Indefinite-delivery contracts are used when the desired period of performance is known, but the delivery or performance schedule or exact quantity (stated as number of units or as dollar values) of goods or services that will be required during the term of the contract is unknown at the time of award. These contracts establish the following:
- The period of performance, including extensions as applicable.
- The goods or services that can be ordered.
- Terms and conditions.
- The minimum and maximum obligations of the parties.
- Whether the award is a single indefinite-delivery contract or one of multiple indefinite-delivery contracts awarded.
- The defined procedures that will be used in the ordering, billing, and payment methods; and, as applicable, any designated ordering officials. If multiple awards may be made resulting from a competitive Request for Proposal (RFP), whether some or all of the orders will be further competed and the procedures and criteria that will be used for evaluation and determination for the placement of orders.
- Order types (pricing structures such as firm-fixed price, time and material, labor-hour, cost reimbursement, etc.).
- Prices.
Indefinite-delivery contracts may provide for delivery of a definite quantity, an indefinite quantity within a minimum and maximum, or all of the Postal Service’s requirements. During the contract term, delivery orders for goods or task orders for services are issued by contracting officers; or, orders may be placed through alternative methods, such as, designated ordering officials, online catalogs, and automated processes. Indefinite-delivery contracts should have well-defined procedures for ordering, billing, and payment stated in the contract.
Generally with contracting officer-initiated delivery or task orders, funds will be committed with the order and standard billing and payment processes will apply. However, a variety of other funding, ordering, billing, and payment processes may be used, such as, funding the indefinite-delivery contract, automatic replenishment, scanned-based billing and payment, and third-party provider ordering and payment processes, especially, when orders are placed by alternate methods. Any alternate method must ensure performance occurs and billing and payment processes have effective controls and procedures to ensure proper inspection and acceptance to safeguard the interests of the Postal Service and suppliers. As appropriate, additional coordination with the Controller, Accounting, the SOX Program Office, SCM Strategies, or others, may be required to implement alternative methods. (See Section 5-12, Make Payment.) Reviews and approvals for an indefinite-delivery contract are based upon the total estimated dollar value of all potential orders including any extensions. (See Sections 2-41, Obtain Selected Reviews and Approvals and 2-41.2, Estimated Total Dollar Value.)
Definite-quantity contract — An indefinite-delivery–definite-quantity (IDDQ) contract provides for a definite quantity of specific goods or services during the contract period, with deliveries or performance to be scheduled at designated locations when ordered. All definite-quantity contracts must include Clause 2-41: Definite Quantity.
Indefinite-quantity contract — An indefinite-delivery–indefinite-quantity (IDIQ) contract provides for an indefinite quantity of specific goods or services, within a stated minimum (more than a nominal quantity but should not exceed known requirements) and maximum (must be realistic) quantity, to be delivered during the contract period to designated locations when ordered. Use an IDIQ contract when a recurring need is anticipated and precise requirements for goods or services ordered over the term of the contract, above known minimums, cannot be determined. The minimum and maximum are provided to limit the pricing risk to the supplier by obligating the Postal Service to order the stated minimum and establishing a maximum requirement to be furnished by the supplier, if ordered. The contract minimum in combination with Clause 2-40: Delivery-Order Limitations is designed to protect the supplier from being required to perform at uneconomical levels or beyond its capacity and for the Postal Service to achieve fair and reasonable prices.
For sourcing efficiencies and in limited circumstances, such as satisfying a final order quantity or completing an issued task order, contract maximums may be exceeded upon the mutual agreement of the Postal Service and the supplier. In increasing the contract maximum, the contracting officer must first determine if the action increasing the quantity or value is within the scope of the contract compared to the contracted amount or whether noncompetitive procedures apply. (See Section 5-8.9, Change Orders about contracting officer determination of the scope of the contract.)
In the case where the contracting officer determines the action to be within scope, any quantity or value added above the contract maximum must be limited in nature and represent a small percentage when compared to the existing maximum value. A bilateral contract modification increasing the contract maximum must be executed prior to the Postal Service ordering goods or services in excess of the established maximum. When modifying a contract to increase the contract maximum, review and approval of the action is required. (See Section 2-41.3.2 Reviews and Approvals of Contract Awards, Modifications, and Ordering Agreements.) All indefinite-quantity contracts must include Clause 2-42: Indefinite Quantity.
Requirements contract — A requirements contract provides for filling all (or specified portions) of actual purchase requirements of the Postal Service as a whole or a designated Postal Service organization for specific goods and services to be delivered or performed as ordered over the term of the contract. Use a requirements contract for the following:
A requirements contract creates an obligation on the Postal Service not to purchase the same goods or services from other sources during the term of the contract. A requirements contract might be selected when the purchase/SCM team decides to award a contract to only one source but cannot obtain or otherwise predict quantity information as to establish a contract minimum, or where the goods or services required are so differentiated that alternatives do not meet the needs of the Postal Service. The solicitation and contract must state an estimated total quantity and, if feasible, the maximum limit of the supplier’s obligation to deliver and the Postal Service’s obligation to order. The total-quantity estimate does not represent an obligation to the supplier, but must be as realistic as possible, based on records of previous requirements and current market information. The contract may also specify minimum or maximum quantities for individual orders and a maximum that may be ordered during a specified time using Clause 2-40: Delivery-Order Limitations.
When a requirements contract is for repair, modification, or overhaul of Postal Service property, the solicitation must state that failure of the Postal Service to furnish such items in the amounts described as “estimated” or “maximum” will not entitle the supplier to any price adjustment under the Postal Service Property clause used within the contract. (See property clauses, 2-11: Postal Service Property-Fixed-Price, 2-12: Postal Service Property – Short Form, 2-13: Postal Service Property–Non-Fixed-Price, and 2-14: Postal Service Property Furnished “As Is”). All requirements contracts must include Clause 2-43: Requirements.
All definite-quantity, indefinite-quantity, and requirements contracts must include Clause 2-39: Ordering and Clause 2-40: Delivery-Order Limitations. Reviews and approvals for Indefinite-Delivery contracts and subsequent orders are discussed in Sections 2-41, Obtain Selected Reviews and Approvals and 4-1, Ordering.
Indefinite-delivery contracts can employ a variety of pricing structures for the orders. Firm-fixed price orders are preferred unless the orders cannot be accurately priced before issuance. When the contract allows for such flexibility, time and materials, labor-hour, or cost-type orders may be used at the discretion of the contracting officer. The contracting officer must ensure that the contract includes the relevant payment clauses that address the various pricing structures that will be used to place orders under the indefinite-delivery contract (i.e., Clause 2-26: Payment—Fixed Price, Clause 2-38: Payment Time-and-Materials and Labor-Hour Contracts, Clause 2-33: Cost Contract—No Fee). (See Sections 2-18, Select Contract Type and Period of Performance and 4-1.4, Orders Against Indefinite-Delivery Contracts.) Contracting officers should ensure that payment clauses clearly state the processes that will be used for payment and, when applicable, consult with Legal Counsel when modifying payment clauses. (See Section 7-6, Deviations, when modifying clauses.)
Although the total contract price of goods and services may not be determined until orders are issued, the contracting officer is required to analyze the cost or price for the goods to be provided or the services to be performed under the contract at time of contract award. To determine fair and reasonable pricing for the indefinite-delivery contract, the contracting officer must develop a basis upon which the evaluation of cost or price can be performed. For goods, the contracting officer may request offerors to submit fixed unit prices for the term of the contract and then apply those prices to Postal Service-estimated quantities to arrive at a total evaluated price. For services, the contracting officer may use various approaches to provide the most comprehensive way to accomplish the evaluation. For orders with pricing structures using labor-hour rates, contracting officers may request a breakout of wages, indirect costs, general and administrative expenses, and profit that would be used for evaluation purposes, which when applied to Postal Service estimates, can produce a total evaluated price. Alternatively or in addition to labor-hour rates, offerors may be directed to provide a detailed cost proposal for a sample or hypothetical task order for one or more of the services to be performed under the contract. The contracting officer may use historical information that addresses similar past projects to estimate the labor mix, labor hours, or materials. The offeror’s responses to the sample task order can provide insight into their technical and staffing approach and may, therefore, provide a reasonable basis to assess the relative costs of the competing proposals. (See Section 2-34, Conduct Price/Cost Analysis, for additional information.)
During purchase planning, the purchase/SCM team should consider whether a single award or multiple awards are necessary to meet the needs of the Postal Service. Market research will assist in determining whether a single supplier will be capable of meeting Postal Service needs or whether multiple suppliers are the best approach.
Some factors to consider when determining the number of indefinite-delivery contracts required to satisfy the Postal Service’s needs are the following:
The award of a single indefinite-delivery contract may provide the best business solution under the following circumstances:
The award of multiple indefinite-delivery contracts may provide the best business solution under the following circumstances:
The decision and rationale to award single or multiple contracts and to what extent, if any, orders may be further competed should be addressed in the contract file or the purchase plan, when a purchase plan is required. (See Sections 2-1, Develop Purchase Plan and 4-1.4.4, Orders Against Multiple-Award Indefinite-Delivery Contracts.)
If multiple awards of indefinite-delivery contracts are made, further competition of orders should be considered by the purchase/SCM team. In many circumstances, further competition may represent the best business decision. However, competition is not always required; and, the initial determination to compete or not further compete orders does not limit the contracting officer’s ability to compete or not compete any single order under a multiple-award indefinite-delivery contract to satisfy the delivery needs of the Postal Service.
Examples that support a decision to further compete among all or some multiple awardees include, but are not limited to, the following:
Certain market conditions may dictate that under multiple indefinite-delivery contracts the placement of orders without further competition is in the best interest of the Postal Service. Examples of when competition of orders among multiple contract holders may not provide the best business solution include, but are not limited to, the following:
If competition of orders will be considered, contracting officers must ensure that the contract states that some or all orders may be competed. Clause 2–39: Ordering, paragraph e., is used to inform suppliers that the Postal Service reserves the right to compete orders among some or all suppliers holding contracts for the same or similar goods or services and that the decision to compete orders lies solely with the Postal Service and is not guaranteed.
When competing orders, contracting officers must specify any evaluation factors that will discriminate among proposals and establish the relationship of price to other factors (more significant, as significant, less significant) to determine which supplier will best satisfy the delivery needs of the Postal Service. The evaluation method used should be simple and practical, and a description of the method, the evaluation factors, and selection determination must all be documented and included in the contract file. Generally a review of a supplier’s performance on orders under the contract or similar contracts and the supplier’s capability to meet the requirements of the proposed work should suffice as evaluation factors. Other factors such as technical approach to the requirements, delivery schedule, or management approach may be appropriate depending on the order. The evaluation method should not impose a significant proposal preparation and cost burden to the supplier.
Under multiple-award indefinite-delivery contracts, contracting officers may decide to exclude one or more of the awardees from further competition for a particular order, or select a single awardee for a particular order if advantageous to the Postal Service. The rationale supporting that decision must be documented in the file. (See 4-1.4.4.2 Decision for Order Placement – Multiple Awards.)
See Section 4-1.4, Orders Against Indefinite-Delivery Contracts, for information about orders against a single-award, indefinite-delivery contract and multiple-award, indefinite-delivery contracts.
