We all use different methods to buy what we need. For a gallon of milk, we might stop on the way home from work at the most convenient store, rather than the place offering the cheapest price. But if we’re in the market for a new car, we’ll take time to research the market – what features we’re looking for; how much we have in our budget; different manufacturers, and so on.
The federal government buys what they need in a similar way – evaluating proposals based on a combination of price, past performance, technical or managerial experience, delivery, product features, and their budget.
Contracting officials are bound by procedures outlined in the Federal Acquisition Regulations (FAR) to guide their decisions.
Micro-Purchases: Government purchases up to $10,000, known as Micro-Purchases, don’t require a competitive bid or quote. Agencies simply pay using a Government Purchase Card. The government spends a LOT of money this way – $8.7 billion in 2014!
Simplified Acquisition Procedures: Purchases under $150,000 can use simplified purchasing procedures that involve less paperwork and fewer approval levels. Generally contracting officers try to receive at least 3 responsive quotes from commercial businesses. Purchases under $350,000 may be “set aside” exclusively for small businesses.
Sealed Bids: When the government has very specific requirements, an agency may issue an “Invitation for Bid” (IFB). Sealed bids are opened in a public setting, read aloud and recorded. Contracts are awarded to the lowest-priced, fully responsive bidder.
Contracting by Negotiation: For more complex requirements with a highly technical product or service, the government may issue a Request for Proposal (RFP) or Request for Quote (RFQ). Proposals in response to an RFP can be subject to negotiation.
Consolidated Purchasing: Many agencies have common purchasing needs, like software or office supplies. These purchases are often centralized via various “consolidated purchasing,” vehicles – for example GSA Schedule contracts, or Government Wide Acquisition Contracts (GWACs) for Information technology. These centralized buying vehicles are negotiated by the government, with awards to many vendors, and used by multiple agencies.