs. Professional Experience John began his career in the late 80s working in the Clearwater, FL audit office and over the next three decades he progressed through a number of positions within both DCAA and DCMA with career highlights as DCAA Program Manager at Ft. Belvoir, Chief of Technical Programs Division, Deputy Assistant Director-Policy, Director of the DCMA Cost and Pricing Center, the SES-level Lockheed Martin Corporate Audit Director, and Director of Integrity and Quality Assurance. John’s three decades of experience in performing and leading DCAA auditors and DCMA reviewers provides a wealth of expertise to our clients. John’s role, not only in the performance of audits, but also in the development of audit policy affords him unique insights into the defense of audit findings and the linkage of audit program steps to the underlying regulatory framework. He is an expert in FAR, DFARS, and other agency acquisition regulation, as well as a subject matter expert in the Cost Accounting Standards having reviewed and provided audit feedback on many of the largest and most complex cost accounting practices during his tenure with the DCAA. John’s tenure with DCAA and DCMA came at a critical time during each agency’s history where a number of changes were occurring such as the response to the ICS backlog, development of audit approaches to the DFARS Business Systems and implementation of new audit initiatives as a result of Congressional oversight through the NDAA process. John’s leadership at the DCMA Cost & Pricing center saw oversight of all major DOD pricing actions, leadership of should cost review teams, the Commercial Pricing group and many other areas of strategic value to our clients. His involvement in these and other Agency initiatives is of great value to our clients due to his in depth understanding of DCAA and DCMA’s internal policy directives. Education John holds a Master of Business Administration and a B.A. in Accounting from the University of South Florida. Certifications Certified Information Systems Auditor State of Alabama Certified Public Accountant