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Published: 2012-09-21

How The Government Buys



The Federal Acquisition Streamlining Act of 1994 significantly changes how the govern- ment does business. For a summary of this legislation please go to the Office of Advocacy's Procurement Section on this BBS and enter the character found beside the Letter to the Deputy Secretary of Defense and others on the Federal Acquisition Regulations - [FAR Cases 94-802; 94-803 and 94-804]. Military and civilian purchasing activities, installations or offices scattered throughout the country buy through two methods: sealed bidding and negotiation. When soliciting for bids, a purchasing office normally sends bid invitations to firms listed on their solicitation mailing lists - or, if a given list is unduly long, the purchasing of- fice may solicit segments of the total list. The solicitation mailing list is made up of business firms that have advised the buying of- fice that they want to offer on particular so- licitations and have supplied data showing their ability to fulfill contracts for the item, ser- vice or project. In some cases, the purchasing installation or office will want offers from additional firms not listed on its solicitation mailing list. These firms are usually located through public advertisements in the Commerce Business Daily (CBD), trade papers, notices in post offices and by Small Business Administration represen- tatives. Invitations for Bids (IFBs) usually include a copy of the specifications for the particular proposed purchase, instructions for prepara- tion of bids, and the conditions of purchase, delivery and payment schedule. The IFB also designates the date and time of bid opening. Each sealed bid is opened in public at the purchasing office at the time designated in the invitation. Facts about each bid are read aloud and recorded. A contract is then awarded to the low bidder whose bid conforms with all requirements of the invitation and will be advantageous to the gov- ernment in terms of price, and price-related factors included in the invitation. When buy- ing by negotiation, the government uses proce- dures that differ from sealed bidding. Buying by negotiation is authorized in certain circumstances by law under applicable Federal regulations (Federal Acquisition Regulation or FAR). Simplified acquisition procedures for the most part use expedited negotiated procedures. Gov- ernment purchases up to $2,500 are now classi- fied as "micro purchases". Micro purchases are no longer reserved for small firms; can be made without obtaining competitive quotations if the contracting officer determines that the price is reasonable; and, are not subject to the require- ments of the Buy American Act. The current "small purchase threshold" is $25,000. This means that purchases under $25,000 may use simplified procedures in lieu of detailed "full and open competition" procedures required by statute. The Federal Acquisition Streamlining Act of 1994, replaces the $25,000 threshold with a new Simplified Acquisition Threshold of $100,000. Often, negotiated contracts cover advanced tech- nology not widely supplied by small businesses and may include very complex areas of research and development, projects connected with highly so- phisticated systems, missile programs, and air- craft and weapons systems. Negotiation procedures, however, may also be applied to more-or-less stan- dard items, when negotiation authority has been properly documented by the contracting office. For example, items or services may be purchased by negotiation when it is impossible to draft ade- quate specifications or to describe fully the spe- cific item, service, or project. When purchasing by negotiation, the purchasing office also makes use of its solicitation mailing list for the particular item or service. It may also ask for detailed statements of estimated costs or other evidence of reasonable price. These Requests for Proposals (RFPs) are sent to a number of offerors so that the purchase may be made on a competitive basis. Requests for Quotations (RFQs) may be used in negotiated procurements to communicate government requirements to prospective contractors. A quotation received in response to an RFQ is not an offer and cannot be accepted by the government to create a binding contract. An RFQ may be used when the government does not intend to award a contract on the basis of the solicitation but wishes to obtain price, delivery, or other infor- mation for planning purposes. After reviewing the various quotations received on the proposed purchase, the contracting officer may negotiate further with the firms that have submitted acceptable proposals to assure the con- tract most advantageous to the government.