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Oct 10, 2021

How Government Contracts Are Awarded

Time to read: 6 min

The Purchase Process

The purchase process is what distinguishes federal acquisitions from ones in the private sector. Different factors affect how decisions are made to determine who wins a bid in public vs. private contexts. In the private sector, companies are chosen based on subjective priorities and contracts are awarded to those that can best fulfill these subjective needs.

Government agencies, for their part, are required to award on a more objective basis due to time constraints. Thousands of contracts are released daily on SAM.gov, which means that the government cannot have a lot of evolving conversations with every potential bidder. Having all needs for each contract written out beforehand reduces the need for further discussion between government agencies and potential vendors. This results in extremely prescriptive contracting requirements. 

How Award Decisions Are Made

There are two main processes driving award decisions, based on different evaluation regimes. The government can judge proposals by the lowest price offered or the best value given:

  • Low Price Technically Acceptable (LPTA)
  • Best Value Procurement (BVP)

 

Low Price Technically Acceptable 

As the name suggests, the vendor offering the lowest price among all compliant proposals wins. The government ranks all proposals received from least expensive to most expensive. Then the proposals are read in order and evaluated based on three main factors:

  1. Administrative compliance
  2. Substance review
  3. Adherence to contract-specific requirements

Administrative Compliance 

 

Adhering to administrative requirements in proposals is extremely important. Government officers look for the correct font size, margin size, tabs, headers, and other formatting details. Vendors with incorrectly formatted proposals will automatically be disqualified from the decision process. 

 

Substance Review

 

In this step, the government looks through the bid for every element requested in the proposal to see whether each has been properly addressed. Vendors need to include all details as asked for. For example, forgetting to answer a question’s sub-bullet can automatically disqualify the proposal.

 

Contract-Specific Requirements

 

Government contracts often have very specific requirements in order to eliminate as many subjective decisions as possible. For example, a team may need to submit a resume for its proposed team lead, who must have a master’s degree and at least 12 years of experience. If a team lead’s resume does not have the required credentials, the proposal will be disqualified. Another example of a requirement is that the vendor may need to describe three previous work experiences. This is a binary threshold, because vendors only need to adhere to the minimum requirements to proceed, and so it acts purely as a compliance review. 

 

Best Value Procurement

In this scenario, the government will evaluate all compliant proposals and make a decision that is not based solely on price. The first two evaluation factors mentioned above also apply here, but in this case, some subjectivity is required as well. All proposals are evaluated based on:

  1. Administrative compliance
  2. Substance review
  3. Perceived value to government 

 

Perceived Value to Government

 

Judgments are made by balancing the products or services offered against their value to the government. There is an aversion to subjective judgments in awarding contracts; as a result, the government will load these types of proposals with external quantifiable benchmarks. For example, a  team’s project manager must have his or her PMP certification and 10 years of experience, or a vendor must have completed three similar pieces of work in the past. Each piece of work is then evaluated and awarded a numeric score based on  a number of factors. These can include the project’s technical complexity, the vendor’s performance, and administrative performance. 

 

The government provides structured rubrics and evaluation criteria to create the impression of precision and repeatability in this kind of award process. The scores given to each compliant proposal are then compared against their quoted prices. In theory, this should provide a more subjective solution that still offers quality results for complex contracts. 

 

Award Process

The government needs to be objective when deciding who wins contract bids. As this is a large piece of the RFP structure, all requirements in government contracts are quantified. This works to reduce the time required to award a contract, as well as to increase the government’s options. Common assets and accreditation standards for bidders include:

 

  • professional certifications
  • college degrees and education
  • company’s past performance history

 

For example, a project manager may need to have a master’s degree and 10 years of experience. RFPs are structured like this to help make the evaluation processes as objective as possible. 

 

Minimizing Risks

 

The government must work to minimize any risks when dealing with vendors. It thus favors businesses that offer reliability in their products and services. However, the award process still needs to be both objective and competitive. Contracts work to maximize and balance stability between vendors and government agencies. Outlining all requirements and demands helps lessen public speculation about subjectivity in the award process. Protests from losing vendors can prolong the proposal process for over a year, and also ruin a company’s reputation with the government. Having objective criteria reduces the risk of time delay in awarding contracts. 

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Topics: Government Contracting