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GCN Home > February 18, 2002 issue

Federal Contract Law: If you make a contract mandatory, you better use it

If you make a contract mandatory, you better use it

By Karen Powell

Imagine an agency plans to award multiple indefinite-delivery, indefinite-quantity contracts to provide IT for field offices. The typical contract minimum of $1,000 won’t even cover the costs of a proposal. But the agency’s multi-million-dollar annual IT budget looks very attractive. Several companies will decide to compete, and some will receive awards.

Now imagine that after award the agency orders the equipment from a General Services Administration schedule contract instead of the IDIQ. Can it do so without breaching the IDIQ awards?

Decisions by the Federal Court of Appeals and other venues say, “Maybe, maybe not.”

One such decision is Ace-Federal Reporters Inc. v. Barram. GSA had established a mandatory schedule for court reporting services. It awarded IDIQ contracts to ten companies. When some agencies ordered reporting services elsewhere, several of the contractors brought claims. The GSA Board of Contract Appeals held the diversion of requirements away from the schedule was not a breach.

But the Court of Appeals reversed the GSBCA, finding that the government’s promise to order only from the schedule had “substantial business value.” The court also held the amount of each contractor’s damages could be calculated based on known factors such as the value of the off-schedule orders and each contractor’s market share.

However, the court’s next decision involving multiple awards seemed to say no damages could be claimed.

Travel Centre v. Barram also involved an appeal from the GSBCA. In this case, GSA had established a nonmandatory schedule for travel reservation services. It issued a request for proposals with estimates of the volume of business it expected from various regions.

Before any task orders were made, two agencies responsible for fifty percent of the volume in the Northeast region notified GSA that they would be issuing their own IDIQ contracts, yet GSA did not revise the estimates. Travel Centre received a contract for the affected area and filed a claim when the anticipated volume failed to materialize. The board found that GSA had breached the contract by inducing the contractor to bid based on the faulty estimates.

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