Contracting caps: which contract is the right one?

TINKER AIR FORCE BASE, Okla. -- Have you ever had a project all lined up, thought you knew of the perfect contract for your project and the contracting officer said something like, "I'm sorry but this project will exceed your contract's cap so we can't use this contract?"

Contracts come in a variety of shapes and sizes to meet the customer's needs. A contract's type will dictate how requirements are managed just as much as writing the proper specifications. Both are critical in communicating the requirement to industry and receiving the best value in return.

The Federal Acquisition Regulation defines several different types of contracts that can be used to meet the government's needs. Contracting professionals, working in tandem with other multi-functional team members review the FAR relative to the requirement and select the best contract type. Some contracts specify an exact quantity of a requirement and need date rather than a maximum quantity with unknown need dates. A simple example would be agreeing to pay $40 each for a certain quantity of widgets to be delivered by a certain date.

Other contracts, such as Indefinite Delivery/Indefinite Quantity types, establish the government's needs on a less certain basis. That is, we know we need a certain product (or service) but perhaps not exactly how many or exactly when. We place orders for those specific needs when they are known and money is available. BUT, when we awarded the contract we established a maximum value that would not be exceeded. A contract "cap" is basically contracting slang for "maximum." These values can be expressed in quantity (we will not order more or less than a certain number of widgets), or in dollars (we will spend at least $5,000 but not more than $5 million during the life (or per month, year, etc.) of the contract. These minimum and maximum amounts are highly important to know and track.

The maximum (cap) sets up part of the rules of engagement for using a particular contract. Government requirements are publicly advertised and awards are publicly announced. If we later say the maximum was not a maximum and can be changed, then we are violating our original agreement. The contracting officer will use the phrase "out of scope," meaning the requirement is no longer as originally advertised and awarded. Other competitors may have offered us a better deal if the true conditions were known to them before contract award. Those competitors will rightly feel they should be allowed an opportunity to compete for the requirements above the cap established at time of award. They then have the right to complain - to the court, to the contracting officer, to their Congressional representative, or even to the press.

Given the public scrutiny on the expenditure of public funds, the need to stay within the contract's scope is obvious. Full and open competition is the law in federal contracting, with only a few exceptions, such as truly urgent situations or where only one vendor can provide the requirement without substantial duplication of cost to the government. Any action outside the scope of a contract must be supported by a justification and approval for other than full and open competition. J&As must tell a story that fully supports a statutory exception to full and open competition. Requirements do not become "urgent" due to lack of advance planning. Currently, J&As to support contract actions over $650,000 issued by 38th Cyberspace Engineering Group can only be approved by Air Force Space Command A7K. J&As are publically posted when approval is granted.

So, if J&A approvals are tougher to get than tax refunds, are there other options? Yes.

1) Give a lot of thought into defining your requirement up front and ensure your contract maximum covers your needs;

2) closely monitor your cap; know how much money/quantity is left at all times, leaving plenty of time to re-procure early if approaching thresholds;

3) closely scrutinize everything you order under the contract, considering other contracts that may be better suited or able to handle the instant requirement;

4) communicate with contracting professionals as soon as possible concerning requirements to be placed on any contract with a cap and certainly when you realize that requirements are approaching the cap earlier than anticipated.