One of the most common contract types being used by the federal government is the indefinite delivery/indefinite quantity (IDIQ) contract.
IDIQ contracts are often used in federal contracting to provide the federal government with flexibility in procurements where the exact requirements are not yet known. These contracts can be used on both a fixed-price and cost-reimbursement basis.
What is an IDIQ Contract?
IDIQ stands for Indefinite Delivery, Indefinite Quantity. In layman's terms, this means the quantity of products or services that the contractor is delivering is not yet determined.
After a government agency determines a need to purchase a particular product or service, it develops an acquisition strategy, and a major part of this strategy involves determining which contract type best serves the government's needs. Sometimes, the government doesn't always know how many items or hours of an expert's time it will need.
Most types of contracts the government uses require it to list exact quantities of the product or service it needs. If it doesn't know those exact quantities, it will opt for the flexibility of an IDIQ contract. This will give the government greater flexibility to define its needs more specifically over the life of the IDIQ contract.
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Different Types of IDIQ Contracts
There are two primary types of IDIQ contracts, segmented by the number of companies that will receive an award from the federal government. These include single-award IDIQ contracts and multiple-award IDIQ contracts.
Single-Award IDIQ Contracts
A single-award IDIQ contract is the simplest type. This occurs when a government agency establishes and awards a contract to a single contractor.
Awarding an IDIQ contract to a single contractor simplifies the government's pricing for products and services and streamlines the process overall. But it does remove some flexibility and introduces risk that the government could potentially be stuck with a lone vendor that is underperforming or behind schedule.
Multiple-Award IDIQ Contracts
If the government prefers to work with more than one vendor, it can introduce a multiple-award IDIQ contract. These contracts will include a few pre-approved vendors that have agreed to a common set of terms and conditions.
While these types of contracts can be more complex, they have become increasingly popular in recent years.
Using a multiple-award IDIQ contract allows the government to select several vendors for an agency to rely on, then ask that small group to bid against one another to complete each task.
IDIQ Contract Pricing
While there are many other differences across types of IDIQ contracts, depending on the government agency and the products or services in question, one of the main differences (as with all government contract types) is pricing.
Specifically, an IDIQ contract opportunity can fall under a fixed-price, cost-reimbursement, or time-and-materials contract.
Fixed-Price Contracts
Fixed-price contracts are used by all federal agencies and generally provide a firm price for the work completed or items supplied. However, an adjustable price level is sometimes used for a ceiling price, a target price (including the target cost), or both.
Cost-Reimbursement (Or Cost-Plus) Contracts
Cost-reimbursement, or cost-plus, is a type of contract in which a contractor is reimbursed for all allowable expenses up to a set limit, plus an additional payment to allow the company to make a profit.
In a cost-reimbursement contract, final pricing is determined upon completion of the contract or at another previously established date during the contracting period. A total cost estimate will be determined before contract work commences, allowing the agency to set a project budget and establish a maximum reimbursement amount.
Time and Materials Contracts
Less common in the federal government, time-and-materials (T&M) contracts present the highest risk to the government and the lowest risk to the contractor.
These contracts allow government purchasing officials to procure supplies or services based on direct labor hours and actual material costs.
A Time and Materials contract is generally used only when it is not possible to accurately estimate or anticipate the extent or duration of the overall work.
What are the Benefits of Having an IDIQ Contract?
For federal governments, the primary benefit of IDIQ contracts is a simplification of the procurement process.
It allows a government to procure a product or service with less hassle, even if they don’t know exactly how much they need or for how long they will need the service.
For government buyers, IDIQ contracts eliminate the need for a lengthy bidding process. It can also help vendors new to the public sector with a way into the federal government procurement process, and a route to win government contracts, including an entryway into the GSA Schedule program.
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Government Spending on IDIQ Contracts
Federal agencies widely use Indefinite Delivery/Indefinite Quantity (IDIQ) contracts to meet requirements.
More often than not, IDIQ contracts are multiple-award, which makes them similar to Government-Wide Acquisition Contracts (GWACs), only smaller and, typically, more limited in scope.
Federal agencies have, for the most part, been spending more on multiple award IDIQs in recent years. From FY 2019 to FY 2022, spending by different federal governments on IDIQ agencies rose by $3.7B, from $9.8B in FY 2019 to $13.5 B in FY 2022, according to Deltek's research.
If this pattern continues, then competing for spots on IDIQ contracts should remain an important part of the business development strategy for firms of all sizes.
Many different government contract vehicles use IDIQ, including some very significant ones such as:
- The GSA Multiple Award Schedule (MAS) Program: These are long-term government-wide contracts from the GSA that provide products and services to government buyers at pre-negotiated prices.
- OASIS Plus (or OASIS+): Originally referred to as "BIC MAC" and "Services MAC," OASIS Plus is expected to have a major impact on federal acquisition for years to come.
- GSA’s Alliant 3: Like the earlier Alliant 2, Alliant 3 is an unrestricted Best-In-Class (BIC) contract using IDIQ/GWAC methods, designed to provide federal agencies with comprehensive and flexible IT solutions.
How Do I Get an IDIQ Contract?
Identifying the source of these valuable contracts is the first step toward getting an IDIQ contract.
Federal agencies use several methods of advertising their intent to spend money, including socioeconomic set-aside programs and government websites such as SAM.gov. Sometimes agencies also offer a preview of coming solicitations by hosting industry days.
Federal government contracting is increasingly competitive. When you're trying to beat out other like-minded businesses for the next contract, it helps to identify best-fit opportunities before your competitors do.
For your business to find government contracts that fit your areas of strength, you will need to zero in on your target portion of the federal government contracting market and look for IDIQ contract opportunities that best match up with your strengths as a business.
