Controls Over Multiple Award Indefinite Delivery, Indefinite Quantity Contracts
Background
An indefinite delivery, indefinite quantity (IDIQ) contract is a type of contract the U.S. Postal Service uses to acquire future deliveries of services and supplies. An IDIQ is established when the Postal Service needs services or supplies but is not certain when (indefinite delivery) or how much (indefinite quantity). As needs arise, contracting officers (CO) make purchases from suppliers by issuing orders against IDIQ contracts. Suppliers are obligated to fulfill the orders upon receipt.
The Postal Service has two types of IDIQ contracts. Single award IDIQ contracts are awarded to a single supplier, and multiple award IDIQ contracts are awarded to two or more suppliers for the same services or supplies. Suppliers with multiple award IDIQs may compete against each other for all or some of the contract orders. IDIQ contracts have guaranteed minimum and maximum order amounts and the Postal Service is contractually obligated to order at least the minimum amount of services or supplies.
COs are also required to incorporate specific clauses in all IDIQ contracts. The clauses define the Postal Service's and suppliers' purchase and order fulfillment requirements, and establish communication procedures between the parties.
For fiscal years 2014 and 2015, the Postal Service had about 200 active multiple award IDIQ contracts valued at more than $5 billion. These contracts are managed under five portfolios: Transportation, Commercial Products and Services (CP&S), Technology Infrastructure, Facilities, and Mail and Operational Equipment.
Our objective was to determine whether the Postal Service had adequate controls over multiple award IDIQ contracts and identify best practices for multiple award contracts.
What the OIG Found
The Postal Service could improve controls over the use and administration of multiple award IDIQs. COs made some purchases without issuing the required orders, and did not always incorporate required clauses in the contracts or issue orders competitively.
COs in the CP&S portfolio made purchases without issuing the required orders for five of the 11 contracts we reviewed (45 percent), which were valued at over $18.3 million. COs stated they were aware of the policy to issue orders but thought they could deviate from it to streamline the purchasing process. However, the CO did not obtain approval for a deviation.
Orders allow COs to effectively track IDIQs to ensure the minimum contract commitment is reached. If COs do not monitor these minimums, the Postal Service may be liable to pay suppliers without receiving any services or supplies.
Also, one CO in the Transportation portfolio did not incorporate required contracting clauses in four of six IDIQ contracts (67 percent) valued at over $722 million. Supply Management contracting officials stated the contracts were inherited from a prior department and the clauses were not included by the former CO who initially awarded the contracts.
Omitting required clauses may lead to confusion and mistakes in administering the contract. Specifically, the supplier may not have a clear understanding of how orders are placed or the applicable order limitations, which could negatively impact Postal Service operations.
Finally, Postal Service policy states that best value is generally achieved through competition, but it does not require qualified and eligible suppliers to compete for orders or COs to justify business decisions for multiple award IDIQ contracts. If COs do not require suppliers to compete for orders, there is an increased risk the Postal Service will not obtain best value.