Time to read: 2 min
Government contracts are awarded based on merit, not from previous relationship or purchase history. As all acquisitions are publicly funded, the government needs to follow procedures. This ensures delays, such as protests, are limited. The government favors a competitive process for acquisitions to avoid speculation from the public about purchasing biases. There are two major concerns about government contracts:
- The government is the sole purchaser of certain products and services
- The government customer is not the direct user or end user
Sole Purchaser Dilemma
There is a reverse monopoly problem as the government is the sole buyer of certain products—like military equipment and tanks, for example. As the only purchaser for these items, the government has a direct hand in controlling the industry’s price and quantity of products. There is a high risk for any deals made by government agencies being viewed as unfair or a waste of taxpayer money.
End User Dilemma
Another concern is that the purchaser is not the beneficiary nor the end user of the product. It forces the government to be extremely prescriptive when writing out their needs. Requirements are specific to each industry and each applicant must comply to be eligible for the award. For example, if a customer needs cloud storage services, the contract would state every detail about the storage limit, the server, data protection, and more.
Competition pressures companies to offer better products and services at lower, competitive rates. This is great in theory, however, the competitive acquisition process can be extremely time consuming, slowing down the decision-making process.
How The Bidding Process Helps Limit These Concerns
The government uses a competitive bidding process to ensure they limit these concerns. Government contracts are often perceived by new entrants as tedious and meticulous. This is necessary for agencies to make sure they are only awarding the best possible products and services. Rates and pricing are compared to reduce concerns and save taxpayers’ money.
While the bidding process can be slow when compared to commercial acquisitions, it ensures that these two concerns about government contracts are resolved.