It is no secret that government construction contracts are big business for contractors. Public construction spending recorded a seasonally adjusted average of $266 billion in July 2017, and industry giants like AECOM have business units dedicated to the practice.
Included among the lump sum, design-build and cost-plus contracts — to name a few — commonly used to carry out this work is another type of arrangement: indefinite delivery/indefinite quantity (IDIQ) contracting. Many public agencies use IDIQ when there is uncertainty as to how much of a service they need and when they’ll need it.
The word “indefinite” might lead some to think its use could cause unscrupulous contractors to abuse the mechanism as an open faucet of funding. In practice, however, it is actually a tool for governments to better manage their budgets and prevent that scenario.
IDIQ programs allow public agencies to lock in prices for a set period of time. For contractors chosen to participate, it can be an opportunity to lock in a customer.
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