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  • Question

    If the estimated ceiling for cost is exceeded. Is this a cost growth? Rather than a a situation that would require a Justification and Approval (J&A) for increased quantities.


    Answer

    1. The FAR references quoted below in pertinent part are applicable to this response. Based on the information provided, our response assumes that the contracts in question are “Indefinite-Quantity” contracts as described in FAR 16.504.

    FAR 16.504 -- Indefinite-Quantity Contracts
    (a) Description. An indefinite-quantity contract provides for an indefinite quantity, within stated limits, of supplies or services during a fixed period. The Government places orders for individual requirements. Quantity limits may be stated as number of units or as dollar values.

    FAR 52.216-22 -- Indefinite Quantity
    (b) Delivery or performance shall be made only as authorized by orders issued in accordance with the Ordering clause. The Contractor shall furnish to the Government, when and if ordered, the supplies or services specified in the Schedule up to and including the quantity designated in the Schedule as the “maximum.” The Government shall order at least the quantity of supplies or services designated in the Schedule as the “minimum.”

    2. As indicated in FAR 16.504(a), contract quantity limits may be expressed in terms of number of units or as dollar values. As stated in FAR 52.216-22(b), the maximum quantity is designated in the Schedule of the contract. In this case, it appears that both the maximum quantities per CLIN and an “estimated contract cost ceiling” are both specified in the Schedule. Therefore, the determination as to which metric takes precedence with regard to FAR 52.216-22(b) would depend on the purpose of specifying an estimated contract cost ceiling in the contract.  Given the information provided, it would appear that if all of the quantities specified against each CLIN were order against the associated unit prices, then the resulting amount would exceed the currently stated estimated cost ceiling.

    3. Given the limited information provided in this inquiry, and unless otherwise expressly stated in the contract, the estimated cost ceiling appears to represent a total contract ceiling price. As such, we believe that this contract ceiling price would therefore represent the maximum quantity that could be ordered under the contract for the purposes of FAR 52.216-22(b) and would take precedence over the sum of the actual quantities specified in the CLINs. Consequently, in this case, we believe that ordering additional contract quantities that exceed this contract ceiling price cannot be considered as simply a cost growth and would require the execution a Justification and Approval (J&A) authorizing the use of Other Than Full and Open Competition for the procurement of increased quantities under the contract.

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