More effective federal procurement response to disasters: maximizing the extraordinary flexibilities of IDIQ contracting.

• Author: Wilkinson, Kevin J.

1. INTRODUCTION II. HURRICANE KATRINA A. The Storm B. Federal Response Under the Microscope 1. Advance Planning and Preparation 2. Quick Response 3. Quality Products/Services at Reasonable Prices 4. Absence of Cronyism 5. The "Right" Contractor 6. Transparency III. FEDERAL GOVERNMENT CONTRACTING DURING EMERGENCIES A. The Concept: Defense Type Contracting Continuum B. Emergency Procurement Tools and Vehicles 1. FAR Part 18 2. Katrina-Specific Tools C. Army's LOGCAP: Single to Multiple Awardees 1. History 2. Recent Criticism 3. A New Direction D. IDIQ Contracting Under FASA and the FAR 1. A Brief History 2. The Regulatory Basics 3. Central Purchasing Bodies: GSA Schedules and Multi-Agency IDIQ Contracts IV. SCALABLE MULTIPLE AWARD IDIQ CONTRACTS A. Phases 1. Preparation/Standby 2. Imminent Disaster 3. Disaster 4. Recovery/Reconstruction B. Keys to Maximizing the Extraordinary Flexibilities and Meeting Expectations 1. Acquisition Planning 2. Commercial items: Commodities and Commoditized Services 3. "Open" IDIQ Contracts 4. Simplified IDIQ Contracts 5. The Gap Filler: Central Purchasing Agencies C. Benefits of IDIQ Contracts in Disaster Response 1. Pre-negotiated Contract Terms and Conditions Established in Writing 2. Continuous Competition and Fair and Reasonable Prices 3. Fixed Price Contracts and Limiting Cost-Plus and Time and Material Contracts 4. Contractor Pre-qualification of Contractors 5. Socioeconomic Objectives 6. Subcontracting Plans for Larger Businesses 7. Orders Limited in Amount and Duration 8. Needs of the Contractors: Accounting for Having Goods and Services "at the Ready" 9. Transparency 10. Acquisition Workforce Relief V. CONCLUSION I. INTRODUCTION

   Federal public procurement practices are constantly under the public microscope. Congress, the Government Accountability Office (GAO), the media, and watchdog organizations scrutinize how agencies spend hundreds of billions of taxpayer dollars each year. (1) That scrutiny does not recede during national emergencies, whether they are military contingencies or natural disasters. In fact, that scrutiny has by all accounts increased exponentially, particularly with regard to federal procurement for Hurricane Katrina response and reconstruction. This includes both the hundreds of billions of dollars already spent and those funds yet to be spent. Serious concerns have been raised, and continue to be raised, as to federal agencies' procurement strategies and use of contracting alternatives during emergencies.

   The federal procurement system has various contracting tools to prepare for, respond to, and recover from emergencies. Among these tools is the indefinite delivery-indefinite quantity (IDIQ) contract. (2) This article asserts that the multiple-award IDIQ contract is the most valuable procurement tool for disaster and crisis response operations by federal agencies and that IDIQ contracts are ideally suited to meet the majority of contracting needs before, during, and after disasters or emergencies.

   Although IDIQ contracts have been in the procurement toolbox for decades, their use exploded with passage of the Federal Acquisition Streamlining Act (FASA) (3) in 1994. (4) Their value has been articulated primarily in terms of administrative efficiency and flexibility, especially because FASA's codification of IDIQ contracts was coupled with other streamlined procurement mechanisms with a goal to make federal procurement more commercial-like and with a significant reduction in government acquisition personnel. (5) Unfortunately, IDIQ contracting has been plagued by years of abuse and poor implementation. (6) Speed and efficiency came at the expense of competition, integrity, and transparency. Amidst the criticism, little has been said of the use of IDIQ contracts where speed and flexibility are necessitated by catastrophic events, not just administrative efficiency and flexibility.

   In August 2005, Hurricane Katrina validated the multiple-award IDIQ contract as an essential contractual vehicle for use during and after natural disasters (and other emergencies), not so much by what was done than by what was not done. Hurricane Katrina exposed serious shortcomings in federal agencies' logistics and contract planning and execution.

   The Department of Defense (DoD) has capitalized for some time now on the benefits of having a single-award IDIQ contract in place for logistics and services for military contingencies. The Department of the Army's Logistics Civil Augmentation Program (LOGCAP) has successfully provided DoD combat and combat service support for military contingencies since its inception in the late 1980s. (7) Since September 11, 2001, LOGCAP has grown from a multi-million dollar contract for services during minor contingencies to a multi-billion dollar contract in support of major military actions. (8) Over the last five years, the sole LOGCAP contractor, Kellogg, Brown and Root (KBR), has come under intense scrutiny for, among other things, alleged overpricing and poor performance. (9) The Army is terminating the current contract and re-competing it as a multiple award contract. (10)

   Other federal agencies also have IDIQ contracts as part of their procurement strategies for dealing with emergencies. The United States Army Corps of Engineers (USACE) and the Federal Emergency Management Agency (FEMA) have had IDIQ contracts in place for disaster response; unfortunately, the contracts were woefully inadequate for the magnitude of the disaster wreaked across the Gulf Coast by Hurricane Katrina. (11) This forced FEMA to award four multi-million dollar IDIQ contracts with little or no competition. (12) After extensive criticism, FEMA promised to re-compete the contracts and introduced a "dual-track competitive bidding strategy" for disaster contracting, based on IDIQ contracts for future national emergency response and for post-Katrina Gulf Coast rebuilding. (13)

   Many commentators take a traditional approach to IDIQ contracts that oversimplifies or unnecessarily restricts them. The traditional notion is that agencies should put advance "umbrella" agreements in place before a disaster so that when disaster strikes, they have "immediate access to the contractor's products and services for response and recovery work." (14) While this is the primary feature of IDIQ contracts, there are greater flexibilities inherent in these contract vehicles that should not be overlooked. They may not be one-size-fits-all vehicles, but properly administered, IDIQ contracts will outperform costlier, less efficient alternatives. This article presents a broader view of the IDIQ contract in disaster response. It is a vehicle that can flex as necessary to meet the needs and expectations of the public while maintaining its streamlined nature and efficiency.

   Section II of this article sets the stage by addressing procurement shortcomings in Hurricane Katrina and explains why, practically, multiple-award IDIQ contracts are needed in disaster response. Section III describes the federal contingency contracting construct and presents an elegant model of contractual objectives and methods employed across the spectrum of a contingency. Section III also reviews the emergency procurement vehicles and tools available to contracting agencies, primarily those proffered by the newly implemented Federal Acquisition Regulation (FAR) Part 18. Although FAR Part 18 does not proffer anything new, it lays out "specific techniques or procedures that may be used to streamline the standard acquisition process." (15) Section III also looks at the Army's LOGCAP contract and its abrupt change of direction from a single-award contract toward a multiple-award contract. Finally, Section III turns to IDIQ contracts themselves, highlighting the simple requirements and procedures under which they operate.

   Section IV then extracts IDIQ contracting from its limited traditional role and applies IDIQ contracting to the entire contingency contracting continuum, demonstrating its effectiveness across the complete span of an emergency, from the preparation and stand-by phase, through the disaster, to the long-term reconstruction phase. Section IV then discusses the keys to effectively administering IDIQ contracts to maximize their "extraordinary flexibilities" and the benefits of IDIQ contracts. Section IV also discusses how IDIQ contracts satisfy the public expectations imposed on federal agencies.

   Section V concludes that IDIQ contracts are ideal for emergency response, especially when the contracting agencies engage in meaningful acquisition planning, procure commodities and "commoditized" services, and use simple, open IDIQ contracts.

2. HURRICANE KATRINA

   1. The Storm

      Hurricane Katrina was the costliest, most destructive, and one of the deadliest natural disasters in the history of the United States. (16) Estimates of its devastation have ranged from $96 billion to over $200 billion* Hurricane Katrina began as a tropical depression in the Atlantic Ocean over the Bahamas on August 23, 2005. (17) As the storm approached southern Florida, it developed into a cyclone, which was given the name Katrina on August 24. (18) On August 25, Katrina reached Category I hurricane status just before it reached land. (19) For some six hours, it crossed Florida, mostly over the Everglades, gradually losing its intensity and becoming a tropical storm. (20) On August 26, Katrina regained its hurricane status as it crossed the warm waters of the Gulf of Mexico. Between August 26-28, Katrina "embarked upon two periods of rapid intensification." (21) Early on August 27, Katrina became a Category 3 hurricane. Not only had Katrina intensified in force, but it also doubled in size. Within 12 hours, Katrina grew from a Category 3 hurricane to a Category 5. (22) On August 28, Katrina attained its peak intensity, within 200 miles of the mouth of the Mississippi River. As Katrina approached land, it weakened to a Category 3...