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HHS Reference Tool for Contract Funding, Formation and Appropriations Law Compliance



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Case Study - Ability to Acquire both Severable and Non-Severable Services under a Single Contract


The Agency for Healthcare Research and Quality has a requirement for development of a standard for use of information technology (IT) in providing health care, and anticipates a 3-year award for its development with an independent government cost estimate of $450,000. When discussing this requirement with the Contracting Officer (CO), the Project Officer (PO) indicates that: (a) after the standard is developed, the PO wants a contractor to assist affected entities with implementation of the standard for 2 years: and (b) s/he expects to have similar types of requirements over the next few years, i.e., development of additional standards and technical assistance. S/He is providing this information to the CO to indicate the extent of contracting that may be necessary.


Initially, the CO must assess the nature of the services and the contract type to which they lend themselves. In this example, development of the standard appears to be non-severable, i.e., it can clearly stand alone and provide independent merit and value to the Department, but the requirement for technical assistance appears to be severable, i.e., the services are needed on a continual and recurring basis and do not represent a single undertaking.

Although the PO is contemplating multiple contracts based on the timing and nature of the services, it is not necessary to award multiple contracts to address distinctions in the type of services required or because definitive requirements are not yet available. Rather, award of an indefinite-delivery/ indefinite-quality (ID/IQ) contract (assuming a single award is warranted) would allow the Government to acquire non-severable and severable services under the same contract(s) through the award of individual task orders (TOs) at the appropriate time.

The CO may structure the basic ID/IQ contract to allow for funding of severable and non-severable services under separate TOs by including appropriate clauses in the umbrella ID/IQ contract for different types of services and funding arrangements. Each TO would be required to follow the funding practices as if it were a stand-alone contract. For the requirement to develop a standard, TO 1 could be fully funded at the outset or awarded as a multi-year contract pursuant to FAR 17.1. However, given the relatively modest overall dollar value, it would be most appropriate to fully fund this particular TO.

TO 2 for technical assistance to implement the IT standard should be awarded for 2 years—a 1-year base period and a 1-year option. Here, the contractual commitment is to provide hours of labor in order to provide technical assistance as directed by the Government; the base period and option must be funded from the appropriation current at the time of the award and option exercise.

The PO's expectation of similar types of requirements over the next few years was pivotal to the selection of the IDIQ solution discussed above. If, however, the requirement was limited to development of a single standard (non-severable services) and the provision of implementation support to the affected entities (severable services), another solution would be more suitable. A single definitive contract could be written to treat each requirement as a separate line item, funded in accordance with the appropriations law principles applicable to the type of services covered.


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