What You Need to Know About Task Order Contracts
Task Order Contracts are a type of contract used primarily by government agencies for the procurement of services or supplies that require a scope of work typically too broad to be defined at the time the contract is awarded. Instead of awarding a contract for a set scope of work to be performed, an agency enters into a single contract and then issues task orders. Each task order is essentially its own mini-contract, containing pricing and delivery terms most relevant to the specific task that is being ordered under the larger scope of the overall contract. The resulting flexibility creates efficiency for agencies with programmatic needs that may evolve over time and for large projects that require both efficiencies and flexibility because the full scope of work cannot be defined up front .
Also referred to as "indefinite delivery, indefinite quantity contracts" or "IDIQS," task order contracts are often associated with a master agreement, but they are not limited to agreements between government agencies. In the commercial sector, companies can use task order contracts to manage the procurement process with a single company that sells to many customers or to limit the need for multiple contracts when managing a large project requiring multiple task orders. Instead of having multiple contracts requiring different terms for a variety of services, companies can enter one contract and then issue task orders as needed on a case-by-case basis.
Defining the Components of Task Order Contracts
Task order contracts have a number of fundamental components. These include the scope of work required, the pricing for the work, the time frame for completing the work, and the parties to the contract. The specific way in which the task order is deployed or incorporated into the contract also could be considered yet another element. Because these components are essential to the effective management of a task order contract, a closer examination is warranted.
Scope of Work
The scope of work component establishes the type of work to be completed under the task order contract. Scope of work language in a task order contract differs from scope of work language in other types of contracts. Specifically, the language determines the amount of specific work and the time frames for the work to be completed. Although a task order contract governs. So while scope of work language does work differently in a task order contract than it would in another contract, it still is used in the same way. The language is intended to provide guidance, so that all parties to the contract are aware of the requirements for the work to be performed.
Pricing
Pricing in a task order contract usually is a fixed price. However, like other contract elements, pricing may work differently based on the requirements of the federal agency, the related government procurement policies and procedures, and the terms of the contract.
Time Frame
Most task order contracts will include a time frame related to when the work contemplated by the contract must be completed. Again, the amount of time allowed depends on a number of factors, including the individual terms of the contract.
Contracting Parties
Another element to consider is the parties to the contract. In this regard, specific task order contracts often will require that the contractor have a certain level of experience working with the department or agency placing the order request. These provisions are important to ensure that the contractor can adequately perform the work required by the task order contract.
Deployment
Finally, and as mentioned above, one additional element to consider is the specific way in which the task order is deployed or incorporated into the contract. Usually, the order is incorporated by reference, rather than as a standalone document.
Exploring the Various Forms and Frameworks of Task Order Contracts
Task order contracts come in various forms, including definite-quantity contracts, indefinite-quantity contracts (IQCs), and requirement contracts. Each of these structures serves different needs and scenarios, but all are designed to streamline the process of ordering goods and services.
Definite-Quantity Contracts
In a definite-quantity contract, a specific quantity of supplies or services is ordered. Definite-quantity task orders are often used for purchases of a recurring nature, when a government agency knows precisely how much assistance it will need, but does not want to go through the trouble of repeatedly soliciting price quotes or bids. For example, an agency could enter into a task order contract with a vendor to supply replacement batteries for two-way radios for the Department of Defense. Over the course of the contract, the agency anticipates that it will need 200 new batteries on four separate occasions. It sets a firm delivery schedule for each delivery, with no flexibility to obtain additional units beyond those specified in the contract.
Indefinite-Quantity Contracts
An indefinite-quantity contract (IQC) does not set a firm quantity of goods or services that will be ordered, but rather establishes a minimum and maximum ordering amount. This structure can also be used when the government requires a recurring service or product, but is uncertain about how much "infinite" assistance or products will be needed. The US General Services Administration’s Federal Supply Schedule contracts are IQCs that establish both a minimum and a maximum value at which supplies or services can be purchased. The agency can thereafter place one or more orders without doing a separate procurement each time.
Requirements Contracts
If the government is not certain of the actual needs, but does know it will need a particular type of goods or services over the course of the contract, it can enter into a requirement contract. A requirement contract guarantees the "best offers" from a vendor for a specified range of goods or services, and is initially used when agencies conduct market research to determine the feasibility of a large or indefinite purchase. A requirements contract applies to purchases for a fixed minimum amount, and the supplier agrees to provide a specific quantity of goods or services to meet the federal agency’s future requirements over the course of the contract.
The DBA
Federal agencies also often utilize a Task and Delivery (DBA) contract, which typically uses a combination of maximum and minimum terms and establishes a ceiling on the overall quantity to be purchased in the contract. If the agency decides to purchase less than the maximum quantity, then the contract would be terminated. While the DBA is considered to have a high degree of flexibility, it can be the subject of abuse if extensive changes are made mid-term.
The Benefits of Task Order Contracts
Task order contracts provide numerous advantages for both the government and contractors. For the government, task order contracts can lead to significant savings in both time and cost when it comes to procurement. Depending on how the task order contract is structured, it can also create flexibility. For example, the Federal Acquisition Regulation (FAR) encourages the use of multiple award task and delivery order contracts when there is a need for more than one supplier. FAR 16.504(a). This can allow for greater control over how much is spent on individual orders, among other advantages.
FAR 16.504(b) provides that "orders are to be issued on the basis of fair consideration of all responsible sources . . . ." This does not mean that an open and competitive process must be used. Instead, as the GAO has explained, "[t]he contracting agency is given discretion in selecting the source or sources from which it will solicit price quotes." Corporate Research, Inc., B-298579, Jan. 27, 2006, 2006 CPD ¶ 26, at 3. There is no need for a "qualitative evaluation of their technical capabilities or of other proposed approaches." Id. Thus, as long as the contracting agency takes steps to ensure that all responsible vendors are provided with a reasonable opportunity to quote prices, it is adhering to the requirements in FAR 16.504(b). So if the government avoids an open and competitive process, what does it need to do to make sure it is complying with the FAR? The government needs to make sure there is a rational basis for its decision to order from one source over another. IDEAS, 46 Comp. Gen. 628, 634 (1967). But as our own work for the Court of Federal Claims before the Federal Circuit has shown, the standards are minimal and deferential. See Support Solutions Int’l, Inc. v. United States, Appeal No. 2015-5148 (2016) ("Agencies are afforded wide discretion in the evaluation of proposals, so long as rational basis exists for those decisions.") This means the government does not need to run an open and competitive procurement process to decide who gets the work. The government can direct work to the contractor of its choice, as long as there is a rational reason for that choice. This means if the government is under strict time limits or it needs a specialized vendor, it might get the best results by directing that work to a different pool of contractors. On the flip side, task order contracts can be an effective way for contractors to produce economies of scale. Because the government gets to direct a steady stream of work to a single contractor, it can often obtain discounts off of non-contract prices. This will depend on a variety of factors, including the duration of the work to be performed and the experience (or size) of the company involved. But the potential for savings is certainly real and should be considered when evaluating whether to offer services under a task order contract.
Because task order contracts leave many of the details open to the government’s direct order, they can also be strategically advantageous. For example, if a contractor is looking to achieve small business status, task order contracts may not require the contractor to demonstrate how each individual instance of performance will be handled. Instead, the contractor can bundle its performance, as long as the end result is that the entity performing the work qualifies as a small business. This can affect the size of the award, the type of competition solicited, and even the delays that can occur when dealing with the government. Task order contracts can be used in many other ways that help the government and help contractors. In certain instances, they can allow the government to avoid the strictures of the FAR and allow contractors to avoid the restrictions that accompany other contract vehicles. For some companies doing business with the government, this can be a very valuable thing.
Potential Pitfalls and Risks Associated with Task Order Contracts
When entering into a task order contract, both the contractor and the issuing agency must be prepared to face specific and unique challenges, which can, if left unchecked, result in disputes, failure of performance, or even worse, litigation. Both parties should therefore be aware of all potential issues that could arise while executing task order contracts; including scope creep, cost overruns, and contract disputes.
In government contracting, scope creep often occurs when a federal agency issues a task order with the expectation that it will be performed even though its specifications are later changed without consideration or alteration of price. Most importantly, a contractor can hardly ever claim a change in specifications of a task order by an agency because changes are "implied" in task order contracts. The rationale for giving the agency this leeway is that usually, there has been competition between contractors for the task order; the scope of the task order is therefore implied to include some level of changes and alterations.
Because scope is considered to be implicit in task order contracts, it is far more difficult for contractors to deviate from the specified tasks and request additional payment. This complication then means that by the time the contractor realizes that it will have to perform works outside the scope, it has likely already incurred many costs which it cannot recover.
Cost overruns arise when the total cost of the project eventually exceeds the amount of the task order. For example, if a task order states that the total cost of a certain task is $100,000 and the contractor ends up spending $900,000, it is a cost overrun . In task order contracts, cost overruns are most often caused by the complexity of the task or a lack of clarity in the specifications. In some cases, it can even be caused by excessive changes by the issuing agency. In other words, it is usually a small issue, like lack of clarity in the specifications, which causes a cascade of problems leading to a cost overrun. As with scope, a contractor will most often not be able to recover the extra costs incurred by a cost overrun because the cost overrun is assumed to be covered by the task order.
Contract disputes often occur in task order contracts, for a simple reason; the task order contractor is also the prime contractor, meaning that it has stepped into the shoes of the main contractor in the eyes of the federal government. With that comes increased liability and increased difficulty in managing the task order. Furthermore, disputes can arise between a contractor and the issuing agency when the costs charged for a task order work differs from the original estimate. Disputes can also arise for other reasons, including issues related to materials, schedules, quality and workmanship. Most of these disputes can, however, be avoided with proper management of the task order contract.
Due to the inherent difficulties in entering a task order contract, it is always best to have legal representation before signing one. Legal representation can help you to determine whether the task order contract meets your current needs, and ensure that the scope of work, prices, and all other vital clauses are as they should be. This way, even if scope creep does arise, it would be easier to recognize and stop it before it becomes too costly.
Managing a Task Order Contract: A Guide of Best Practices
Effective management of task order contracts is key to maximizing their benefits. Government task orders are more than just separate contracts; they are important components of the agency’s overall program. With this in mind, here are some strategies to consider for managing task order contracts:
Plan early and strategically. As noted above, it is critical to plan for the use of task order contracts from a program, as opposed to contract perspective. Moreover, it is critical to integrate the use of task order contracts into the overall program management cycle, including pre-award and post-award planning and management. For example, many agencies are now incorporating the use of task order contracts into multiple award IDIQ competition evaluation and source selection plans. Excellent source selection plans are the building blocks of solid task order contracts. Even if no procurements issues develop at the task order level, acquiring agencies that incorporate good and consistent practices at the IDIQ MAC level will inevitably drive an improved track record of fair and effective task order source selections over time.
Monitor, assess and adapt. Having a solid contract management information system for reporting is crucial to tracking the development of task orders through the acquisition/administration cycle. Diligently monitoring workloads, task order requirements, award decisions and compliance issues can contribute to improved program delivery cycles. Moreover, frequent assessments of these acquisition/administration issues helps to ensure the agency can recognize a need for changes to the task order requirements before the task order award is made, or implement mitigation measures quickly once the task order is awarded to avoid problems early-on.
Engage with the contractor. Orchestrating frequent and productive communication with the awardee after a contract is awarded is beneficial to both sides. It helps to improve quality, reduce costs, resolve disputes, and mitigate performance risk factors before they develop into serious problems. This enhanced level of engagement is especially crucial when the government is asking the contractor to perform at a level significantly above its previously awarded task orders.
Legal Framework Governing Task Order Contracts
Recognizing the unique nature of task order contracts, several significant legal provisions and regulations impact their use. The Federal Acquisition Streamlining Act of 1994 requires that any indefinite delivery contracts, including task order contracts, value greater than $10,000,000 shall be awarded on a competitive basis.
The Federal Acquisition Reform Act of 1996 provides that orders placed under existing multiple award contracts for goods and services in excess of $5,000,000 to non-DoD contractors shall be—
(1) Placed under a separate contract awarded on a competitive basis; or
(2) Placed under a task or delivery order contract awarded on a competitive basis.
The Federal Acquisition Reform Act of 1996 also establishes an "Order" clause, and thus states that "An order placed against an indefinite quantity contract . . . is deemed to be a contract for the purpose of the clause . . . [pertaining to] that’s required to include the clauses pertaining to labor standards, contract work hours, and overtime compensation; and Davis Bacon Act compliance." 41 U.S.C. § 3901; 29. U.S.C. § 3701.
In addition, the Competition in Contracting Act of 1984 established the Competition Advocate General for the purpose of reviewing the periodic contracting activity of each agency in order to encourage full and open competition. 41 U.S.C. § 1701. The General Services Administration ("GSA") has established Acquisition Letters to provide general information related to the application of FAR to GSA contracts.
The Federal Acquisition Circular 2001-15 updates the FAR in accord with the Small Business Administration’s regulation, 13 CFR part 121, for the award of orders under multiple award contracts and modifications to such orders. In order to facilitate agencies’ use of multiyear contracts, part 32 of the FAR was expanded to include new policies and procedures for the use of multiyear task order contracts.
Aside from these regulations and rulings, there are additional considerations that should be taken into account related to subcontracting and/or joint venture arrangements. The rules must be taken into account regarding the use of partnerships, joint ventures, and subcontractors involving federal government contracts. When a partnership or other facet of joint venture exists prior to the negotiation of a government contract, all partners or members of the joint venture are deemed to be equally responsible for the performance of the contract.
The federal government must be notified of the existence of partnerships and joint venture formed to obtain government contracts before contract award to either party. 48 C.F.R. 52.236-2(e). However, there are several rulings holding that a joint venture relationship, such as a limited liability company, lacked the "formalities" necessary to be deemed a legitimate joint venture. See Raphael Constr. Corp., ASBCA 31471, 93-1 BCA (CCH) ¶ 24920 (Def. Spec. Bd. App. May 6, 1992); Green Thumb, Inc., B-250002, May 30, 1992, 94-2 CPD ¶ 137 (GAO); Matter of Tool Steel Products Corp., B-220149, Feb. 26, 1986, 85-2 CPD ¶ 241 (GAO); Matter of Teledyne, R. D., B-218671, Apr. 23, 1985, 85-1 CPD ¶ 438 (GAO); but see Mixed-Bedrock, LLC, B-292309, Dec. 5, 2002 (GAO) (formality is not required).
Task Order Contracting Through Case Studies
When using task order contracts, whether its under GSA schedules, 845s or 841s, you can be assured that you are complying with the TINA regulations. This is not to say that best practices do not exist in using task orders, because they do, and often can be learned from studying real-world examples. So in the interest of doing so, let’s examine three scenarios where the use of task order contracting (specifically 845 or 841s) were successfully employed and some best practices.
In a case involving the GAO protest of request for quotations (RFQ) issued by the Transportation Security Administration (TSA), the TSA sought the acquisition of marketing services. A task order was set up on an existing 845 (now known as FSSI) vehicle, and was awarded to a bidder believed to have more competitive labor rates. The GAO denied the protest, finding that "consideration of the overall value of all of the order costs mitigated the adverse impact of the higher labor rates on [the contractor’s] price on the agency’s best value assessment."
In a recent GAO bid protest decision regarding a task order awarded by the Department of Commerce under the Department of Homeland Security’s (DHS) Enterprise Acquisition Gateway for Leading Edge Solutions (EAGLE) multiple-award task order contracts , the GAO denied the protest on the basis that the agency reasonably determined that it was cost-beneficial to award the task order to a contractor with a lower rated complex past performance record. The agency, reviewed what was the most important aspect of past performance – how well did the contractor handle complex past performance. The GAO concluded that "[e]vidence of the firm’s complex past performance was properly assessed as a strength in favor of [the contractor] in the SSA’s best-value tradeoff analysis."
In a case involving NASA’s selection of the best value offeror under its Enterprise Services Agreement (ESA) program, the GAO held that NASA properly found the awardee’s offer to be lowest priced technically acceptable (LPTA) under ESA RFP," where it presented an overall lower evaluated cost "when the government realistically could have anticipated likely performance difficulties" posed by the awardee’s staffing plan.