An Evaluation of IDIQ Contracts for Services

Abstract

In its efforts to modernize, reduce costs, and improve efficiency, the Department of Defense (DoD) has implemented strategies to improve its acquisition of goods and services. Indefinite-delivery/indefinite-quantity (IDIQ) contracts are being widely used within this context because of the flexibility they permit the contracting agency. This study presents findings from original quantitative and qualitative data generated by a survey of professional services industry firms experienced with the IDIQ contract vehicle. Based on our review of the literature and our survey results, we present a summary of the benefits of IDIQ arrangements and identify ways to improve IDIQ contract efficiency, while potentially enhancing competition. The objective of this report is to provide a better understanding of how the DoD can leverage the advantages of IDIQ contracting to improve efficiency and achieve cost savings in its acquisition of essential services. Agencies use IDIQ contracts to acquire supplies and/or services when the exact times and/or quantities of future deliveries are not known at the time of contract award� (FAR, 2011, 16.501-2(a)). In contrast to a definite-quantity or a defined-requirements contract, an IDIQ contract provides for an indefinite quantity, within stated limits, of supplies or services to be furnished during a fixed period, with deliveries or performance to be scheduled by placing orders with the contractor� (FAR, 2011, 16.504(a)). IDIQ contracts first emerged in the early 1990s as a means of reducing transaction costs. In its efforts to devise a contracting vehicle that was less prone to perceived abuse, the Office of the Secretary of Defense released a paper in 1994 entitled Acquisition Reform: A Mandate for Change. This paper provides the conceptual foundation of the DoD's revised approach to acquisition reform (Perry, 1995). Shortly thereafter, The Federal Acquisition Streamlining Act of 1994 (FASA) was enacted, institutionalizing business processes that facilitated affordable and timely delivery of products and services. It was this act that first provided statutory recognition for IDIQ contracts and outlined the guidelines for their proper utilization and administration. FASA specifically endorsed the use of multiple-award IDIQ contracts, whereby awards are made to a number of vendors who then compete among themselves for the contracting agency's future business.