Third Party Procurement
Frequently Asked Questions
Q = Question; A = Answer
Q. We have a current contract for electronic fare-box equipment that has a cooperative purchasing agreement. Our purchasing department did not include minimum/maximum quantities for the contract other than the quantities our agency needed. Since there is a cooperative agreement for other agencies to piggyback, without a min/max quantity, how do we effectively manage this contract when other agencies want to piggyback on to it? Background Information: Listed below is the cooperative purchasing agreement that was included in our RFP, "Cooperative Purchasing." During the term of the contract, the successful bidder will extend all terms and conditions to any other local governmental agencies upon their request. These agencies will issue their own purchase orders, will directly receive goods or services at their place of business, and will be directly billed by the successful Contractor."
A. FTA policies do not allow grantees to award "open-ended" contracts with assignment clauses; i.e., where the contract does not provide for minimum and maximum quantities. For this reason, other transit agencies would not be allowed to "piggyback" your contract. Following is the policy statement from the FTA Circular 4220.1F, Page V-6, "Assignment of Contract Rights. FTA expects the recipient to limit its procurements to the amount of property and services required to meet its reasonably expected needs without adding excess capacity simply for the purpose of assigning contract rights to others at a later date. FTA expects the recipient to be able to justify the quantities it procures. Having written statements of its anticipated material requirements in the recipient's contract files may prove helpful. For example, if the supplies or services were solicited, competed, and awarded through the use of an indefinite-delivery-indefinite-quantity (IDIQ) contract, the solicitation and also the contract award are expected to contain both a minimum and maximum quantity that represents the recipient's reasonably foreseeable needs." (Posted: December, 2011)
Q. How do I write a solicitation and contract to make it an IDIQ as opposed to base + option, for bus procurements, since IDIQ seems to make life easier after the initial award?
Background: Please define the difference, when it comes to bus procurements, between an IDIQ contract and a base + options contract. In reading 4220.1F and the BPPM, there is very little language on what makes a contract an IDIQ contract, yet there is a clear statement in the BPPM that exercising "orders" from an IDIQ contract does not require the current market price evaluation that exercising "options" from a base + option contract does. This would seem to be a giant loophole, that one can do a five-year bus purchase and NEVER be required to do any further price evaluation, just by calling the contract an IDIQ instead of a base + options.
A. FTA expects you to choose the contract mechanism that will give you the best possible price outcome. You cannot get the best possible pricing from a manufacturer with an IDIQ contract where he must commit himself to a fixed price for an unknown quantity. To protect himself he will quote a price on the minimum quantity only.
IDIQ contracts work with fungible, mass-produced items that are widely sold. In this context, the manufacturer is not concerned about quantities. IDIQ contracts do not work well with custom-built products such as buses, since (1) the OEM experiences an economy of scale with larger orders, and (2) there is no other market for a custom-built bus. As a result the OEM risks experiencing a series of very expensive single-bus orders. A good options contract will identify anticipated quantities (or at least ranges of quantities) for each option period, based on the buying agency's five-year capital plan. This allows the OEM to provide reasonable pricing, based upon those quantities. (Posted: January, 2013)
Q. Can a grantee awarding an IT contract place an assignability clause that says up to seven additional software systems may be ordered under this contract, even though no other agencies are known at the time of award that expressed an interest in the procurement, and where the software product being acquired is not necessary the product referred to in the assignability clause? In other words, must the option be expressed in terms of quantities of specific products vs. the number of other agencies that might piggyback the contract?
A. The Assignment clause of the contract does not specify nor does it represent neither the anticipated needs of the city nor those of other agencies known to the city at the time of the solicitation or contract award. This was not a joint procurement. It is an attempt to set up a GSA-type contract that other municipalities may use but it does not limit the number of software licenses nor does it reflect actual known needs of the cities that might want to use the contract. As such it does not comply with FTA policy re IDIQ contracts with assignability provisions. (Posted: August, 2013)