Chairperson Schwartz and members of the Committee on Workforce Development and Government Operations, I am David P. Gragan, Chief Procurement Officer for the District of Columbia. I am here today to testify on Indefinite Delivery Indefinite Quantity (IDIQ) Construction Contracts. Within 24 hours after this hearing my testimony will be posted on the OCP website.
There have been a total of 14 IDIQ contracts submitted to the Council since September from the Construction Design and Building Renovation (CDBR) group within OCP.
THE PROCESS
The District has a well-established history of entering into IDIQ contracts. Title 27 of the District of Columbia Municipal Regulations §2499.1 defines an indefinite quantity contract as “a contract that provides for an indefinite quantity, within written stated limits, of special supplies or services to be furnished during a fixed period, with deliveries to be scheduled by placing orders with the contractor. The contract requires the District to order, and the contractor to furnish at least a stated minimum of supplies or services.” IDIQ is a contract type used in my Construction, Design, and Building Renovation section and in my DC Supply Schedule program. A contracting officer may use an indefinite quantity contract when he or she cannot predetermine, above a specified minimum, the precise quantity of supplies or services that will be required during the contract period, and the contracting officer determines that it is inadvisable to commit the District to more than a minimum quantity. The contracting officer shall ensure that each agency listed as a using agency on the contract obligates the amount of budget authority needed to cover the agency’s minimum required order under the contract. In FY 2008, OCP purchased goods and services from certified businesses via indefinite quantity contracts totaling $101.7 million.
At our discretion and in support of small and local businesses, in March 2007, OCP issued a solicitation on the Small Business Enterprise (SBE) set-aside market and received 47 proposals for construction services. The solicitation was divided into two categories by dollar threshold (Group I - $0-$999K; Group II - $0-$3M). Of the proposals received 8 were selected for Group I; and 15 were selected for Group II.
Construction projects are unique in that they are greatly affected by market fluctuations. Ordering office supplies or janitorial services, for example, is generally a fixed cost. Construction projects, on the other hand, have a number of fluctuating costs, and tend to get more expensive over time. This is known in the construction business as escalation cost and is attributed to the rising costs of materials such as paint, gas, and steel. The Office of Property Management has found that the current market rate average for escalations to be around 5.5% per year.
The IDIQ process reduces the procurement time for construction projects, and thus saves the District thousands of dollars in these escalation costs. The existing procurement process takes roughly five months from start to finish.
The IDIQ process, on the other hand, only takes about two months.
IDIQ contracts as a procurement method result in a shorter processing time, while still having safeguards in place that ensure the integrity of the contracting process. This procurement method significantly shortens the contract time frame by several months; by decreasing the advertising time and reducing the redundancies of multiple reviews. Agency program managers are not only pleased about the shorter process, but more agencies are now able to participate in the purchase of goods and services from these contracts; SBE vendors who were in a sub-contractor status before are now more able to be prime contractors and expand their business opportunities. Most importantly, OCP has now established a pool of prequalified SBE vendors to select from on these construction projects (each task order will be competitively bid from the pre-qualified vendor list).
CONCLUSION
Indefinite quantity contracts are a recognized best practice for procuring goods and services in a timely and cost efficient manner. This procurement method ensures the consistency of procedures and the decision making process; balances the responsibility we all support of fiscal accountability with the needs of user agencies; and creates better opportunity for our vendors. With a centralized procurement vehicle, these contracts allow agencies to obtain these necessary goods and services at the lowest possible cost in a fair, consistent and predictable manner.
I thank you for the opportunity to testify before you on these construction contracts. At this time, I would be happy to address any questions that the Committee may have.