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    I am contemplating issuing a multiple award requirements contract for supplies (repair parts). Reading the FAR 16.503(a) above, does the one contractor in parenthesis mean that a Requirement Contract can only be issued to one contractor?


    Answer

    The answer is yes and no.  The FAR does not specifically prohibit multiple-award requirements contracts, but there are some significant concerns with it.  The idea behind a requirements contract is to give the Government the flexibility to order specific supplies or services when we need them for the quantity needed without having to provide the contractor a minimum order guarantee.  In return, the contractor is guaranteed to get ALL of the Government's orders for these supplies or services (if and when a government need arises).  Therefore, in lieu of a minimum order guarantee, the Government promises to buy all of what it needs only from them.  Without this promise, the contract would lack “consideration” and, as a result, would not be a legally binding contract. 

    The statutory multiple award preference establishes a preference for making multiple awards of indefinite-quantity contracts (See FAR 16.500).  An indefinite-quantity contract is not a requirements contract.  I think one important reason the multiple-award preference does not apply to requirements contracts is the “Fair Opportunity” procedures which must be followed when placing an order against multiple-award, indefinite-quantity contracts.  "Fair Opportunity" is intended to give each multiple award IDIQ contract holder a fair opportunity to compete for each and every order placed under the multiple-award contracts unless an exception applies (See FAR 16.505(b)).  Therefore, multiple-award requirements contracts based on “fair opportunity” would nullify the Governments promise to order whatever it needs from a particular contractor (which thus nullifies the “consideration”, a necessary element for contract formation).  

    The one circumstance where the FAR does provide for the award of more than one requirements contract is if the acquisition involves a partial small business set-aside (See FAR 16.506(d)(4)).  In that case, the Contracting Officer would need to include FAR 52.216-21 Alternate III in the contract.  Alternate III reads as follows: " The Government’s requirements for each item or subitem of supplies or services described in the Schedule are being purchased through one non-set-aside contract and one set-aside contract. Therefore, the Government shall order from each Contractor approximately one-half of the total supplies or services specified in the Schedule that are required to be purchased by the specified Government activity or activities. The Government may choose between the set-aside Contractor and the non-set-aside Contractor in placing any particular order. However, the Government shall allocate successive orders, in accordance with its delivery requirements, to maintain as close a ratio as is reasonably practicable between the total quantities ordered from the two Contractors.”

    However, I think it’s important to point out that FAR 52.216-21, Alt. III does not follow the “fair opportunity” procedures as described in FAR 16.505.  Under Alt III, each awardee is promised approximately half of the requirement. That's something different than each contractor getting a fair opportunity to compete for each order.  Therefore, in the case of a partial set-aside, each contractor getting roughly half of the requirement is considered adequate consideration.

    Furthermore, the FAR makes it clear that a partial set aside of multiple-award contracts would not be appropriate unless “the requirement can be divided into distinct portions” where the set aside contractor(s) is guaranteed a portion of the work to perform (See FAR 19.502-4(a)).   This limitation I think would also apply if awarding more than one requirements contract via a "partial set-aside"; there would need to be “distinct portions” for each contract awarded.  To do otherwise in my mind would be inconsistent with the procedures stated in FAR 19.502-4 for partial set-asides. 

    Another option might be to award contracts by geographic region (that’s assuming there’s a  need to deliver quantities to more than one region).

    Bottom line: While the FAR does not specifically prohibit a multiple-award requirements contract, I think you can see there are some important implications for using this approach.  And finally, we always recommend consulting with your local contracting chain of command and legal office before taking action.

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