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How the government chooses what it buys is often not a function of what's best, but of how easily it can be bought. The contractual process in the federal government isn't a mere means to an end. The process influences outcomes, and companies can be battered or buoyed by it depending on their understanding of the mechanics involved.
In this installment of our ongoing series on selling to the government, we'll look at fundamentals of government contracting. We'll tackle contracting methods in general order of apparent competitiveness, starting with the most price competitive and ending with the most limited.
Sealed bidding works like this: Agencies describe exactly what they want to buy in a solicitation called an invitation for bid (IFB). Companies submit secret bids to provide it. The award goes to the company that is considered to be the "lowest responsive, responsible bidder."
"Responsive" means the bid conforms exactly to the solicitation's specifications; "responsible" means the government makes a determination that the winning company can deliver on its offer. Anybody who proposes to deliver items that differ even slightly from the spec is disqualified from the competition, no matter how much better that alternative may be.
Old-school sealed bidding is rare today within the federal government for IT procurements, but it lives on in mutated form: online reverse auctions, in which companies publicly underbid each other, with the lowest bidder winning the business.
Reverse auctions have yet to capture a significant portion of federal IT contracting. Reverse auctions are a method for buying commodity items, often small quantities of brand-specific part numbers. A handful of agencies use them to conduct quarterly or semi-annual procurements of products from approved vendors for predetermined configurations and quantities of office machines such as desktops, laptops and printers, but few manage to have the discipline necessary to aggregate requirements and pool money like that.
Negotiated Procurement (RFPs)
Contracting by negotiation is the underlying premise of a solicitation issued as a request for proposals (RFP). After companies submit proposals, federal source selection teams can ask for clarification and hold discussions with companies. It isn't much less competitive than sealed bidding, but it's much more complex.
Like sealed bidding, this approach is full and open. It's slightly less price-competitive than sealed bidding because an award may hinge on factors other than price, giving an advantage to companies that understand the wider context and intent of the procurement. Also, especially in large procurements, agencies can exclude companies from the original round of consideration based on the quality of companies' proposals, whereas the point of sealed bidding is to examine every bid for the absolutely lowest price.