HHS Reference Tool for Contract Funding, Formation and Appropriations Law Compliance
Using Indefinite-Delivery/Indefinite-Quantity Contracts to Acquire Severable and Non-severable Services.
Indefinite-delivery/indefinite-quantity (ID/IQ) contracts establish a guaranteed minimum amount that the Government is committed to purchase. The Contracting Officer must obligate appropriations available at the time of the ID/IQ award to cover the required minimum, and at the time of each individual task order award consistent with the type of services acquired (severable or non-severable).
It is possible to order both severable and non-severable services under a single ID/IQ contract. Using an ID/IQ contract for information technology services to develop, enhance and maintain a set of OPDIV systems as an example, Task Order 1 is awarded to convert a system from a client-server to a web-based application. There are interim products, but the contractual commitment is to deliver a working web-based application within 18 months of award. The required work represents a single undertaking, thus the services are non-severable, and the Contracting Officer must obligate the entire task order value at the time of award execution using current appropriations.
Task Order 2 under the same ID/IQ contract requires the contractor to provide continuous maintenance support for a different system. The task order establishes and funds an estimated level-of-effort for a base period and 3 option years. Here, the contractual commitment is to provide hours of labor to deal with system problems as they occur. The services are needed on a continual and recurring basis and do not represent a single undertaking; thus they are severable. The Contracting Officer must fund the base period and the options from appropriations current at the time of the award or option exercise.
HHS recommends against using task orders under an ID/IQ contract to procure non-severable services using multi-year contracting procedures pursuant to FAR 17.1. While HHS has not identified an express statutory prohibition on this point, please note that FAR 17.105-1(a) provides that prior to using a multi-year contract, the Head of the Contract Activity must determine that "[t]he need for the supplies or services is reasonably firm and continuing over the period of the contract." Making such a determination and finding would seem at odds with the use of an Indefinite Delivery/Indefinite Quantity contract. See e.g., Bureau of Customs and Border Protection - Automated Commercial Environment Contract,B-302358, December 27, 2004 (The FAR [17.105-1(a)(1)] authorizes multi-year contracts only when "the need for the supplies or services is reasonably firm and continuing over the period of the contract." The FAR [16.504(b)] authorizes an ID/IQ contract, however, "when the Government cannot predetermine, above a specified minimum, the precise quantities of supplies or services that the Government will require during the contract period").
Should an OPDIV determine to use ID/IQ task orders structured as multi-year efforts to acquire non-severable services, HHS recommends that the terms and conditions of the umbrella ID/IQ contract vehicle permit it and the task orders adhere to FAR 17.1 and HHSAR 317.1. However, HHS neither envisioned nor authorized the structuring of multi-year efforts under ID/IQ orders, nor the further extension of such orders by using options to acquire additional non-severable requirements. Instead, new ID/IQ orders may be awarded for that purpose.
Finally, in this context, HHS believes that ID/IQ contracts would be best used as a means of ordering separate non-severable requirements.