Indefinite Delivery/Indefinite Quantity Contracting Practices (2015)

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55 associated procurement and administration processes as evidenced by the finding that the majority of IDIQ protests and claims are settled in favor of the govern- ment. Thus, the federal form can furnish a starting point from which a DOT can then tailor its own con- tract form to fit its state’s statutes. 2. Concerns found in the literature regarding increased protest risk owing to the potential restriction of com- petition were proven to be unwarranted, because only five of 76 protests were based on a violation of the Competition in Contracting Act (i.e., the premise that competition was not full and open). Additionally, all five claims were denied. Therefore, the full and open competition that occurs in the pre-award phase appears to be viewed by industry as sufficient. 3. The use of IDIQ in conjunction with design-bid-build (DBB), design-build (DB), or construction manager/ general contractor (CMGC) project delivery does not alter the fundamental structure of these delivery meth- ods. The parameters dictated by these delivery methods are individually applied to the planning, design, and exe- cution of each work order. Therefore, the advantages and disadvantages commonly attributed to the three project delivery methods are realized at the work order level. 4. The major benefits of IDIQ contracting perceived by state DOTs are in order of importance: • Reduction of project delivery period; • Flexibility in quantity of product and services purchased; • Flexibility in scheduling the delivery of the work order projects; and • The ability to use IDIQ contracts to provide a quick response during emergency situations. 5. High levels of uncertainty may not prevent contrac- tors from bidding for IDIQ contracts, but may result in higher prices for owners. 6. IDIQ contracting procedures allow agencies to pro- cure broad-scope projects for virtually all types of work that are a recurrent need for the owner. However, each procurement model will be constrained by agen- cies’ procurement policies, procedures, and applicable regulations. 7. IDIQ contracting techniques provide owners with the capability to rapidly issue work orders without going through a complete procurement process, improving their capacity to respond to emergency situations, and enhancing their ability to efficiently use available year- end funding. This chapter contains the conclusions and effective prac- tices identified using intersections of trends found on two or more research tools. In addition, a better understanding of this contracting approach allowed the authors to synthesize mechanisms and alternatives to improve some of the Indefi- nite Delivery/Indefinite Quantity (IDIQ) practices mentioned throughout this report. Suggestions for future research pre- sented in this chapter were stated based on revealed gaps in the body of knowledge. The following sections comprise all conclusions, effective practices, and suggestions for future research drawn from previous chapters. As a general note, this study found that IDIQ techniques increase agency capabilities to quickly procure a wide range of recurrent construction and maintenance services. With an appropriate selection of con- tracting procedures, agencies could successfully execute IDIQ contracts for almost all types of projects typically procured by state departments of transportation (DOTs). Two major conclusions were reached. First, IDIQ contract- ing can be applied to any form of procurement that an agency may choose to secure the capacity to deliver needed services and products across the life cycle of a typical DOT project delivery program. The synthesis found evidence of successful application of IDIQ contracts in planning, design, construc- tion, and maintenance. Therefore, IDIQs have the potential to become a useful tool in the DOT procurement toolbox. The second major conclusion is that IDIQ contracts reduce the need to conduct multiple procurement actions to deliver technically similar repetitive projects to a single transaction. Upon award, the agency acquires the capacity to access contractor services by issuing individual work orders for each project. This capacity has been used by a number of DOTs as a means to efficiently obligate unused year-end funds to complete minor construction and maintenance backlog proj- ects whose priority was too low to be funded in the fiscal year’s budget. Thus, IDIQ contracts enhance the efficient use of avail- able capital by creating a mechanism to quickly fund needed work. This is especially valuable in the event of an emergency because the IDIQ contractor is on board, selected on the basis of competitive pricing, and there is no need to gain authoriza- tion for expedited procedures or sole source procurements. The remaining conclusions drawn from the analysis dis- cussed in this synthesis report are as follows: 1. The federal government’s experience employing IDIQ contracts has produced a defensible contract form and chapter six CONCLUSIONS

56 8. The use of multiple award IDIQ contracts with com- petitive work orders eliminates the need for mobiliza- tion and escalation clauses since contractors are usually required to bid current prices on each work order, including the price for mobilization for the specific work order site. 9. Not including escalation clauses in multi-year single award or multiple award contracts with non-competitive work orders may result in higher project costs for public owners given the contractors’ need for larger contingen- cies in price proposals. 10. Small businesses’ ability to bid for other contracts, or even the ability to participate in a given IDIQ contract, may be severely reduced when owners require con- tract bonds at award covering the maximum amount to be ordered under the contract. EFFECTIVE PRACTICES The effective practices identified from the analysis discussed in this synthesis report are as follows. 1. Streamlined IDIQ contracting procedures with mini- mum proposal submittal requirements reduce the cost to industry and expedite the procurement. Some authors and studies proposed the use of oral proposals and page limitations for submittal requirements that must remain in a written format. These simplified techniques could be used at either the contract or the work order level. 2. When implementing IDIQ, DOTs may want to consider conducting training sessions with in-house staff and pre-bid meetings with bidders to inform and instruct them about this alternative contracting approach. 3. Balancing the number of contractors in multiple award IDIQ contracts with the number of expected work orders to be issued under the contract gives those con- tractors a good opportunity to win work beyond a stated minimum, if any. The appropriate number of awardees is a function of project scope and complexity; expected number, frequency, and duration of work orders; and required resources for a contractor to perform all the types of work described in the contract documents. 4. Invitation for bids low-bid advertise/award procedures were found to be better suited to IDIQ construction and maintenance contracts. 5. Best-value selection procedures can be used as a risk mitigation strategy to ensure the selection of a contrac- tor with the required technical and logistic skills for a reasonable price. 6. The advertisement of IDIQ contracts along with the state- ment of work for the first work order allows owners to conduct complete best-value selection procedures using the specifications and requirements of the first project to determine the technical capabilities of the contractor. 7. State DOTs’ historical data play an important role when developing the list of pay items to be included in the solicitation documents. By reviewing similar projects, owners will get a better idea of the work items usually required to complete a particular project. Incomplete pay item lists may result in the need to conduct nego- tiations and issue change orders to add pay items and prices to the contract. 8. A strong relationship between bid quantities included in these solicitation documents, and the actual quantities of work expected to be performed for a typical work order throughout the contract, would facilitate the selec- tion of the low bid on a single award IDIQ contract. If expected work orders are not fairly uniform, the work might be executed using a multiple award IDIQ contract or delivered using single-project contracting approaches. 9. Ideally, work orders are developed where they are neither so small that higher than normal bid pricing is triggered nor too large to prevent the agency from being able to award future work under the IDIQ contract because of funding constraints. 10. The use of single award IDIQ contracts offers owners the ability to create an interactive contracting environ- ment in which contractors provide input to the work order development processes in much the same man- ner as CMGC contracts. This type of interaction is lim- ited in multiple award contracts owing to the need to be equitable to the competing contractors in the IDIQ pool. 11. Cost-reimbursable compensation provisions allow owners to execute complex work orders when actual quantities of work to be performed are difficult to estimate. 12. Implementing IDIQ procedures based on a construc- tion task catalog and adjustment factors bid by con- tractors improves the agency’s budget control and discourages contractors from submitting unbalanced price proposals. 13. The inclusion of multiple mobilization pay items in sin- gle award IDIQ contracts, anticipating different potential case scenarios, provides agencies with greater flexibility to execute larger contracts covering more locations with a single solicitation. 14. “A × E bidding” is expected to increase the accuracy of price escalation methods as well as increase contrac- tors’ confidence in understandable, fair, and transparent escalation clauses, which may lead to lower contingen- cies in price proposals. 15. To facilitate bonding procedures and increase small business participation in IDIQ contracts, agencies might consider the following practices: • Limit the contract period to one or two years or allow surety companies to furnish annual bonds; • Establish maximum quantities of work (in dollars) to be assigned to contractors each year; and • Establish a maximum value of work orders (in dollars) that the contractor may be performing at any one time.

57 16. By allowing contractors to decide whether or not to modify unit prices on an annual basis in accordance with the Construction Cost Index published by the Engineering-News Record, the New York State DOT removes from contractors the risk related to disadvan- tageous adjustments. 17. The procurement of multiple projects under a single work order, as undertaken by the Florida DOT, allows the contractor to make better use of its resources reducing overhead costs that would be transferred to the owner. 18. When developing the evaluation plan for an IDIQ con- tract that replaces an expiring IDIQ contract, the agency might consider the potential impact that the evaluation panel member’s personal experience with the incum- bent contractor may have on their decision. The plan might include a written caution to the evaluators to base their rating on the information contained in the written proposals and not allow any personal experi- ence to bias their ratings one way or the other. This will be particularly critical to avoid a protest of the award if the incumbent has had performance issues during the current contract. 19. The inclusion of project size limitations in solicitation documents, in dollars and/or jobsite dimensions, may help agencies to easily identify project candidates. It also may give contractors additional information to prepare more responsive price proposals. 20. Identifying potential projects to be performed in the IDIQ RFP/IFB (Request for Proposals/Invitation for Bids) allows competing contractors to prepare more responsive proposals, reducing the level of uncertainty and the need for large contingencies in these proposals (when price is used as a selection factor). In addition, it helps agencies to conduct more efficient pre-award procedures. FUTURE RESEARCH NEEDS This synthesis identified four areas where future research would add value to the transportation procurement toolbox and assist transportation agencies in realizing the potential benefits discussed in this report. The remainder of this section is devoted to formulating concepts for research to advance the use and value of IDIQ contracting on highway projects. Stan- dard AASHTO Research Needs Statements for each potential project are found in Appendix F and are provided for the con- venience of interested AASHTO members to furnish to their organizations in support of the study. First, it was determined that the great diversity of IDIQ practices currently in use provides an opportunity for the public owner to utilize a wide range of alternatives to address specific issues within their capital and maintenance programs. Further research could address the development of an inte- gral framework that optimizes the combination of contracting procedures covering the entire project development life cycle for an agency’s annual program. The framework would coor- dinate both pre-award and post-award activities, increasing consistency and communication between these two project phases. The principal characteristic expected from the frame- work would be flexible enough to prescribe the use of IDIQ contracts in conjunction with single-project delivery methods in accordance with the policies, regulations, and contracting philosophy of each agency. Next, the apparent success of multiple award IDIQ con- tracts with competitive work orders in the federal sector and the clear preference given by the Federal Acquisition Regula- tion (FAR) to this approach, suggest that future research could be conducted to tailor multiple award IDIQs for implementa- tion by state DOTs. The research would produce a guidebook on implementing multiple award IDIQs for standard types of roadway, bridge, and drainage projects. The value of the work would be demonstrated in the ability to demonstrate to the public that the maximum amount of competition was being encouraged. In addition, there is a need for research on the use of construction task catalogs and adjustments factors and their impact on IDIQ contracting in the highway sector. Although this method is being used by several agencies, there is little information about it in the literature. Some specific aspects of this method that could be added in future research include: advantages, limitations, cost of develop- ing and maintaining these catalogs, and their suitability for use in multiple award IDIQ contracts. It is anticipated that the research would focus on using DOT bid tabulations as the primary data source for local pricing data and that the research would produce guidance for adapting that rich source of data in order to produce a viable catalog that is acceptable to both the owner and IDIQ contractors. It is also possible that a similar catalog could be developed for IDIQ design contracts. Finally, the wide use of design and research IDIQ con- tracts by state transportation agencies and the contrasting lack of research on this matter suggest that it may be a valu- able future research topic. The principal gaps of knowledge that could be addressed by this research are related to the identification of effective practices, advantages and dis- advantages, and types of professional services best suited for IDIQ contracting.