U.S. Department of Agriculture Agricultural Marketing Service Commodity Procurement Program Introduction The purpose of this request for information is to inform the USDA commodity vendor community of the current Long Term Contracting (LTC) efforts of the Business Management Improvement (BMI) project. Currently, USDA is working to develop a pilot project utilizing multiple year contracts with options for certain products, which is intended to improve efficiency of the procurement process and to build better business relationships between USDA and industry, among other potential benefits. Why is USDA exploring the expanded use of Long Term Contracts? Expanding the LTC format for USDA commodity procurements was identified by several stakeholder groups, including the vendor community, recipients, and USDA personnel over the course of the BMI project as a solution to challenges currently being experienced by: □ Reducing administrative burden (fewer solicitations, more streamlined operational procurement procedures) □ Reducing supply risk □ Improving order fulfillment □ Improving consistency of product distributed to recipients Benefits to the Vendor Community As previously mentioned, this LTC effort is aimed at addressing pain points from a wide range of stakeholder groups, including the vendor community. Potential benefits to the vendor community include: □ Higher guaranteed minimum quantities for awarded vendors □ Improved ability to forecast demand of products supplied to USDA □ Decreased administrative burden o Less frequent and repetitive bids o Streamlined ordering processes □ Strategic rather than transactional relationship with USDA LTC Design Options Blanket Purchase Agreement (BPA) A BPA is a simplified method of filling anticipated repetitive needs for supplies or services by establishing "charge accounts" with qualified sources of supply. In addition to price, when determining best value, the ordering activity may consider among other factors, the following: □ Past performance □ Special features of the supply or service required for effective program performance □ Delivery terms Indefinite Delivery Indefinite Quantity (IDIQ) An IDIQ 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. The contract may also specify maximum or minimum quantities that the Government may order under each task or delivery order and the maximum that it may order during a specific period of time. Side-by-side Comparison BPA IDIQ Scope Ordering activities may establish BPAs under any schedule contract to fill repetitive needs for supplies or services. 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. Min-Max Requirements No Yes BPA IDIQ Contract Guarantees No - it is an agreement Yes - number of TOs/DOs against the IDIQ Structure Single and multiple award BPAs Preference given to making multiple awards of indefinite-quantity contracts under a single solicitation for the same or similar supplies or services to two or more sources. Ceilings Estimates provided A dollar ceiling or quantity value provided Duration Multiple awards BPAs should not exceed 5 years- single awards are usually 1 year Base + Option Benefits □ Provide opportunities to negotiate improved discounts □ Satisfy recurring requirements; □ Reduce administrative costs by eliminating repetitive acquisition efforts □ Permit ordering activities to leverage buying power through volume purchasing □ Enable ordering activities streamlined ordering procedures □ Permit ordering activities to incorporate Contractor Team Arrangements (CTAs) □ Reduce procurement lead time □ Permit ordering activities the ability to incorporate terms and conditions not in conflict with the underlying contract □ Orders placed against schedule contracts may be credited toward the □ Indefinite-quantity contracts permit -- o Government stocks to be maintained at minimum levels o Direct shipment to users o Flexibility in both quantities and delivery scheduling o Ordering of supplies or services after requirements materialize □ Indefinite-quantity contracts limit the Government's obligation to the minimum quantity specified in the contract □ Indefinite-delivery contracts may provide for any appropriate cost or pricing arrangement under FAR Part 16. Cost or pricing arrangements that provide for an estimated quantity of supplies or services (e.g., estimated number of labor hours) must comply with the appropriate procedures of this subpart BPA IDIQ ordering activity's small business goals References FAR section 13.303, 8.4, 16.5 https://interact.gsa.gov/blog/comparing-and-contrasting-far-84-bpas-and- idiqs Economic Price Adjustments A primary concern that has been raised throughout this process is the need to mitigate the risk of price fluctuation in the commodity market that may come with a longer term contract. One method that may be used to address this concern is an Economic Price Adjustment, in which prices are adjusted at certain intervals of the contract using a market-based price index that reflects general increases & decreases in price over a given time period. *Significant research is currently being conducted on this topic by USDA. If any vendors are familiar with or currently using any market-based price indexes that may be useful in this effort, please notify USDA at your earliest convenience. [Insert USDA POC] Criteria for Choosing LTC Products Based on information gathered throughout the BMI project, including industry knowledge gained through dozens of interviews, workshops, and feedback from the vendor community, USDA has established criteria for determining products that may be suitable for a LTC Pilot. Products suitable to be used in the LTC pilot would have some or all of the following attributes: □ Positive feedback from vendors group on LTC at the 2017 AMS Industry Meeting □ Spend is concentrated within a small number of vendors □ Product has been purchased at a relatively consistent rate across recent years □ Relatively low price fluctuation or the availability of an index for use as an economic price adjustment □ Products with inconsistency between vendors Questions for Industry Please provide responses to the following questions to Carrie Alexander @
[email protected] by September 28, 2018. 1. Would you be receptive to the idea of moving to year-long or multiple year contracts? a. What product(s) do you think would be suitable for long term contracts? 2. What is your ideal length of contract? Would you be receptive to options in addition to the base contract length? 3. How long would it be appropriate for a firm-fixed price from an initial offer to remain unchanged? Do you use price indexes for Economic Price Adjustments in long term contracts in your commercial business? If so, what indexes do you use? What other pricing mechanism(s) do you use to mitigate risks associated with price volatility? 4. Would moving to an annual IDIQ with quarterly or monthly releases work for you, assuming you were given enough notice for specific quantities and delivery locations? a. How much notice would you require? Together We're Making a Difference: American Agriculture for the American People Agricultural Marketing Service, Commodity Procurement Program 1400 Independence Ave., SW, Room 3522-S, STOP 0239 Washington, DC 20250-0239 Voice 202.720.4517 Fax 202.720.5871 An Equal Opportunity Provider and Employer