What are the rules for task-order pacts?

Several readers have raised the following topic: What are the rules for placing task orders under multiple-award, indefinite-quantity contracts?

An indefinite-quantity contract is any contract that defines the parties' obligations primarily through the use of minimum and maximum ordering rules instead of specific quantities. The government's legal obligations to the contractor are satisfied when purchases meet the specified minimums. Using the contract to purchase beyond the minimums generally is at the government's discretion.

Contracts of this type have been around for many years. However, in sections 1004 and 1054 of the Federal Acquisition Streamlining Act of 1994 (FASA), Congress specifically recognized their use. [See Congressional Record H8879, H8924 (Aug. 21, 1994), in which it is stated, "this provision is intended as a codification of existing authority to use such contractual vehicles."]

FASA identifies three kinds of indefinite-quantity contracts: delivery-order contracts, which are indefinite-quantity contracts for goods; task-order contracts, which are indefinite-quantity contracts for services; and task-order contracts for advisory and assistance services. The statutory history is unclear on why Congress thought it necessary to recognize separately a contract for advisory and assistance services.

In all substantive ways, delivery-order and task-order contracts are treated the same. Thus, FASA directed the Federal Acquisition Regulation Council to establish regulations to provide a preference for awarding, to the maximum extent practicable, multiple contracts for the same items. (See 10 U.S.C. : 2304a; 41 U.S.C. : 253h.) The act also required that such contracts, when awarded to multiple offerors, provide all contractors "a fair opportunity to be considered, pursuant to procedures set forth in the contracts, for each task or delivery order in excess of $2,500 that is to be issued under any of the contracts," unless the agency has an urgent need, the required items are unique or highly specialized, the order is a logical follow on to an order issued on a competitive basis or it is necessary to order from a particular contractor to satisfy a minimum guarantee. (See 10 U.S.C. : 2304(c); 41 U.S.C. : 253j.)

In response, the FAR Council promulgated rules in FAR Subpart 16.5 that essentially repeat the statutory provisions. Of particular note, however, according to FAR 16.505(b), "The procedures and selection criteria that will be used to provide multiple awardees a fair opportunity to be considered for each order must be set forth in the solicitation.... Formal evaluation plans or scoring of quotes or offers are not required. Agencies may use oral proposals and streamlined procedures when selecting an order awardee. In addition, the contracting officer need not contact each of the multiple awardees under the contract before selecting an order awardee if the contracting officer has information available to ensure that each awardee is provided a fair opportunity to be considered for each order."

Nothing in FASA, the FAR implementation nor in the previous law, which Congress "recodified," requires an agency to conduct a formal competition to determine which contractor will receive a particular order. Agencies are free to consider price and non-price terms in whatever way they see fit in determining which contractor to use for a particular order, provided only that they fairly consider all contractors. Moreover, FASA specifically states that contractors may not protest their non-selection. [See 10 U.S.C. : 2304c(d); 41 U.S.C. : 253j(d).]

Disappointed contractors may complain to an agency "ombudsman" if they wish. [See 10 U.S.C. : 2304c(e); 41 U.S.C. : 253j(e)).] But I am aware of only one instance in which a complaint was taken to an ombudsman, and nothing came of the complaint.

An agency is not required to take formal proposals from contractors, or to communicate with them regarding a prospective order, unless the solicitation under which the contracts were awarded states that it will do so. But few agencies include such statements in solicitations.

Interestingly, however, some agencies take an extra step in the ordering process to test their decision-making before placing some orders. Before placing an order, these agencies may identify a particular contractor as the "preferred provider" or use a similar label to identify the likely supplier, while allowing other contractors an opportunity to try to change an agency's mind before the order is placed. Agencies are not required to follow this procedure. They could place an order without giving the contractors any opportunity to submit more information. They take the extra step voluntarily.

However, in two letters dated April 21, 1998, the Office of Federal Procurement Policy took the position that the designation of a preferred source in this way "is not a good practice" and should be stopped immediately. OFPP also wants the FAR Council to promulgate a new rule prohibiting the practice.

Even if a new rule of this type is promulgated, agencies still may award orders without conducting a formal competition and without even communicating with the contractors before they decide which to use. But they will be prevented from employing one particular technique by which they could test their decision before going forward.

Peckinpaugh is a member of the government contracts section of the law firm of Winston & Strawn, Washington, D.C.