Competitive Bidding and Sealed Proposals
Sealed bidding and competitive proposals are the two methods used to acquire competitive prices from bidders. Sealed bidding is “a process by which government needs are made known by a solicitation called and Invitation for Bids. The government will use sealed bidding when (1) it feels confident that award can be made to the lowest price offeror who is responsive and responsible and (2) the government’s requirement is reasonably well defined in the form of drawings and specifications”(Murphy, 2009). Once the bids are opened, the prices become public knowledge. This could be a disadvantage to contractors because their prices will be made known for all to see. When sealed bidding is used, the lowest bidder that is found to responsive and responsible will be awarded the contract. “Sealed bidding always leads to a firm-fixed-price contract or fixed-price with economic adjustment contract” (Murphy, 2009). This would be another disadvantage to the contractor, because all the risk is on the contractor in fixed-priced contracts.
“Competitive acquisitions rely on market forces to obtain the best value to the government” (Murphy, 2009). This process differs from sealed bidding because offerors can change their proposals and negotiate. Unlike sealed bidding, competitive acquisitions may not award the contract to the lowest bidder. “This process permits tradeoffs among cost or price and noncost factors and allows the government to accept other than the lowest priced proposal. The perceived benefits of the higher priced proposal shall merit the additional cost, and the rationale for tradeoffs must be documented in the file” (Murphy, 2009). Being awarded cost-reimbursement contract would be best for a contractor because most, if not all, of the risk falls on the government.
Because of the differences in these two methods, the competitive acquisition method can be more advantageous to contractors. Contractors who do not have the lowest proposed price can still
“Competitive acquisitions rely on market forces to obtain the best value to the government” (Murphy, 2009). This process differs from sealed bidding because offerors can change their proposals and negotiate. Unlike sealed bidding, competitive acquisitions may not award the contract to the lowest bidder. “This process permits tradeoffs among cost or price and noncost factors and allows the government to accept other than the lowest priced proposal. The perceived benefits of the higher priced proposal shall merit the additional cost, and the rationale for tradeoffs must be documented in the file” (Murphy, 2009). Being awarded cost-reimbursement contract would be best for a contractor because most, if not all, of the risk falls on the government.
Because of the differences in these two methods, the competitive acquisition method can be more advantageous to contractors. Contractors who do not have the lowest proposed price can still
References: Murphy, J.E. (2009). Guide to contract pricing: Cost and price analysis for contractors, subcontractors, and government agencies. Vienna, VA: Management Concepts