If your operation is looking to enter the business of government contracting, you’ll have a lot of adjusting to do. Government sales are unlike any other form of business, with a lot of specialized terminology and ideas. Due to the sheer size of the government, there is also a huge range of possible ways you can get contracts.
However, one thing remains true across all contractors: The most prized contracts are known as Indefinite Delivery/Indefinite Quantity, or IDIQ. Fundamentally, the goal for virtually any contractor is winning IDIQ contracts. So today, we wanted to discuss the basics of the IDIQ contract, for newcomers.
Government Contracting 101: Understanding the IDIQ Contract
Boiled down, what an IDIQ Contract means is this: For a pre-set amount of time, generally five years, your company will provide a certain product or service on-demand. You may not be measured according to any specific quantity of deliverables, just that you be able to deliver them as requested.
Basically, if you have the capacity to fulfill the orders when they come in, IDIQ contracts almost always mean solid profits for the term of the contract, IF you can aggressively add scope to your contract with requested work. Further, contractors who can many years.
IDIQ contracts are useful for the government because they take a lot of uncertainty out of ordering and fulfillment. As a simple example: An R&D division is developing a military hardware project, and they have no idea how many screws they’ll need to successfully complete the project. So, they set up an IDIQ contract with a provider of screws, ensuring they’ll always be able to get more screws as needed. This also means being able to budget for it ahead of time-based on the value of the contract.
IDIQ contracts are usually win-win for both sides. The government gets guaranteed supply, while minimizing administrative costs, and the contractor gets a highly lucrative contract that’s guaranteed for at least several years.
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