CLC033 - Contract Format/Structure DOD e-Biz Special Contract Structures Special Contract Structures Different contract types require

Department of Defense (DOD) contracting professionals to consider unique issues in order to maintain effective contract structure. The following require special attention: Indefinite Delivery Contracts o Indefinite quantity o Definite quantity o Requirements o Contract Options Page 1 of 8

1- Indefinite Quantity Contracts Provide for an indefinite quantity, within stated limits, of supplies and services, during a fixed period. The Government is obligated to purchase a minimum quantity and places orders for individual requirements as the arise. Quantity limits may be stated in number of units or in dollar values. 2- Definite Quantity Provides for the delivery of a definite quantity of specific supplies or services for a fixed period, with time and place of delivery or performance to be identified at time of order. 3- Requirements Provides for filling all actual purchase requirements of designated Government activities for supplies or services during a specified contract period. Deliveries or performance are scheduled by placing orders with the contractor. The contract document contains an estimated quantity of the supplies or services required by the Government. Contract Option An option is a unilateral right to buy: Specified items At set prices In specified quantities By a certain date (or event) Established at award, they are exercised unilaterally by the Government contracting officer and are exercised "as is".

CLC033 - Contract Format/Structure DOD e-Biz Special Contract Structures Special Considerations for Indefinite Delivery Contracts The following key points should be remembered for indefinite delivery contracts: The basic contract sets forth: o Minimum and maximum quantities (or estimated total for requirements contracts) o Delivery parameters o Pricing Individual orders set delivery schedules and provide funding The terms are more flexible than the use of contract options They should be used for requirements with predictable quantity ranges and short item lead times Contracting personnel should beware of "rogue customers" who may use sources other than those specified in requirements contracts Page 2 of 8

CLC033 - Contract Format/Structure DOD e-Biz Special Contract Structures Mixing Different Contract Types Special care must be taken to ensure costs do not migrate from fixed-price line items to cost-type line items. Grouping "like types" together in the contract schedule will make it easier to keep track of the contract types being employed. Click here for an example of effective grouping of fixed-price and cost-type items. Page 3 of 8

Example An example of effective grouping of fixed-price and cost-type items is illustrated below. 0001 - 0010 Firm Fixed Price (Base year) 0101 - 0110 Cost Plus Fixed Fee (Base year) 1001 - 1010 Firm Fixed Price (Option year) 1101 - 1110 Cost Plus Fixed Fee (Option year)

CLC033 - Contract Format/Structure DOD e-Biz Special Contract Structures Special Considerations for Options It is important that options be clearly and accurately expressed in contracts so that contract performance and payment can be accomplished without unnecessary delay. For increased quantities of supplies or services, options should be expressed in terms of: Percentage of specific line items Increase in specific line items Additional numbered line items identified as the option Click here to view an example that demonstrates effective line item structure with use of option items. Page 4 of 8

Example

ITEM 0001 0002 0003 0004 0005 Option Items 0101 0102 0103 0104 0105

SUPPLIES/SERVICE A-44B Attack Aircraft Lot 3 (FY11) Aircraft Technical Manuals (see Exhibit A) Logistics Analysis Data for Item 0003 (see Exhibit B) Initial Spares (see Exhibit C)

QUANTITY UNIT UNIT PRICE 12 ea

AMOUNT

$55,555,00 $666,660,000 (NSP) $2,500,000 (NSP) $1,123,546

A-44B Attack Aircraft Lot 4 (FY12) Aircraft Technical Manual (see Exhibit A) Logistics Analysis Data for Item 0103 (see Exhibit B) Initial Spares (see Exhibit D)

12

ea

$55,675,000 $668,100,000 (NSP) $2,500,000 (NSP) $2,312,452

CLC033 - Contract Format/Structure DOD e-Biz Special Contract Structures Knowledge Review Which of the following contract type contains only an estimated quantity of the Government's needs? Definite quantity contract Options Indefinite quantity contract Requirements contract That is correct. The Option contract type contains only an estimated quantity of the Government's needs. Page 5 of 8

CLC033 - Contract Format/Structure DOD e-Biz Special Contract Structures Knowledge Review Which one of the following sections is the LEAST acceptable way to express quantities of supplies or services when using options? As a percentage of specific line items As the quantitative mean of the basic line items As an increase in specific line items Additional numbered line items identified as the option That is correct. The LEAST acceptable way to express quantities of supplies or services when using options is as the quantitative mean of the basic line items. Page 6 of 8

CLC033 - Contract Format/Structure DOD e-Biz Special Contract Structures Lesson Summary During this lesson we differentiated among the four special contract structures identified below. We also discussed important considerations pertaining to each as they relate to effective contract structure. Definite quantity contracts Indefinite quantity contracts Requirements contracts Contract options Page 7 of 8

CLC033 - Contract Format/Structure DOD e-Biz Special Contract Structures Page 8 of 8

You have completed the content for this lesson. To continue, select another lesson from the Table of Contents on the left. If you have closed or hidden the Table of Contents, click the Show TOC button at the top in the Atlas navigation bar.