Over the past five years, the federal government has committed to spending as much as $130 billion a year on supplies and services through unusual contracts that break the mold of traditional contracting practices.

Typically, when federal agencies buy anything from jetfighters to computer services to paper clips, they throw open bidding on major contracts to a number of eager businesses that compete to offer the best price, the most experience and the promise of meeting a deadline. Larger projects — like building a battle ships — are broken into scores of subcontracts that are bid out in similar fashion.

Yet another type of contract, known as “indefinite delivery/indefinite quantity,” has become common at the Departments of Defense, Homeland Security, Health and Human Services and Veterans Affairs over the last decade or so, according to a new report by the General Accounting Office (GAO), with the Pentagon accounting for about 68 percent of all such contracts between 2011 and 2015.

For these so-called IDIQs, the government hand picks one or more contractors to commit to delivering products and services in the future and sets a ceiling on how much money will be spent overall. Awards are for a specified number of years with renewal options, but usually for no longer than five years.

Keep reading this article at: http://finance.yahoo.com/news/government-130-billion-contracts-no-121500314.html

See the GAO report at: http://www.gao.gov/products/GAO-17-329