Increasing Task-order Level Competition – By Not Requiring Pricing at Contract Formation

Introduction

Pricing is an essential element of the evaluation of all federal contract awards – unless it isn’t! With the enormous growth in federal agencies’ use of multiple-award, multi-function, multi-billion dollar, IDIQ contracts, the burden is significant on offerors to submit pricing against a hypothetical set of pricing requirements, and on agencies who have to evaluate such pricing submissions, when the “real” work is solicited and awarded at the task order level. Over time, Congress has granted several federal agencies limited authority to bypass pricing at contract formation for these IDIQs and shift it to the task order rounds. But there are constrains imposed by these current congressional grants of authority. A proposal has been introduced in the Senate to open the aperture on when agencies can skip pricing at the prime IDIQ level and change the justification required.

Existing Statutory Flexibilities for IDIQ Pricing

Since the enactment of the 1984 Competition in Contracting Act, price has been an essential element of every contract awarded by the Federal government under the Federal Acquisition Regulation (FAR). With the advent of multiple-award task and delivery order contracts (also known as indefinite delivery/ indefinite quantity, or IDIQ, awards), the requirement for agencies to obtain pricing for unspecified work that will only come with task orders became more hypothetical than real, with significant burdens on both offerors and on agencies to evaluate pricing at the formation of the IDIQ contract. Yet the actual work, where pricing would have a real bearing on evaluations, was deferred until the actual work was subsequently solicited via task orders. In effect, contractors may have to submit two rounds of pricing volumes and agencies have to evaluate each round separately.

Section 825 of the Fiscal Year 2017 NDAA (Pub. L. 114–328) amended 10 U.S.C. 2305(a)(3) to modify the requirement to consider price or cost as an evaluation factor for the award of certain multiple- award task-order contracts issued by DoD, NASA, and the Coast Guard. Section 825 provided that, at the Government’s discretion, solicitations for multiple-award contracts that will be awarded for the same or similar services, and that state the Government intends to award a contract to each qualifying offeror, do not require price or cost as an evaluation factor for contract award. This exception does not apply to solicitations for multiple-award contracts that provide for sole-source orders pursuant to Section 8(a) of the Small Business Act. When price or cost is not evaluated during contract award, the contracting officer must consider price or cost as a factor for the award of each task order under the contract. When using the authority of section 825, the solicitation must be for the ‘‘same or similar services’’ as the base contract. A final FAR rule to implement the Section 825 authority was published on July 2, 2020,[1] effective August 3, 2020.

Section 825 was modified by Section 816 of the Fiscal Year 2020 NDAA (Pub. L. 116–92) to revise the contract file documentation requirements when awarding a task- or delivery order- contract in excess of $100 million to a single source. Section 816 amends 10 U.S.C. 2304a (and applicable to DoD only) to permit the award of a DoD task- or delivery-order contract estimated to exceed $100 million (including all options) to a single source without a written determination by the head of the agency, if the head of the agency makes a written determination that other than competitive procedures were authorized for the award of such contract. A final DFARS rule was published on September 29, 2020, and effective October 1, 2020.[2]

In addition, Section 876 of the Fiscal Year 2019 NDAA (Pub. L. 115-232) provided executive agencies an exception to the requirement to consider price as an evaluation factor in the award of certain IDIQ contracts and for the GSA Federal Supply Schedule for services to be acquired on an hourly basis. GSA issued a FAR class deviation on August 14, 2020, to implement Section 876.[3]

New Legislation

On January 19, 2024, legislation (S. 3626) was introduced in the Senate by Senators Peters (D-MI) and Ernst (R-IA) to clarify the task and delivery order solicitation and contract requirements. Titled the “Conforming Procedures for Federal Task and Delivery Order Contracts Act,” the bill proposes to give all federal agencies the authority to skip the use of pricing as an assessment factor when awarding slots on IDIQ contracts. The authors claim that these actions will significantly benefit the small business community. As of this writing, there is no House companion bill.

S. 3626 contains four sections.

Section 1 is the short title noted above.

Section 2 provides “Sense of Congress” provisions, including text “to clarify that all Federal agencies and their contractors can benefit from the streamlined procedures for solicitation and award of task and delivery order contracts would align with the purpose of the (FAR) to provide procurement procedures for use by all executive agencies that are standard, consistent, and conducted in a fair and impartial manner.” In my view, there are clearly benefits to small businesses who want to compete for these large, multi-year, multi-function IDIQs; there is also benefit to every offeror bidding for these opportunities, as well as significant benefits to agencies who have to evaluate proposals and justify their source selection decisions. But we should not be oversold on the magnitude of the relief granted to them by eliminating just the pricing requirement and only at contract formation.

Section 3 addresses multiple award task and delivery order solicitation requirements, and amends 41 U.S.C 3306(c)(3) to expand the scope of multiple-award contracts beyond those for “services to be acquired on an hourly rate,” as in current law, by removing this requirement. I have been a long-time supporter of focusing proposal pricing actions where the actual work is being done and this section will fully address that objective.  This section effectively nullifies the April 2023 decision of the U.S. Court of Federal Claims[4] holding that GSA, in soliciting offers for its Polaris multiple-award contract, violated the statutory provision because the Polaris solicitation was not limited to only task orders “acquired on an hourly rate.”

Section 4 addresses the internal agency approval requirements for single-award task order contracts as required by 41 U.S.C. 4103. Under current law for civilian agencies, no task order contract exceeding $100 million may be awarded to a single source unless the head of the agency determines in writing that (1) all orders are expected to be so integrally related that only a single source can reasonably perform the work, (2) the contract provides for only firm, fixed price task orders, and (3) “because of exceptional circumstances,” it is necessary to award the contract to a single source. Under the bill, these three existing criteria are replaced with a single standard that a determination is made that “procedures other than competitive procedures” may be used in making the single award of the contract, aligning with the DoD authority. Yet in my view, by taking this step, it removes even minimal controls on large IDIQs by eliminating even common-sense constraints on the use of single-award IDIAQ awards while also removing the requirement for senior level review of the rational for making single source awards for IDIQ contracts that exceed $100 million (as so, so many of them do). Retaining some guardrails on the use of single award IDIQs and providing accountability for their use based on the changes being recommended is not too much to ask for in the name of acquisition streamlining and simplification.

Conclusion

There is considerable support in the acquisition community, from small and other than small contractors and from federal agencies, to shift away from hypothetical pricing for IDIQ contracts for the underlying contract to meaningful pricing at the task order level in response to actual statements of work. Count me among those advocates. However, the Senate bill may go too far too fast and lacks any accountability or reasonable constraints on when agencies my shift the pricing for these IDIQs or make single-source awards, even for those like me who are strong proponents of the objective.

Centre Law will continue to monitor the progress of this legislation and the regulatory actions relating to sifting pricing from the formation of the basic contract to task order solicitations. If you have any questions or need any additional information, please do not hesitate to contact the author or the Centre Law attorney with whom you normally work.

Sources:

[1] Federal Acquisition Regulation Final Rule: “Evaluation Factors for Multiple-Award Contracts,” 85 Fed. Reg. 40068 (July 2, 2020), available at https://www.govinfo.gov/content/pkg/FR-2020-07-02/pdf/2020-12764.pdf.

A FAR rule was required because NASA and the Coast Guard are not covered by the DOD FAR Supplement.

[2] DFARS Final Rule Modification of Determination Requirement for Certain Task- or Delivery-Order Contracts (Sept 29, 2020), 85 Fed Reg.60922, available at https://www.govinfo.gov/content/pkg/FR-2020-09-29/pdf/2020-21250.pdf. Last viewed Jan 29, 2024.

[3] FAR Class Deviation – Enhancing Competition at the Order level for Certain Indefinite Delivery, Indefinite Quantity Multiple-Award Contracts; Class Deviation CD-2020-14; Aug 14, 2020, available at

https://thecgp.org/images/CD-2020-14_0.pdf. Last viewed Jan 29, 2024.

[4] See Part III of SH Synergy, LLC, et.al. v U.S. 22-cv-1466, 22-cv-1468 (Apr 28, 2023), available at https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2022cv1466-45-0. Last viewed Jan 29, 2024).