July 8, 2010
This chapter reviews the major contracting methods and the categories of contract types used by the government from a pricing standpoint. The two that I will explore in this paper are Sealed Bidding and Negotiation. Sealed bidding is used when the contracting officer decides that adequate price competition exists and that the specification or statement of work is well defined to enable offerors to bid on a fixed-price basis. On the other hand negotiation is used when sealed bidding is inappropriate, such as instances when the specification or statement of work may not be well-defined enough for offerors to bid on a fixed-price basis.
Contracting Methods and Contract Types: Pricing Implications
Sealed Bidding Sealed bidding is used when the contracting agency knows exactly what it wants and is simply looking to get it at the lowest responsive and responsible price. The contracting agency prepares an invitation for bid (IFB) to inform perspective bidders of the government’s needs. The IFB contains a precise description of the supplies or services required. The upcoming acquisition is then publicized electronically through FedBizOpps.gov, enabling any interested firm to download the IFB and decide if it warrants a response. Interested firms will submit bids that are kept in a secure place until the bid opening date and time stated in the IFB. The bids are opened publicly and it is then that the bid amounts of each offeror become public. This is also the beginning of the government’s evaluation process. They start with the apparent low bidder that is both responsive and responsible. Once this criterion has been met the contract is awarded and the government is committed to paying the price that was bid and accepted.
The government recognized that the sealed bidding process can be time