Indefinite Delivery/Indefinite Quantity (ID/IQ) contracts are hard.

ID/IQ contracts are a subset of indefinite-delivery contract types. Indefinite-delivery contracts are used “to acquire supplies and/or services when the exact times and/or exact quantities of future deliveries are not known at the time of contract award.” FAR 16.501-2 states, “There are three types of indefinite-delivery contracts: definite-quantity contracts, requirements contracts, and indefinite-quantity contracts.” FAR Part 16.5 also makes the following points:

• A definite-quantity contract provides for delivery of a definite quantity of specific supplies or services for a fixed period, with deliveries or performance to be scheduled at designated locations upon order.

• A requirements contract provides for filling all actual purchase requirements of designated Government activities for supplies or services during a specified contract period (from one contractor), with deliveries or performance to be scheduled by placing orders with the contractor.

• An indefinite-quantity contract provides for an indefinite quantity, within stated limits, of supplies or services during a fixed period. The Government places orders for individual requirements. Quantity limits may be stated as number of units or as dollar values.

Thus, an ID/IQ contract is one where a variable quantity of goods or services may be ordered at any time during a fixed period. We will adopt Vern Edward’s terminology and call that “fixed period” the “ordering period.” Contractors don’t know when and they don’t know how much, until they receive a task or delivery order that tells them.

FAR 16.504(c) tells contracting officers that they “must, to the maximum extent practicable, give preference to making multiple awards of indefinite-quantity contracts under a single solicitation for the same or similar supplies or services to two or more sources.” The upshot of this direction is that contractors may have to compete for the award of individual task/delivery orders, at unpredictable times during the ordering period. For unpredictable quantities.

In other words, ID/IQ contracts are risky. Even when you have one in hand, you may not get much work. In fact, the government is not required to order any more than the specified minimum quantity.

Competition typically is fierce. While there are specified exceptions, “The contracting officer must provide each awardee a fair opportunity to be considered for each order exceeding $3,500 issued under multiple delivery-order contracts or multiple task-order contracts…” The contract’s competition procedures must be specified in the contract; but often a contractor may believe there was a bias because it did not receive an opportunity to bid or perhaps consistently lost on the bids it submitted.

Unfortunately for most contractors who believe they have been treated unfairly, the FAR prohibits protests of task or delivery order awards, except in limited (and specified) circumstances. Consequently, contractors that may believe they have not received sufficient orders under their multiple-award ID/IQ contracts have very little opportunity to do anything about it.

On the other hand, the ASBCA has provided contractors with limited success, where they have alleged that the contracting officer breached the contract by failing to give the contractor a fair opportunity to compete for a task/delivery order, as the contract promised. (Note the Court of Federal Claims has rejected the assertion that a prohibited bid protest can be “re-characterized” as a Contract Disputes Act (CDA) claim.)

But the government would prefer that contractors not bother the courts with their concerns. Instead, the government would prefer that aggrieved contractors first discuss their concerns with the cognizant contracting officer. In fact, we would suggest that this is good advice for contractors in many circumstances, not just those associated with ID/IQ contracts. Your first call should be to your CO, in order to get an understanding of their side of the story.

If that doesn’t work, there is an alternative. The contractor can call the contract’s Ombudsman. Each multiple-award ID/IQ contract is required to identify the cognizant Ombudsman. See FAR 16.505-(b)(8)—

The head of the agency shall designate a task-order and delivery-order ombudsman. The ombudsman must review complaints from contractors and ensure they are afforded a fair opportunity to be considered, consistent with the procedures in the contract. The ombudsman must be a senior agency official who is independent of the contracting officer and may be the agency’s advocate for competition.

If you have a multiple-award ID/IQ contract, then it must “include the name, address, telephone number, facsimile number, and e-mail address of the agency task and delivery order ombudsman.” The government wants you to call the Ombudsman, who is supposed to impartially hear your concerns. (Also: the government wants you to ignore its inconsistent capitalization of the term in its regulations.)

In fact, a recent proposed rule on the topic was issued “to implement a new clause that provides the agency task- and delivery-order ombudsman's responsibilities and contact information for use in multiple-award indefinite-delivery, indefinite-quantity (IDIQ) contracts.” According to the promulgating comments, lack of a standard FAR clause has led several agencies to create their own individual clauses; and thus it would be nice if there were a standard FAR clause that would supersede those agency-unique clauses.

Importantly, the proposed contract clause includes Alternate 1 language that would be used if multiple agencies are ordering from the same ID/IQ contract. It would state “This is a contract that is used by multiple agencies. Complaints from Contractors concerning orders placed under contracts used by multiple agencies are primarily reviewed by the task-order and delivery-order Ombudsman for the ordering agency.”

So: ID/IQ contracts are risky and one way to manage the risk is to understand the communication hierarchy the government wants you to be using. Litigation should be a last resort, as is true in so many areas of government contracting.

Back from the Society of Corporate Compliance and Ethics (SCCE) annual Compliance & Ethics Institute (CEI). From my perspective, well worth the investment of three-and-a-half days of time. The focus was not on Government contractors, per se, but there was enough related content to keep it interesting. Some of the breakout sessions were full of wonderful content—content that made one think about it and how it could be applied to the day-to-day grind of work.

One of those breakout sessions was taught by a member of the Office of the Inspector General of the Department of the Interior (DOI), Daniel Coney. He had a slide so personally impactful that I took a picture of it with my phone.

When speaking about the discretion OIGs have, he stated (paraphrasing), “Most of our cases are not criminal. We don’t go after people for making mistakes. We don’t go after people when there’s no intent to commit a crime.” Which is good news for many of us!

But then he showed a slide that contained the following sentence:

A MISTAKE REPEATED MORE THAN ONCE IS A DECISION

Whoa.

What I gleaned from that single sentence is that the more a mistake is repeated, the more it looks like intent—or, at least, like negligence.

Remember, the civil False Claims Act (as amended) has a different definition of intent than the criminal statute. To be liable, a defendant must have “knowingly” submitted a false claim; the civil statute defines “knowingly” as including either “deliberate ignorance” or “reckless disregard” for the truth. In our layperson’s interpretation, a defendant cannot claim that the false claim was the result of a mistake when the “mistake“ was the result of ignoring (or not looking for) warning signs that the mistake was being made.

But then we started thinking about cost accounting practices. Most of us know that a contractor subject to either modified or full CAS coverage has constraints over when it can make changes to its cost accounting practices. See, for example, the contract clause 52.230-2, which states (in pertinent part):

… the Contractor, in connection with this contract, shall -- Follow consistently the Contractor’s cost accounting practices in accumulating and reporting contract performance cost data concerning this contract. If any change in cost accounting practices is made for the purposes of any contract or subcontract subject to CAS requirements, the change must be applied prospectively to this contract and the Disclosure Statement must be amended accordingly. If the contract price or cost allowance of this contract is affected by such changes, adjustment shall be made in accordance with subparagraph (a)(4) or (a)(5) of this clause, as appropriate.

Similarly, the clause 52.230-4 states (in pertinent part):

… the Contractor, in connection with this contract, shall -- (i) Follow consistently the Contractor’s cost accounting practices. A change to such practices may be proposed, however, by either the Government or the Contractor, and the Contractor agrees to negotiate with the Contracting Officer the terms and conditions under which a change may be made. After the terms and conditions under which the change is to be made have been agreed to, the change must be applied prospectively to this contract, and the Disclosure Statement, if affected, must be amended accordingly.

The mechanism(s) for disclosing changes to cost accounting practice are established by yet another contract clause (52.230-6).

Finally, see FAR 30.6 (CAS Administration) provides direction to government contracting officers regarding how to administer the requirements of the foregoing contract clauses.

In summary, if you are a CAS-covered contractor, then you need to become somewhat of an expert in the clause requirements and FAR guidance. However, that will only get you so far.

Importantly, none of the foregoing clauses or the cited FAR language actually define the phrase “cost accounting practice.” The phrase is defined in the Cost Accounting Standards regulations themselves (see 48 CFR 9903.302-1) but that’s about it. In addition, you need to read certain court decisions (e.g., Perry v. Martin Marietta) to understand how the courts have interpreted the CAS language.

The tension between the CAS contract clauses, the FAR regulations, and the desires of the contracting parties have led to disagreements regarding whether or not a cost accounting practice has been changed. More to the point of this article, in our experience there is also disagreement regarding whether or not a cost accounting practice has been followed consistently.

As required by the clause language quoted above, when they execute their CAS-covered contracts, contractors agree to follow their cost accounting practices consistently. (We discussed the nuances between “disclosed” and “established” cost accounting practices in this article.) That’s the deal and, if a contractor fails to be consistent, then it may be alleged to have breached its contract. That’s not good.

But what about mistakes?

Does a simple mistake—somebody does something they’re not supposed to do—lead to a contract breach via an allegation that cost accounting practices were not followed consistently?

It depends, doesn’t it?

For a long time we argued that mistakes are not cost accounting practice. We argued that the cost accounting practice is what the contractor intends, not what some ill-trained employee actually does. But if that were literally true then a contractor would almost never have inconsistent cost accounting practices. There would need to be some type of direction from an authority figure in order to find inconsistent cost accounting practices. A smoking gun email would do it. A meeting behind closed doors would do it. But otherwise, not so much. If an employee violated policies and procedures and, as a result, the contractor treated something differently than it had told the government it was going to, that would not be an inconsistent cost accounting practice—because it would be a simple mistake.

Now, having seen and thought about Mr. Coney’s simple sentence, we think a reasonable person could distinguish between a simple mistake and an inconsistency in cost accounting practice based on the number of transactions that were affected.

Obviously, there’s no bright line in this line of reasoning. But we might assert (with some trepidation) the following general guidelines:

• One transaction out of many is not an inconsistent cost accounting practice; it is a mistake.

• One employee miscoding a transaction when many others in the same function are getting it right is not an inconsistent cost accounting practice; it is a mistake.

• Transactions escaping controls are also mistakes, assuming the controls were reasonably designed to prevent and/or detect mistakes.

Something for CAS-covered contractors to consider, perhaps?