B-199422 June 23, 1981

B-199422 June 23, 1981

1. When contractor agrees to provide certain number of man-hours, but Government is not specifically required to assign any tasks, obligation does not arise until first task order is issued. At that time, amount sufficient to cover cost of minimum number of hours specified in contract may be obligated on estimated basis. 2. Alternative view is that when contractor agrees to provide certain number of man-hours, but Government is not specifically required to assign any tasks, promise by Government to place order and pay for minimum number of man-hours specified in so-called task order contract may be implied. 3. Government becomes obligated for pre-contract costs at time of award of task order contract with clause authorizing payment. In any case, under legal theories of quantum meruit and quantum valebant, Government is obligated for reasonable value of goods or services if it accepted them. or otherwise received benefit. 4. If Government has specific obligation to issue task orders, contract in which level-of-effort is expressed in hours to be applied on basis of such orders is definite enough to justify obligating total of pre-contract costs, estimated costs for minimum number of hours specified, and fixed fee at time of award. 5. Obligation is chargeable to annual appropriation for fiscal year in which it is incurred. When contract spans more than one fiscal year and annual appropriations are involved, Government is bound only until end of fiscal year, and amounts obligated may not be applied against task orders issued after end of fiscal year. Rule does not apply if multiple-year or no-year funds are used.

Attention: Raymond Holt, Jr. Accounting Policy and Procedures Branch

Dear Mr. Holt:

This responds to your informal request that we review Department of Energy (DOE) contract No. DE-ACO1-79-CR10000 and advise you (1) whether task order contracts such as this are considered indefinite delivery contracts and (2) when obligations are incurred under such contracts.

The contractor in this case agreed to provide DOE with an estimated total of 125,000 man-hours of support over one year, with two option years at the same level-of-effort. The specific tasks to be performed were to be assigned by the contracting officer as the need arose.

DOE agreed to pay a base (fixed) fee Or $54,000 plus the contractor's actual allowable costs for man-hours, travel and materials and computer time; these costs were estimated at approximately $2,700,000. An award fee of up to $162,000, based on quality of performance, also was available If less than 113,000 or more than 137,000 man-hours were involved, these amounts were to be equitably adjusted.

Pre-contract costs were covered in article 3.5, whichstated that the contractor was entitled to up to $800,00for reimbursement of expenses incurred between November l, 1978, and April 27, 1979 (the date of execution) if these would have been allowable under the contract. In our opinion, at the time of award the Government became obligated to pay these precontract costs. In any event, under the legal theories of quantum meruit and quantum valebant, the Government owed the contractor the reasonable value of the goods or services if it had accepted them or otherwise received a benefit.

Beyond this, it would not have been consistent with 31 U.S.C. Sec. 200 to record an obligation on April 27, 1979, since on that date neither party was required to perform or pay for work to be set forth in task orders. However, once a task order was issued, an amount sufficient to cover the cost Or the minimum number of hours specified in the contract might have been recorded as an obligation on an estimated casts, see generally Obligations and Charges under Small Business Administration Contracts, (B-198574, February 2, 1981) February 2,(copy enclosed), since placing of the task order would have served as consideration for the contractor's agreeing to perform, a valid contract existed.

A second or alternate interpretation its that if both the contractor and DOE intended to enter into a contract on April 27, 1979, a promise by the Government to place task orders and to pay for a stated minimum number of man-hoursmay be impliedSee Sylvan Crest Sand and Gravel Co. v. U.S., 150 F. 2d 642 ( 2d Cir ., 1945 ), in which the plaintiff was to deliver trap rock "as required," in accord with delivery instructions to be given by the Government the court found an implied promise by the Government to take and pay for the trap rock and to give shipping directions or to give notice of cancellation within a reasonable time.

Under this interpretation the contract would have been valid upon execution, rather than when the first task order was issued. In cases such as this, an amount sufficientto cover any pre-contract costs, plus costs and fixed fees for the minimum number of hours which the Government I s obligated to purchase must be obligated at the time of aware;. The remainder, up to the maximum, may be administrative reserved. Our Office has held that a contract inwhich the level-of-effort i s expressed in man- hours to be appliedon the bests of work orders issued after award ;_ definite enough to justify recording the full estimated amount as an obligation at the time of award. Bureau of Alcohol, Tobacco, and Firearms- -Payments under Interagency Agreement, 58 Comp. Gen. 471, 474 (1979); Recording Obligations under EPA Cost-Plus Contract, D-183164, May 30, 1975, and cases cited therein (copy also enclosed). (In the EPA case, however, the Government was clearly obligated to order specific tasks.)

We also note the general rule that obligations are chargeable to the annual appropriation for the fiscal year in which they are incurred. The contract which you subcomitted to us for review covered more than one fiscal year (April 1979 to April 1980), but we cannot tell what type of appropriation was used. If annual appropriations were involved, since the Government may enter into a contract which extends only to the end of the fiscal year, the amount obligated could not have been applied against task orders issued after the end of the first fiscal year. Of course, if multiple or no-year funds were invovled this would not have been a problem so long as the amount appropriated was sufficient to cover the contractor's costs and fees.

In any event, valid task order contracts are similar to the indefinite delivery, indefinite quanitity contracts described in the Federal Procurement Regulations (FPR) Sec. 1-3.409(c) (2d Ed., Circ. 1, June 1964). The date and time of performance, i.e., delivery, are indefinite. However unlike the contracts described in the FPR, which are for firm- fixed prices, although they may provide for price escalation or pride redetermination, DOE contracts are of the cost-reimbursement type.

I hope this information will be helpful to you. If you have further questions you nay call Marilynn Eaton of my staff at 275-5476.

Sincerely yours,

Seymour Efros Associate General Counsel

Enclosures