The Limitations of Multiple Award IDIQ Contracts

Situational Advantages of Single Award and Multiple Award IDIQs

Single and multiple award IDIQ contracts have their respective advantages and disadvantages for federal construction work, pointing to different recommended use cases. The key to making the best choice between single award and multiple award contracts lies in understanding how the different approaches require different levels of effort from the government and the contractor, and how each contract can drive very different motivations, with significant downstream impacts.

Cost Savings

The MATOC/MACC promise of competition on every task order is an appealing one that seems to check the box of ensuring fair and reasonable pricing, a responsibility with which contracting officers are entrusted.  As long as you can see four or five contractor bids for the same scope of work, the government is getting the best deal, right?

Not always.

There are times when the administrative cost of achieving multiple bids outstrips the cost savings. The Office of Management and Budget (OMB) and the General Services Administration (GSA) recognize that there are times when the default preference for multiple awards to foster competition don’t make sense, and JOC is specifically called out as an instance where single award contracts may be preferable:

“An illustration of circumstances when more favorable terms and conditions, including pricing, could be obtained if single awards were made may be the award of certain kinds of fixed-price construction contracts, commonly known as Job Order Contracts (JOC) and Simplified Acquisition of Base Engineer Requirements (SABER) contracts.

These types of contracts typically include government-established unit prices for specific line items needed to complete the requirements of the delivery order. Award determinations are made by selecting the mix of line items to be used for a project and multiplying the mix of line items by the coefficient bid by the offeror. The contractor’s coefficient is based on cost elements such as overhead, profit, minimum design costs, G&A expenses, bond premiums, and gross receipt taxes. These contracts have much of their pricing determined by pre-award competition.

It is possible that the use of multiple awards for these contracts could result in higher overall prices to the government because offerors might be inclined to raise their bidding coefficients to account for the fact that potential delivery orders would be spread out among several firms, which means that the companies would have fewer tasks over which to spread their overhead.”

The cost savings are not the responsibility of the contractor alone. A single award contract enables the government to save a significant amount of time and money because the agency does not have to prepare a fully designed task order package, akin to bid documents, for each task order. Frequently, this preparation does not provide added value to the government but is required for fair competition among contractors.

JOC and SATOC take a more collaborative and streamlined approach to task order preparation. This approach focuses on scope definition activities that are right-sized for the complexity of the project and that provide true value. This results in both cost and time savings.

Effects on Speed and Mission

The work required to develop task order documentation, as well as the evaluation of a MATOC contractor pool for a best value task order award, take time. And that can impact how quickly projects can be executed. In addition to increased cycle time and demand on resources, the slower delivery of projects can have a significant impact to an agency’s mission in dynamic times, whether in response to a pandemic, a cybersecurity attack or a funding windfall. JOC and SATOC can clearly scope, price and execute projects faster than traditional or multiple award methods.

Handling Change Orders

While a competitive task order process drives to the lowest first cost for a particular project, multiple award approaches tend to drive the same kind of opaque, imbalanced project knowledge that has been demonstrated to increase delays and costs in the commercial construction sector (see: The Commercial Real Estate Revolution: Nine Transforming Keys to Lowering Costs, Cutting Waste, and Driving Change in a Broken Industry by Rex Miller et al)

It’s not that contractors are bad actors. It’s that a system that incentivizes contractors based on first cost will always result in change orders. Unfortunately, there is no price competition in change orders, so the government never knows if it is getting a fair deal in change order negotiations.

Both JOC and SATOC, as single-award, unit price-based methodologies, turn those incentives around. Within a JOC or SATOC, the contractor has already established its competitive pricing.  The contractor is looking for the unknown during scope development and is incentivized to reveal all information to the government before work begins. When an unanticipated scope is encountered during the project, such as owner-driven changes or unforeseen site conditions, the contractor is bound by the same unit pricing used before work began.

Contractor Performance

Single-award contracts like JOC have a low minimum guarantee, but the potential for a high volume of work acts as an incentive toward quality performance. The contractor knows that greater profitability comes with higher volume and therefore is highly motivated to work in partnership with the government and provide a high level of customer service to drive more work opportunities through the contract.

Risk of “Last Man Standing”

One of the most unanticipated outcomes of a multiple award contract is to end up with an unplanned single award contract. Imagine that a long-term contract begins with five or more qualified contractors competing for task orders. If one contractor dominates by winning the majority of task orders, which can happen due to a variety of factors from geography, market factors, bonding limits, etc., the competitive pool can winnow down, sometimes to just one contractor. In this situation, the government has very limited ways to validate whether task order pricing is fair and reasonable without significant work effort and expertise.

Understanding the Limits of Multiple Award IDIQ Contracts

While multiple award IDIQ contracts are commonplace for DOD and federal government construction, they may not deliver everything project owners desire in every circumstance. Knowing these limitations exist, leaders in the federal space would be wise to take a hard look at single award IDIQ contracts as an alternative.

About Lisa Cooley, Vice President of Federal Solutions

Lisa Cooley serves Gordian as the Vice President of Federal Sales. Lisa leads a team seeking to solve the significant challenges Federal agencies face building and managing their facilities and infrastructure. Before Gordian, she founded and operated a women-owned general contracting firm focusing on public work, specifically Federal projects. Lisa worked as Manager of Strategic Development at Centennial Contractors, one of the largest national Job Order Contractors, and spent time as an independent JOC consultant to the public-sector. She was also the National Program Manager at RSMeans data (before it was acquired by Gordian). Lisa graduated from the University of Oklahoma where she studied art and architectural history.