How To Assess The Potential Value Of IDIQ Contracts

Referred as “Task or delivery order contracts”, IDIQ Contracts are one of the premium public contracts released by the US government for creating earning opportunities. But, since its launch one of the prime concern pivoting IDIQ is as to how the contracts should be valued for purposes of compliance with Truth-in-Negotiation Act (TINA) and Cost Accounting Standards (CAS). Since the delivery time and quantity of work is indefinite, assessing the price of IDIQ contracts is certainly a hassle.

Though the contract valuation issue could have been addressed by the FAR Councils, there’s practically no regulatory policy-making entity that has ever addressed this issue as a regulation. It was never been officially addressed as to what value of IDIQ contracts the vendors are likely to get. In spite of its limited extent the FAR Councils addressed this issue keeping in line with TINA and CAS applicability, they reached opposite conclusions. This is precisely, a debatable situation in every possible manner. FAR Councils are opting for the TINA contract valuation purposes, which is totally opposite from their position regarding CAS contract valuation. Such a situation, logically speaking is the outcome of poor analysis on the Council’s part.

Why is this even an issue?
TINA is all for the negotiated IDIQ contracts, the value of which is more than $700,000, unless an exemption applies. If your contract action is valued at less than the TINA threshold, then it is not subject to TINA and you no longer need to submit the “certified cost or pricing data”. Quite obviously, you do not run the risk of “defective pricing”. Similarly, CAS is applicable to the negotiated contracts priced at $700,000, unless an exemption applies. If your contract action is somewhat lesser than $700,000, then it is exempt from CAS and you do not run the risk of CAS noncompliance with respect to that contract action.

Apart from this, CAS comes with an important threshold of $50 Million in contract value (no matter from a single contract award or the aggregated ones); in case you are working on any IDIQ contracts below that number, you do not need to carry out the burdensome CAS requirements, but if your contract valued is higher than that, you might get into hot waters. Hence, it’s crucial to correct the value of your contract to align with the compliance requirements and also identify risks associated with non-compliance.

Accurate Contract Valuation
 Evaluating the exact amount is almost impossible for the IDIQ contracts. Since, the Government nor the contractor knows the final contract value until the performance period expires. IDIQ contracts operate on lowest value.The contractor also performs a best-case and worst-case assessment of what he thinks the aggregate order value will be, hence a proper valuation is difficult.

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