Federal Procurement Essentials: Sealed Bidding




Introduction

The US Federal Acquisition Regulation (FAR) defines methods and processes for the contractual acquisition performed by any federal entity of any asset, whether material (goods, products, or construction) or immaterial (services). Although these policies and procedures differ in essence, they share the same procurement standard, that's to say the promotion of competition to the maximum extent: so-called full and open competition (FOC).

Competitive Procurement and Sealed Bidding

Procurement is twofold: it first identifies the method to be used (by qualifying the level of competition required by both the acquisition nature and context), and consequently defines the process or procedures to be implemented in order to support the method chosen.

Competitive procurement (or FOC) provides different contracting methods with different levels of competition:

The Three Competitive Contracting Methods

  1. Sealed bidding, relying on competitive bids (also called sealed bids), submitted in response to an invitation for bids (IFB)

  2. Contracting by negotiation, relying on competitive proposals in response to a request for proposals (RFP)

  3. Simplified acquisitions, relying on quotations in response to a request for quotation (RFQ)

The category of simplified acquisitions is reserved for "small" acquisitions (FAR Part 2.101 defines this as less than $100,000 [USD]). Contracting by negotiation is reserved for acquisitions in which evaluation factors are not primarily related to price but to the overall value. Sealed bidding is aiming at simply selecting the offer with the lowest evaluated price.

Sealed Bidding

Sealed bidding (defined in FAR Part 14) is a procurement method used when the best value is expected to result from the selection of the lowest evaluated priced offer. This contracting method solicits (by means of a document called invitation for bid [IFB]) prospective providers for submitting offers, called sealed bids.

Precedence of sealed bidding
US federal regulations give preference to a procurement process based on sealed bids over competitive proposals if certain conditions are fulfilled:

  1. time permits the solicitation, submission, and evaluation of sealed bids;

  2. the award will be made on the basis of price and other price-related factors;

  3. it is not necessary to conduct discussions with the responding providers because of both the clarity and completeness of requirements; and

  4. there is a reasonable expectation of receiving more than one sealed bid.

If any one of these conditions is lacking, contracting by negotiation is the selected procurement method.

Comparative efficiency of sealed bidding
Most prospective providers consider sealed bidding as the fastest and least costly competitive procurement method, as no time is wasted in discussion between the requester and prospective suppliers (except in very well-defined cases). Therefore, sealed bidding is deemed the fairest, since no opportunity is offered to a provider to appear "smarter" or more efficient than others (which would thus introduce a bias into the requester's mind by leveraging a special relationship, whether newly created or long-lasting). From both sides, the commitment is clear and definitive, with no space for trade-offs, particularly with respect to non-price-related factors used to evaluate the responsiveness of bids.

Sealed bidding contract types
Only a firm-fixed-price (FFP) contract can be used when sealed bidding is selected as the contracting method. Nonetheless, a fixed-price (FP) contract with economic price adjustment may be used when some flexibility is necessary, feasible, and authorized (FAR 16.203).

Sealed Bidding Procedures

Different steps are involved in the process of implementing sealed bidding (and will be detailed shortly):

The Sealed Bidding Process

  1. preparation of the invitation for bids
  2. publicizing the invitation for bids
  3. receipt of bids
  4. public opening of bids
  5. evaluation and comparison of bids
  6. selection of the lowest-priced responsive bid
  7. award of contract

Step 1: preparation of the invitation for bids
Sealed bidding relies on a soliciting document, also called an invitation to bid (ITB), or invitation to tender (ITT), that should clearly, accurately, and completely describe the needs, requirements, and constraints related to the requested good, product, construction, or service.

Sealed bidding specifications or requirements cannot restrict, or unnecessarily and unduly limit the number of organizations submitting a bid. The invitation should include or reference any document needed by the bidder for bidding.

By default, when sealed bidding is retained as the procurement method, the uniform contract format outlined in the following table should be used to the maximum practicable extent for the preparation of invitations for bids and contracts. The use of this format facilitates preparation of the solicitation and contract, as well as consultation and use of those documents by bidders and contractors.

Sealed Bidding—Uniform Contract Format

Part I - The Schedule

A. Solicitation and contract form (SF 33)
B. Supplies or services and prices
C. Description and specifications
D. Packaging and marking
E. Inspection and acceptance
F. Delivery and performance
G. Contract administration data
H. Special contract requirements

Part II - Contract Clauses

I. Contract clauses

Part III - List of Documents, Exhibits, and Other Attachments

J. List of documents, exhibits, and other attachments

Part IV - Representations and Instructions

K. Representations and certifications
L. Instructions, conditions, and notices to bidders
M. Evaluation factors for award

Nevertheless, when some flexibility is necessary, feasible, and authorized (FAR 16.203), a simplified contract format may be used in lieu of the uniform contract format:

Sealed Bidding—Simplified Contract Format

Part I - The Schedule

A. Solicitation and contract form (SF 1447)
B. Contract line item number
C. Description and specifications
D. Quantity and unit of issue
E. Unit price and amount
F. Packaging and marking requirements
G. Inspection and acceptance
H. Delivery and performance
I. Special contract requirements

Part II - Contract Clauses

J. Contract clauses

Part III - List of Documents, Exhibits, and Other Attachments

K. List of documents, exhibits, and other attachments

Part IV -Representations and Instructions

L. Representations and certifications
M. Instructions, conditions, and notices to bidders
N. Evaluation factors for award

Notice that, depending on the type of contract retained, section A of the Schedule varies. Indeed, Standard Form (SF) 33—also called the Solicitation, Offer, and Award form—is used when a uniform contract format is needed, which is the case by default. The SF 1447 solicitation and contract form is used in lieu of SF 33 when a simplified contract format is needed instead

Whatever type of contract is selected, bidders must fill out and sign the related form, and submit it. Then, upon acceptance of the lowest responsive bid, the soliciting organization signing the form establishes a binding contract between both parties.

Step 2: publicizing the invitation for bids
The sealed bidding process then requires invitations to be publicized, by all appropriate means, sufficiently before public opening, to enable prospective bidders to prepare and submit bids.

Means of publication can include direct transmittal to prospective bidders, or dissemination in public places (in particular at the government-wide point of entry (GPE). The GPE is a single point where the public can electronically access federal business opportunities greater than $25,000 (USD).

A pre-bid conference may be used, generally in a complex acquisition, as a means of briefing prospective bidders and of explaining complicated specifications and requirements to them as soon as possible after the invitation has been issued and before the bids are opened. The conference must be conducted in accordance with the procedure prescribed in FAR 15.201.

Step 3: receipt of bids
Bidders must submit sealed bids so that they are received at the place and (no later than) the time stated in the solicitation document, otherwise bids will be deemed late bids, and will not be considered for evaluation.

All bids received before the time set for the opening of bids must be kept securely.

Step 4: public opening of bids
The bids are publicly opened at a predetermined time and place.

If practical, the bid is read aloud to the persons present, and their amount publicly announced. The original of each bid is then recorded, and carefully safeguarded.

Step 5: evaluation and comparison of bids
Bids are evaluated with no discussion held with the bidders. Because bid evaluation and comparison are limited to price and other price-related factors only, the decision cycle is shorter than other competitive procurement methods (which have to deal with more complex, non-price-related evaluation factors).

Evaluation of bids is twofold. First, the bid must be determined to be responsive. If it is, then the bidder must be deemed responsible.

Bid Responsiveness Determination

To be deemed responsive, a bid must fulfill three conditions:

  • It is received, opened, and not rejected at the time and place set forth in the invitation for bids;

  • It conforms to the specifications, terms, and conditions set forth in the invitation for bids; and

  • It is the most advantageous, considering only price and other price-related factors set forth in the invitation for bids (in other words, it offers a fair and reasonable price).

Bidder Responsibility Determination

To be deemed responsible, a bidder must demonstrate conformity with a number of conditions:

  • adequate financial resources to perform the contract, or the ability to obtain them

  • ability to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and governmental business commitments

  • a satisfactory performance record (a prospective contractor shall not be determined responsible or non-responsible solely because of a lack of relevant performance history, except when specified in a standard for special acquisitions)

  • a satisfactory record of integrity and business ethics, including satisfactory compliance with laws related to taxes, labor and employment, environment, antitrust, and consumer protection

  • the necessary organization, experience, accounting and operational controls, and technical skills, or the ability to obtain them

  • the necessary production, construction, and technical equipment and facilities, or ability to obtain them

  • qualifications and eligibility for receiving an award under applicable laws and regulations

Step 6: selection of the lowest-priced responsive bid
The sealed-bidding method leads to the selection of the bidder who is qualified as responsible, and whose bid is deemed (1) responsive (meaning that it conforms to the invitation for bids), and (2) the most advantageous, considering only price and other price-related factors set forth in the solicitation document.

Step 7: award of contract
With reasonable promptness, an award is made to the selected responsible bidder, and a notice of award is sent to unsuccessful bidders whose bid was not retained (whether because they were declared non-responsible, because their bid was deemed non-responsive, or because its price was not the lowest).

Conclusion

Selling to the government can bring new life to contract winners, particularly small and medium businesses (SMB) mastering federal contracting rules. In fact, organizations that understand and leverage federal acquisition methods and processes can grow from scratch to a profitable bottom line, whatever their size.

The solution does not lie in trying to dodge procurement rules that might seem too strict to would-be contractors. As a friend (let's call him Norm) coming from the direct lineage of Buddha used to say, your greatest weapon is in your enemy's mind. Indeed, your best asset in the procurement process consists of knowing the rules by which your enemy (namely, your future customer), is playing. Thus, by doing exactly whatever you are asked—or more exactly, by doing what you are expected to do—you are taking the path of least resistance: that is, the one towards success. This situation improves still more should you pay particular attention to the myriads of special programs giving privileged access to the gold contracting pot to businesses owned by women, minorities, and veterans.

Again, all this is written on the Rosetta Stone of federal contractual acquisition, the FAR. Read it, and you're in business: it's as simple as that.

Related Web Resources:
Sealed Bidding, Federal Acquisition Regulation (FAR) Part 14.

 
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