B-144145, DEC. 19, 1960

B-144145: Dec 19, 1960

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WE HAVE BEEN INFORMALLY ADVISED THAT SUCH FACILITIES WERE NOT INTENDED FOR INCLUSION IN THE DEFINITION. WE RECOMMEND FURTHER THAT ITEM 2 UNDER SUB-SECTION 202.04A BE REDESIGNATED AS ITEM 3 AND THAT A NEW ITEM 2 BE INSERTED ALONG THE FOLLOWING LINES: "RATE OF USE AND FREQUENCY OF ORDERING AT USE POINTS IS ESTIMATED TO BE SUFFICIENT TO WARRANT THE MAKING OF INDEFINITE QUANTITY REQUIREMENT CONTRACTS.'. SHOULD NOT BE USED UNLESS THE EXPECTED DEMAND FOR AN ITEM IS FREQUENT AND RECURRING. THE AMOUNT OF THE LIMITATION SHOULD REPRESENT THE BEST ESTIMATE OF THE QUANTITY ABOVE WHICH SUPPLIERS WILL QUOTE LOWER PRICES AND SHOULD BE RE-EXAMINED EACH TIME A NEW CONTRACT FOR THE SAME ITEM IS LET. WHEN THIS TYPE OF PROVISION IS EMPLOYED.

B-144145, DEC. 19, 1960

TO FRANKLIN FLOETE, ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION:

BY LETTER OF SEPTEMBER 15, 1960, YOU REQUESTED OUR VIEWS REGARDING PROPOSED REVISIONS TO SECTION 202.00, CHAPTER II, TITLE I, PERSONAL PROPERTY MANAGEMENT, REGULATIONS OF THE GENERAL SERVICES ADMINISTRATION.

THE DEFINITION OF "USE POINT" IN SUB-SECTION 202.01 APPEARS TO INCLUDE WAREHOUSES AND SIMILAR FACILITIES WHICH MAY, INCIDENT TO THEIR OPERATIONS, FURNISH SUPPLIES OR MAKE AVAILABLE EQUIPMENT TO USERS. WE HAVE BEEN INFORMALLY ADVISED THAT SUCH FACILITIES WERE NOT INTENDED FOR INCLUSION IN THE DEFINITION. WE RECOMMEND THAT THE DEFINITION BE CLARIFIED ON THIS POINT.

WITH RESPECT TO SUB-SECTION 202.02, THE FACTORS ENUMERATED IN SUB PARAGRAPH D.6 APPEAR TO BE COVERED ADEQUATELY IN SUB-PARAGRAPHS D.1 AND D.3. ACCORDINGLY, WE RECOMMEND THAT D.6 BE DELETED.

WE RECOMMEND FURTHER THAT ITEM 2 UNDER SUB-SECTION 202.04A BE REDESIGNATED AS ITEM 3 AND THAT A NEW ITEM 2 BE INSERTED ALONG THE FOLLOWING LINES:

"RATE OF USE AND FREQUENCY OF ORDERING AT USE POINTS IS ESTIMATED TO BE SUFFICIENT TO WARRANT THE MAKING OF INDEFINITE QUANTITY REQUIREMENT CONTRACTS.'

IN OUR VIEW THE KIND OF CONTRACT PROVIDED FOR UNDER THIS SUBSECTION, THE INDEFINITE REQUIREMENT TYPE, SHOULD NOT BE USED UNLESS THE EXPECTED DEMAND FOR AN ITEM IS FREQUENT AND RECURRING. WE BELIEVE THAT MINOR AND INFREQUENT REQUIREMENTS COULD BETTER BE SATISFIED THROUGH LOCAL INDIVIDUAL PURCHASES.

WE SUGGEST ALSO THAT THERE BE ADDED TO THE SUB-SECTION ON INDEFINITE QUANTITY REQUIREMENT CONTRACTS A PARAGRAPH PROVIDING THAT IN APPROPRIATE CASES THIS TYPE OF CONTRACT, WHEN ENTERED INTO ON A NATIONAL OR AREA LEVEL, BE ADVERTISED ON THE BASIS, AND PROVIDE THAT AN INDIVIDUAL ORDER FOR A QUANTITY BEYOND A SET MAXIMUM SHOULD NOT BE INCLUDED UNDER THE TERMS OF THE CONTRACT BUT SHOULD BE UNDERTAKEN AS A SEPARATE PROCUREMENT ACTION. SUCH PROVISION WOULD BE CONSISTENT WITH THE POLICY SET WITH RESPECT TO SOME FEDERAL SUPPLY SCHEDULE CONTRACTS NOW IN USE AND WOULD PERMIT THE AGENCY TO TAKE ADVANTAGE OF THE PROBABLE PRICE ADVANTAGE IN A DEFINITE QUANTITY PROCUREMENT OF SIZABLE PROPORTIONS. THE AMOUNT OF THE LIMITATION SHOULD REPRESENT THE BEST ESTIMATE OF THE QUANTITY ABOVE WHICH SUPPLIERS WILL QUOTE LOWER PRICES AND SHOULD BE RE-EXAMINED EACH TIME A NEW CONTRACT FOR THE SAME ITEM IS LET. WHEN THIS TYPE OF PROVISION IS EMPLOYED, HOWEVER, CARE SHOULD BE TAKEN TO INSURE THAT A BINDING CONTRACT RATHER THAN AN OPTION TO PURCHASE RESULTS. PARTICULARLY, THE PROVISION SHOULD BE SO WORDED AS TO PRECLUDE ANY POSSIBILITY THAT THE SIZE OF INDIVIDUAL ORDERS MAY BE MANEUVERED NOT ON THE BASIS OF VALID REQUIREMENTS BUT IN ORDER TO TAKE ADVANTAGE OF ANY SHIFTS IN PREVAILING PRICES WHICH WERE NOT ANTICIPATED AT THE TIME THE INDEFINITE REQUIREMENTS CONTRACT WAS LET.

THE FOREGOING COMMENTS SHOULD NOT BE REGARDED AS BINDING WITH RESPECT TO ANY SPECIFIC MATTER BEFORE US FOR CONSIDERATION.