Contract length should be considered as part of an
acquisition strategy when appropriate. Long-term contract relationships -
beyond five years - can be effective in building and maintaining
strategic relationships with suppliers. In addition, long-term supplier
relationships enable DoD to expand its supplier base as companies, once
unattracted to the Department, begin to compete for longer-term contracts.
Acquisition leaders are reminded to include requirements for small business
subcontracting wherever longer-term contract provisions are
Contracts covering requirements for more than one fiscal
year provide benefits that include reduced start-up costs, maintenance of a
stable workforce, increased competition from small businesses and acquisition
streamlining. These benefits are key to the reengineering and streamlining of
the Department's business practices. Without long-term contracts, the
contractors may be unable to justify making the necessary investments; and,
therefore, competition may be diminished.
There are four acquisition strategy considerations that
must be addressed whenever contract duration beyond five years is planned.
These conditions are appropriate to both competitive and noncompetitive
- The strategy must articulate when and how the
provisions of the Competition in Contracting Act (CICA) will be addressed,
including at what point in the future it will be readdressed (e.g. in a sole
source Justification and Approval or in a future competition)
- Continued performance or contract term must be
conditioned on continual successful performance. Performance outcomes must
be clearly articulated.
- Price guarantees, options and cost-based ceilings
should be agreed upon by both parties, either competitively or
noncompetitively, to ensure that commitments are established and maintained
throughout the period of performance. Acquisition personnel are urged to
build in flexible pricing guarantees or alternatives (e.g., ceilings or
price curves) to adapt to budget and quantity fluctuation.
- Contract terms must be consistent with statutory
funding limitations on the purpose and amount of appropriated funds
expenditures. Availability of funds provisions are key to the use of