Historically, many construction businesses have engaged in federal contracting because the projects tend to be plentiful, with little doubt about the payer’s solvency. However, working with the U.S. government today has quirks, risks and challenges all its own.
For example, your company may get the chance to bid on an indefinite delivery, indefinite quantity (IDIQ) contract. And you may wonder, “What the heck is that?” Well, it could be a lucrative opportunity — if you can handle the parameters and commitment.
Multiple projects
From a construction perspective, IDIQ contracts provide for the delivery of an unspecified quantity of services during a fixed period. Generally, such contracts are awarded for a base period of one year. However, they may include option periods — for example, four additional years. Specific job tasks are issued via individual orders during the contract period.
Various federal agencies use IDIQ construction contracts to secure a contractor for an undefined number of projects. The approach appeals to agencies with ongoing or to-be-determined construction needs that fall within each contract’s scope.
Leveraging one construction company for multiple projects helps to create a cohesive, nimble project team with an established working relationship. The agency in question can:
- Engage the winning construction business to work on funded projects, and
- Consult regularly with that contractor about other jobs as funding and approvals are in process.
Plus, having an umbrella contract in place generally enables earlier starts for emergency repairs and construction work.
You might also encounter other entities soliciting bids for IDIQ contracts. These can include state agencies and nonprofit organizations.
4 best practices
First and foremost, bear in mind that IDIQ contracts typically require contractors to mobilize quickly and execute small to midsize projects on tight schedules. Here are four best practices for completing such jobs on time and within budget:
1. Clearly define the agency’s goals. Take time to fully understand its mission and strategic objectives. Be prepared to offer guidance on whether and how the various projects that come up will indeed help it meet those goals.
2. Establish a single point of contact. Assign a well-trained and preferably experienced project manager as the agency’s primary contact. This individual must be able to react quickly, troubleshoot issues as they arise, understand budget constraints and approach jobs with a sense of urgency.
3. Implement scalable technology. To operate efficiently, make sure your technological infrastructure — including hardware, software and mobile apps — can readily adapt to various-size projects. If necessary, build your team’s comfort level with technology and strive to be an early adopter of new solutions.
4. Develop trusted relationships with subcontractors and suppliers. There’s no time for delays on IDIQ jobs. Prequalify subcontractors who can provide services as needed. Identify suppliers that you know will carry the right materials and deliver them on time.
Demanding work
IDIQ contracts can be prime revenue-generating opportunities for construction companies equipped to handle them. Agencies such as the U.S. Department of Defense, Army Corps of Engineers and Department of Veterans Affairs are widely known for awarding them. Sometimes, such contracts are even set aside for small or veteran-owned businesses.
However, the keyword is “equipped.” Once committed, you’ll need to be ready to fulfill the contract terms whenever the agency you’re working with decides to proceed. We can help you evaluate whether IDIQ contracts, or any other kind of federal contracting, would make financial sense for your construction business.
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