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    1. The FAR references quoted below in pertinent part are applicable to this response.
     
    FAR 1.108 – FAR Conventions
    The following conventions provide guidance for interpreting the FAR:
    (a) Words and terms. Definitions in Part 2 apply to the entire regulation unless specifically defined in another part, subpart, section, provision, or clause. Words or terms defined in a specific part, subpart, section, provision, or clause have that meaning when used in that part, subpart, section, provision, or clause. Undefined words retain their common dictionary meaning.
     
    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.
      (1) The contract must require the Government to order and the contractor to furnish at least a stated minimum quantity of supplies or services.
      (2) To ensure that the contract is binding, the minimum quantity must be more than a nominal quantity, but it should not exceed the amount that the Government is fairly certain to order.
     
    2. Nowhere in the Federal Acquisition Regulations System is the term “nominal quantity” defined. Therefore, pursuant to FAR 1.108(a), undefined words retain their common dictionary meaning. In this context, the term “nominal” has the following, similar common dictionary meanings [from Ref. #2 below]: 
     
     - “Nominal describes something that has almost no value or something that exists in name only.” 
     
     - “(of a price, consideration, etc.) named as a mere matter of form, being trifling in comparison with the actual value; minimal.” 
     
     - “being so small or trivial as to be a mere token: nominal fee” 
     
     - “insignificantly small; trifling: a nominal sum.” 
     
    3. Given the common dictionary meaning of the term “nominal” as described above, in a series of cases adjudicating solicitation protests [References #3 through #8 below, with Ref. #3 being a precedent setting case], the Government Accountability Office (GAO) has used the following rationale to determine whether the required “minimum quantity” exceeds a nominal quantity for a given acquisition situation:

    Since the prohibition against a “nominal” minimum quantity is designed to ensure that the intent to form a binding contract is present, the determination whether a stated minimum quantity is nominal must consider the nature of the acquisition as a whole, considering all of the circumstances that are present. For example:
     · The minimum quantity is a quantity that the Government is certain to order,
     · The existence of reliable historical data to support whether the stated minimum quantity is greater than a nominal quantity,
     ·  When multiple awards are contemplated on a best value basis and there is no certainty that individual contractors will actually receive more than the minimum guaranteed quantity, or
     ·  Where other factors surrounding the acquisition show an intent to form binding contracts.

    4. Based on the GAO rulings in these cases, there are no hard and fast rules to define a “nominal” quantity beyond its common dictionary meaning as described above. A quantity of one unit [Ref. #3], an amount of “$25,000 [Ref. #4], a quantity of 100 [Ref. #5], a few hundred dollars [Ref. #6], an amount of $1,000 [Ref. #7] and an amount of $500 [Ref. #8], for example, have all been found by the GAO to demonstrate an intent on the part of the Government to form binding contracts based on the total circumstances of the acquisition situation, and therefore the stated minimum quantities in these cases were determined to be greater than “nominal” quantities. In short, the definition of a “nominal quantity” with respect to an IDIQ contract is highly dependent upon the particular circumstances of a given acquisition situation.

    OTHER REFERENCES

    2. Common dictionary meanings of “nominal”
    a. Dictionary.com
    “(of a price, consideration, etc.) named as a mere matter of form, being trifling in comparison with the actual value; minimal.”
    Legal Dictionary (Merriam-Webster)
    “being so small or trivial as to be a mere token: nominal fee
    http://dictionary.reference.com/browse/nominal

    b. Yourdictionary.com

    “Nominal describes something that has almost no value or something that exists in name only.”
    Webster's New World College Dictionary
    “very small compared to usual expectations; slight: a nominal fee
    American Heritage Dictionary 4
    “insignificantly small; trifling: a nominal sum.”
    http://www.yourdictionary.com/nominal

    3. GAO Case: B-278404.2, Sea-Land Service, Inc., February 9, 1998

    Under RFP contemplating award of multiple indefinite delivery, indefinite quantity contracts, protest that minimum quantity of one container per carrier is insufficient consideration to bind the parties is denied where the nature of the acquisition dictates the possibility that the government may order only this quantity, and where other factors surrounding the acquisition show an intent to form binding contracts. Protest that the maximum quantity--the total capacity of all contract carriers which is available for transport--is unrealistic is denied where the agency reasonably explains that the varying nature and unpredictability of its requirements necessitate this quantity.

    To ensure the contract is binding, the minimum quantity must be more than a nominal quantity but should not exceed the amount the government is fairly certain to order. FAR § 16.504(a)(2).

    The RFP sets forth minimum volume guarantees for all carriers in the aggregate on given major trade routes, but guarantees each carrier a minimum of one Forty-Foot Equivalent Unit (FEU)[1] over the contract term. Sea-Land argues that a guarantee of only one FEU for each individual carrier is nominal and provides inadequate consideration for each contract with individual carriers.

    Since the prohibition against a "nominal" minimum quantity is designed to ensure that the intent to form a binding contract is present, the determination whether a stated minimum quantity is "nominal" must consider the nature of the acquisition as a whole.

    This solicitation allows for the award of contracts to multiple carriers to transport cargo on the same routes or zones. Since the JTMO may have multiple choices in shipping its cargo on particular routes or zones, and since it is not possible to know whether a given carrier is the best value until individual orders arise, it is impossible to ascertain beforehand whether an individual carrier will carry more or less cargo during the life of the contract. Since the minimum quantity may not exceed the amount the government is fairly certain to order, FAR § 16.504(a)(2), the JTMO asserts that one FEU is the only minimum quantity that would not mislead carriers or subject the government to undue risk.

    Sea-Land has given us no reason to disagree with the JTMO's rationale here, or to find that the quantity of one FEU per carrier here means that there is insufficient consideration. While the quantity of one FEU is minimal, other factors surrounding the acquisition underscore the government's intent to form a binding contract. The JTMO points out that, in its experience, all carriers are awarded rates on multiple routes and generally receive significant cargo. Further, since the RFP generally prohibits a carrier from transporting more than 75 percent of the cargo volume on the major outbound routes, as discussed above, as a practical matter no carrier can transport all of the cargo on these routes and at least two carriers transport the bulk of the cargo. Considering all of the circumstances, we cannot conclude that the stated minimum quantity per carrier here represents insufficient consideration to form a binding contract.

    http://archive.gao.gov/legald426p6/159926.pdf 

    In summary, the GAO disagreed with Sea-Land and held that a minimum quantity of one container per carrier is adequate consideration to bind the parties. In its decision, the GAO concluded that due to the multiple award scheme, the Army would not know which carrier (offeror) would provide the best value under an individual order until the need arose. Therefore, it was impossible for the Army to predetermine the minimum quantity it would award a carrier under the contract. The GAO reconciled its decision with the FAR requirement that a minimum quantity be more than nominal by emphasizing that a minimum quantity of one is a quantity the Government was certain to order.

    4. B-277241.15, Aalco Forwarding, Inc., et al., B-277241.15, March 11, 1998

    In these protests, the protesters primarily contend that the RFP does not properly specify contract minimum and maximum quantities of services to be ordered, that the RFP's price evaluation scheme is defective, and that the Service Contract Act of 1965 (SCA), 41 U.S.C.  sec.  351-358 (1994), was improperly applied to this RFP. The protests are denied.

    1. Under a solicitation contemplating the award of multiple indefinite delivery, indefinite quantity contracts to implement a pilot program for moving and storage services, protests that the contract minimum of $25,000 per contractor is only nominal consideration insufficient to bind the parties are denied, where the nature of the acquisition dictates the possibility that the government may order only this quantity and the establishment of long-term commitments with relatively few prime contractors, who will potentially be provided greater shipping volumes than under the current program, shows an intent to form binding contracts.

    To ensure the contract is binding, the minimum quantity must be more than a nominal quantity but should not exceed the amount the government is fairly certain to order.  FAR sec. 16.504(a)(2).  Sea-Land Serv., Inc., B-278404.2, Feb. 9, 1998, 98-1 CPD  para. at 11.

    Since the prohibition in FAR  sec.  16.504(a)(2) against a "nominal" minimum quantity is designed to ensure that the intent to form a binding contract is present, the determination whether a stated minimum quantity is "nominal" must consider the nature of the acquisition as a whole.  Sea-Land Serv., Inc., supra, at 12.

    The fact that the RFP does not provide a minimum quantity proportionate to contractor's committed daily capacity for each awarded channel or is not otherwise linked to the estimated traffic volume for each channel does not detract from the enforceability of the contracts to be awarded, given the uncertainty associated with the number of orders to be placed with each contractor. Considering all of the circumstances, we cannot conclude that the stated minimum quantity per contractor here represents insufficient consideration to form a binding contract.  Id.; Sea-Land Serv., Inc., supra, at 12.

    http://www.gpo.gov/fdsys/pkg/GAOREPORTS-B-277241-15/html/GAOREPORTS-B-277241-15.htm

    5. B-285833, Carr’s Wild Horse Center, October 3, 2000

    1. Under solicitation contemplating award of multiple indefinite-delivery/indefinite-quantity contracts for handling horses/burros at adoption events, protest that minimum guaranteed quantity of 100 horses/burros for life of contract is insufficient consideration to bind parties is denied where nature of acquisition dictates possibility that government may order only this quantity, and where other factors surrounding acquisition show an intent to form binding contracts.

    In order to be binding, the minimum quantity must be more than a nominal quantity but should not exceed the amount the government is fairly certain to order. FAR §16.504(a)(2). In other words, an ID/IQ contract is binding so long as the buyer agrees to purchase from the seller at least a guaranteed minimum quantity of goods and services; the stated minimum quantity forms the consideration for the contract. Sea-Land Serv., Inc., B-278404.2, Feb. 9, 1998, 98-1 CPD47 at 11.Since the prohibition against a nominal minimum quantity is designed to ensure that the intent to form a binding contract is present, the determination whether a stated minimum quantity is nominal must consider the nature of the acquisition as a whole.

    The agency states that it has a recurring need for animal adoptions and that it cannot precisely determine the exact number of adoptions that it will require, since the number of adoptions varies significantly from month to month and year to year. The agency also states that its guaranteed minimum is reasonable because the average number of animals at any given adoption is approximately 100 animals.

    While Carr’s contends that the quantity of 100 animals for the life of the contract is insufficient consideration, the historical data indicates that this quantity is not insufficient or nominal. The data shows that there is a great disparity in the number of animals processed from year to year and at various adoption locations.

    The record shows that BLM has a recurring need for animal adoptions and that the 100-animal minimum guarantee is not out of line with the numbers handled at previous adoption events. Here, multiple awards are contemplated and there is no certainty that individual contractors will assist and handle more than the minimum guaranteed quantity of 100 animals. Considering all of the circumstances here and the historical data, we cannot conclude that the stated minimum quantity for the life of the contract represents insufficient consideration to form a binding contract.

    http://www.gao.gov/products/405576

    6. B-291185, ABF Freight System, Inc., Nov, 8, 2002

    1.  Under a solicitation that provides for the award of multiple indefinite-delivery, indefinite-quantity contracts for freight transportation services, protest that the minimum order quantity is inadequate is denied, where the guaranteed minimum amount is sufficient to support a binding contract and reflects the minimum amount the agency is fairly certain to order from each contractor.

    The determination of whether a stated minimum quantity is “nominal” must consider the nature of the acquisition as a wholeSea-Land Serv., Inc., B-278404.2, Feb. 9, 1998, 98-1 CPD P: 47 at 12.

    [Here], the agency may have multiple choices of contractors to perform the transportation services.  It is not possible to know, after the minimums are satisfied, whether a given contractor will be used under the best-value scheme for any orders until individual orders arise.  For this reason, it is uncertain that a given contractor will carry more than the minimum specified for a lane during the life of the contract.  Given this uncertainty and that the minimum quantity on any one contract may not exceed the amount the government is fairly certain to order, see FAR S: 16.504(a)(2), we find no basis to object to the stated minimum quantities here.

    We also find here that the minimum quantity guaranteed for each lane, even if it amounts to only a few hundred dollars, is sufficient consideration to form a binding contract.  Although it may be true that the guaranteed minimum quantity for certain lanes appears low (particularly as compared to the minimums guaranteed for other lanes), this does not alone demonstrate that the guaranteed quantity is insufficient to support a contract.

    http://www.gpo.gov/fdsys/pkg/GAOREPORTS-B-291185/html/GAOREPORTS-B-291185.htm

    7. B-299255, Information Ventures, Inc., March 19, 2007
    Under solicitation contemplating the award of multiple task order contracts, where it is impossible to determine the amount of work that will ultimately be awarded to each contractor at the time of award, minimum guaranteed amount of $1,000 per contract is reasonable.

    We note in the latter connection that since task orders for contract work are to be competed on a best value basis, the agency has no way of predicting at the time of contract award how much work will ultimately be awarded to any particular contractor. Given the tension between the requirement that the minimum quantity not be nominal and the requirement that it not exceed the amount that the government is fairly certain to order, we think that $1,000 is a reasonable guaranteed minimum amount. Moreover, to the extent that the protester is arguing that $1,000 is insufficient consideration to ensure a binding contract, we have previously found a guarantee of only a few hundred dollars to be sufficient consideration to form a binding contract.  ABF Freight System.. Inc. et al., B-291185, Nov, 8, 2002, 2002 CPD ¶ 201 at 4.

    http://www.gao.gov/assets/390/389485.pdf

    8. B-318046, Library of Congress—Obligation of Guaranteed Minimums for Indefinite-Delivery, Indefinite-Quantity Contracts under the FEDLINK Program, July 7, 2009
    DIGEST
    The Library proposes using a standard amount of $500 as the guaranteed minimum for these contracts regardless of the maximum ordering limitations or total contract value, which amount would be obligated at the time it awards the IDIQ contract. To provide adequate consideration for a binding IDIQ contract, an agency must establish a guaranteed minimum that is more than a nominal amount and reflects the amount the agency is fairly certain to order. In the absence of reliable historical data indicating that a $500 guaranteed minimum for a particular IDIQ contract is too high or too low, we have no basis to object to the use of $500 as a guaranteed minimum.

    The determination of whether a stated minimum quantity is nominal must consider the nature of the acquisition as a whole. … We stated also that a contract's guaranteed minimum need not have a specific relationship to the estimated minimum order amount; rather, the guaranteed minimum must be evaluated in the context of all the specific facts and circumstances of the procurement.

    Nothing in the FAR requires that a guaranteed minimum be a large amount. So, for example, under a solicitation for multiple IDIQ contracts for international ocean and intermodal transportation services, there was a minimum volume guarantee of one Forty-Foot Equivalent Unit (FEU) over the contract term because it was impossible for the agency, at contract award, to ascertain whether a contractor would carry more than that volume. B-278404.2, Feb. 9, 1998, at 8--9, 12. We concluded, therefore, that, [in] B291185, Nov. 8, 2002 (guaranteed minimum of only a few hundred dollars in an IDIQ contract for freight transportation services was sufficient where, after the minimum was satisfied, selection of contractors would be on a best-value basis).

    http://www.gao.gov/decisions/appro/318046.htm



    [1]  The acronym "FEU" is an industry term for cargo volumes transported in standard intermodal containers measuring 8 feet high, 8 feet wide, and 40 feet deep.



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