Competitive Bidding: How this Government Best Practice Dictates Suppliers’ “Best Price” Structure

Austin, TX
Competitive Contracts

You may have seen recent headlines indicating that some federal U.S. agencies are failing to compete 100 percent of the contracts they award. But the reality is that, to minimize wasteful spend and ensure fair and open competition in government contracting, competitive bidding needs to occur.

Most public sector organizations rely on RFPs to solicit for goods, services and construction as the extensive market research, vendor vetting, and in-depth evaluation processes allow for more balanced, and confident, contract awards based on price, value, quality, past performance, and other qualifying criteria. However, some argue these awards can be subjective to a certain extent, especially if the winner didn’t submit the lowest price. 

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That’s why many federal, state and local agencies are issuing “Invitation for Bid” solicitations – or IFBs – when price is deemed to be the foremost – or only – evaluation factor for a contract. This cut-and-dry contract award process is very transparent (bids are opened in a public forum) and very efficient, for both buyers and suppliers.

How Competitive Bidding Benefits The Buyer (The Agency):

  • It prevents inflated supplier pricing and ensures taxpayer dollars are maximized on every buy. Suppliers are motivated to submit their “best price” every time, as the winner is selected based on the lowest price alone.
  • The project terms are clearly defined in advance of the award, and the winning supplier is contractually obligated to meet all specifications once the bid submissions are opened and they are deemed to have the lowest priced bid. There are no negotiations. As such, the expectation is that work can start – or goods can be delivered – immediately (i.e. on-time) without issue. That means that the start of urgent projects can be expedited. In contrast, most RFP solicitations have to be issued up to 6-8 months ahead of the award deadline/project start date to allow enough time for thorough proposal review and vendor evaluation since, as noted above, price typically isn’t the only selection factor.

How It Benefits The Supplier (You):

  • If you’re new to government contracting – meaning you don’t have a proven performance record or references quite yet – this is an easy way to get your foot in the door. Anyone and everyone can submit a bit. As long as you can deliver the solicited good or service for the lowest price, you win the government’s business. And, as long as you deliver on-time and to the pre-defined specifications of the original solicitation without issue, you will start to establish a track record that can open doors to RFP and RFQ solicitations that have more extensive vendor pre-qualifications, such as quality ratings.
  • It gives everyone a fair chance to win. Public sector suppliers are protected from potential buyer bias in competitive bidding processes. Though RFPs use scoring sheets to give certain weight to various proposal strengths/weaknesses, non-price criteria can be subjective sometimes – though it shouldn’t. (But that’s what contract protests are for, right?)
  • Win or lose, participating in a competitive bid empowers you to zero your pricing in for future opportunities. Everyone who competes for a contract is afforded a debrief on who won the contract – and for how much. If you compete enough times, you’ll be able to easily track competitor pricing trends.

Remember: Pricing is always a key determinant of government contract awards, even RFPs evaluated using multiple variables, such as tradeoffs.