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Federal government opens the door for fixed-price intergovernmental agreements.

Article Excerpt
On Dec. 31, 2002, the Department of Justice Office of Legal Counsel (OLC) issued an opinion on the legality of fixed-price intergovernmental agreements (IGA) for detention services. While this opinion opens the door for allowing the DOJ to procure detention services outside the confines of traditional IGA rules, it could also result in state and local jails assuming additional risks associated with cost increases.

Background on IGAs

An IGA is an agreement between two governmental agencies, in which one of the agencies carries out common services for both of the agencies. These agreements are playing a critical role in the government's efforts to house federal detainees as the number of detainees dramatically increases. For example, between fiscal year 1994 and fiscal year 2002, the number of federal detainees increased by an average of 12 percent annually, according to the Department of Justice Office of the Federal Detention Trustee. However in 2002, only 27 percent of detainees were housed in federal facilities; 14 percent were housed in private facilities and 58 percent were held in state and local jails pursuant to an IGA.

Although IGAs for detention services are not subject to federal procurement regulations, they are governed by special rules concerning proper parties, rates of pay and matters of form. (1) Typically, detention services under a DOJ IGA are paid at a pre-negotiated per diem rate. However, the federal government will reimburse a state or local provider if the provider's actual or allowable costs of detention exceed the pre-negotiated per...