Methods of Solicitation and Selection

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4.0 Overview

Requirement

The methods of solicitation and selection allowed within the Federal contractual sphere 1are listed in Section 9 of FTA Circular 4220.1E. You may choose:

  • micro purchases only for contract amounts less than $2,500;
  • small purchase procedures only for contract amounts less than the simplified acquisition threshold (currently $100,000);
  • sealed bids where
    • you have a complete, adequate, and realistic specification or purchase description,
    • two or more responsible bidders are willing and able to compete,
    • the procurement lends itself to a firm fixed price contract and the selection can be made primarily on the basis of price, and
    • no discussion with bidders is needed after receipt of offers;
  • competitive proposals; or
  • noncompetitive proposals (sole source) procurement only if you can justify not soliciting additional competition in the manner explicitly defined in FTA Circular 4220.1E Section 9.h.

State law usually restricts the method of procurement more tightly than these Federal requirements.

Definition

Solicitation - A purchasing entity's request for offers, including a telephone request for price quotations, an invitation for bids, or a request for proposals.

Offer - A promise to provide goods or services according to specified terms and conditions in exchange for material compensation.

Acceptance - Agreement to the terms of an offer. In most jurisdictions, "award" by a public agency can constitute acceptance, and may create an enforceable contract.

Discussion

Based on your procurement plans and the specification developed with your customer, you will generally initiate the procurement by soliciting offers. Depending on the requirements of the method of procurement you choose, you may solicit offers in a telephone call or in many other forms ranging up to multi-volume requests for proposals. When you receive offers (whether quotations, bids, or proposals), you may accept one, reject them all, or (unless you are using the sealed bidding method) request additional offers. Regardless of the procurement method, when you accept an offer, you create a binding contract according to the terms of the offer.

Best Practices

When you and your customer have specified the requirement, you will generally solicit offers from suppliers. The solicitation ranges from a telephone call to make a reasonable price determination (in the case of a micro-purchase), to a lengthy request for proposals in the case of a competitive proposal. The terms in your solicitation of offers are substantially determined by the method of selection you will use. Because your contract will ultimately be based on the terms of the offers, the selection of a method of procurement and the terms in your solicitation of offers are important and you will have the most success if they are based on well-tested practices and documents.

The solicitation of offers places you in the position of controlling the competitive process. You, rather than the supplier, decide whether to accept or reject the offers. A technical exception to this competitive model occurs in some micropurchases and small purchases when, based on catalogues or other supplier information, you issue a purchase order (or similar document) without receiving a direct offer. In this case you are technically making the offer, and the supplier is in a position to accept (usually by performing) or reject (usually by notice to you).

A solicitation does not bind your agency to purchase the goods or services solicited, although it may create an implied contract of fair dealing with your suppliers. 2 Although you will want to treat suppliers as partners and with respect for the purposes of long run competition and cost-effective business relations, many agencies make clear in their solicitations that they reserve the right to reject all offers, i.e., that they are merely soliciting offers and that the solicitation does not create any rights in suppliers. The price quotations, bids, or proposals submitted by suppliers should be firm offers to your agency to supply the goods or services upon the material terms in your solicitation.

In sealed bidding, there is generally no further modification of material terms: your agency either accepts one of the offers or rejects all bids. In the other procurement methods, you may request or receive additional offers before you accept one.

Although FTA Circular 4220.1E provides you broad choice and discretion, State laws and local policy often require that you use sealed bids in certain procurements and that you use competitive proposals in others. Based on State law and your own practice, you may find the method of procurement is largely determined by the type of services or goods you are procuring. 3 If the procurement is too large for micro-purchase or small purchase procedures, you will generally invite sealed bids for selection primarily based on price, or request proposals which will be evaluated according to additional criteria before a selection is made. Under certain restricted circumstances, you may solicit a non-competitive proposal from a sole source. Purchases under contracts with sister states or local agencies may also meet the Federal requirements. 4

If the legal and policy requirements leave you with more than one available procurement method, your choice among these methods will depend largely on:

  • the time and expense required of you and your suppliers for the respective methods, and
  • the likelihood of getting the best buy for your customers.

When you accept an offer, you establish a contract.

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4.1 Micro-Purchases

Requirement

Section 9.a of FTA Circular 4220.1E authorizes the use of micro-purchases as a method of procurement, when appropriate. If used, the following apply:
  1. Micro-purchases are defined as those purchases under $2,500.
  2. Micro-purchases may be made without obtaining competitive quotations if the grantee determines that the price to be paid is fair and reasonable.
  3. Micro-purchases are exempt from the Buy America requirements. 5
  4. Micro-purchases should be equitably distributed among qualified suppliers in the local area and purchases should not be split to avoid the requirements for competition above the $2,500 micro-purchase threshold.
  5. The requirements of the Davis-Bacon Act apply to construction contracts between $2,000 and $2,500. 6
  6. Other than the Davis-Bacon Act clauses for construction contracts between $2,000 and $2,500, no other Federal clauses are required.
  7. Minimal documentation is required: (a) a determination that the price is fair and reasonable and (b) how this determination was derived.

Definition

Micro-purchasing - A method of procuring goods and services under $2,500. A micropurchase does not require obtaining competitive quotations if you determine that the price to be paid is fair and reasonable.

Discussion

If permitted by State and local requirements, purchases under $2,500 no longer require more than one price to satisfy Federal requirements, as long as you determine that the price paid is fair and reasonable. You can include a "fair and reasonable price" determination in your forms used for micro-purchases. Rotating through a list of the suppliers is one method to equitably distribute the micro-purchases among qualified suppliers.

Best Practices

A threshold question you must get an answer to is whether or not your State law allows you to implement a micro-purchase method of procurement that does not require "full and open competition." If you have the legal authority under your State law to implement a micro-purchase program, you must comply with the procedural requirements stated as items 1, 2, 4, & 5 under the Requirements portion of this section. Once you are satisfied that you can legally have a micro-purchase program under your State's laws, you need to develop a procedure or regulation that addresses the FTA requirements and provides practical guidance to your organization

Limits and Procedures

- How will you guide the use of micro-purchase procedures? In accordance with the general requirement to have procurement procedures and a contract administration system (including written selection procedures), 7 larger agencies often maintain formal written procedures that address the circumstances under which micro-purchase procedures should be used. Although these circumstances shall not include purchases greater than $2,500, you may wish to set your limit lower depending on State law and your own experience with the cost-effectiveness of price competition using small purchase procedures. If you can efficiently ascertain the lowest cost supplier, you may not always wish to use micro-purchase procedures.

This method of procurement is intended to be used as creatively as possible and to minimize the paperwork that is inherent in other procurement practices. In establishing policies relating to micro-purchases at the grantee level, you must always be mindful of the "equitably distribute" requirement and the prohibition against splitting procurements. 8 The latter requirement is one you already deal with at all levels of your procurement processes. However, a significant requirement is to meet the documentation requirement of the FTA -- a determination that the price is fair and reasonable and how this determination was derived.

Equitable Distribution

- How will you equitably distribute your purchases among local suppliers? Do you have an automated purchasing and materials management system in place that allows you to track purchases by line item and vendor the item was purchased from? If so, and if you have multiple vendors for that item or service, you can alternate among those vendors. Do you have blanket purchase agreements in place with multiple vendors for multiple products which were established as a competitive process? If so, micro-purchases could be made from those vendors, again on a rotating basis. It is a good practice to keep records on dollar amounts awarded during the year to assist in monitoring distribution.

Bid Splitting

- How will you monitor procurements so that requirements are not being split to avoid another procurement method? You may have a system in place now that allows you to monitor any tendency to split requirements over your small purchase maximum into small purchases. Micro-purchasing would be an additional method of procurement addressed in your procedures and training within your agency. If you have an automated system which records individual procurements, that system may have to be reviewed periodically to analyze the procurement patterns for a particular product or service. Many times, you simply rely on your buyer or contracting officer to monitor not only bid splitting but also equitable distribution.

Fair and Reasonable Determination

- How do you document your determination that the price is fair and reasonable and the basis for that determination? You may want to prepare some "boilerplate" determinations for signature that address specific ways you buy products or services. You may want to say that based upon a telephone quote from John Doe Company for the widget and comparing that price with a price paid 6 months ago for the same widget, it is fair and reasonable -- you would fill in the blanks in your form, sign it, and file in the procurement file. Alternatively, you may use an existing form such as a buyer's tabulation that is filed. You may want to have another form that indicates the procurement is being made from an existing Blanket Purchase Agreement for which competition was obtained. You may want to prepare a form that addresses sales items -- you are buying this widget from X Company based upon an advertisement that the widget normally sells for $35 each and is on sale for $29.50 and this is fair and reasonable. Finally, you may want to have a form that simply addresses a standard commercial item -- the price is fair and reasonable because it is a standard commercial item sold in the open marketplace. 9

In implementing this requirement at the Federal level, the regulations recognize the paperwork cost of verifying the reasonableness of price may more than offset the potential savings. The price is also essentially assumed to be reasonable unless the contracting officer suspects or has information to indicate that the price may not be reasonable (higher than recent price paid or has personal knowledge of price for the supply or service), or a supply or service is being purchased for which there is not comparable pricing information readily available. 10

Other Federal Precedent

- In response to requests from its own field offices for more guidance, the Federal Government recently revised its regulations dealing with direct Federal micropurchases. 11 Because these changes give more flexibility to procuring agencies, you might want to review these provisions as you consider policies and guidance for your agency's micropurchases. Among the changes were:

  • the Government-wide commercial purchase card is the preferred means (but not the only means) to purchase and pay for micro-purchases; 12
  • agencies are encouraged to delegate micro-purchase authority to employees of the agency who will actually be using the supplies or services being purchased; 13
  • contract clauses are not required for micropurchases; and
  • documentation to support micro-purchases is to be minimized. 14

A recent report by the General Accounting Office 15 that addresses use of credit cards by Federal agencies is expected to result in more relaxed guidance being issued by the Federal agencies and increased usage of the credit card. The report discusses the savings in time and money that an agency can realize by utilizing credit cards for micro-purchases and the fact that there has been no apparent increase in procurement fraud through the utilization of these cards.

There is no absolute guidance that can be given in this area as to what works best or even well. The authority to use micro-purchases is intended to provide a very flexible procurement method which will allow you to buy low-priced items in a cost-efficient manner.

4.1.1 Purchase Cards

Discussion

This section deals with the use of purchase cards for micro-purchases, which are those of $2,500 or less. Since micro-purchases are exempt from the requirements of publicizing and obtaining competitive quotes, they are well suited to being delegated by the procurement department to the end users of the supplies or services. And since purchase cards have proven to have certain advantages in making micropurchases, the delegation of authority to use purchase cards will be the focus of this section.

A purchase card works like a personal credit card, such as VISA or MasterCard. Purchase cards offer a number of tangible advantages over the traditional purchasing methods of issuing individual purchase orders or blanket purchase orders, but they also present new challenges, especially in the area of internal controls and the equitable distribution of the agency's business to various vendors, including Disadvantages Business Enterprises (DBE's).

Best Practices

The San Francisco Bay Area Rapid Transit District (BART) instituted a pilot program for purchase cards on July 1, 1996. The results of the BART program have generally been very positive. The BART experience has demonstrated a number of important lessons which other grantees should be aware of, and these are discussed below. The detailed procedures adopted by BART for implementing its purchase card system are included in Appendix B.5, BART Purchase Card System.

Delegation of Authority - All purchase cards should be centrally controlled out of the Procurement Department. The Procurement Department must be responsible for training those individuals who are to be given authority to use the purchase cards. In order to maximize the benefits of micropurchasing with purchase cards, the persons authorized to use the card should be those whose department will be using the supplies or services being purchased. The delegation of authority to end users should involve the appointment in writing of these end users as "contracting officers" (or such other title as the grantee may use to describe those having authority to award contracts). Such an appointment procedure has been adopted by BART, and is also followed by Federal agencies (See FAR 1.603-3, Appointment). All purchase card activity would function, therefore, as redelegated procurement authority requiring a valid warrant, training and periodic review by the Procurement Department. Cardholders would be subject to the same Standards of Conduct as other procurement personnel (See BPPM Section 2.4.2.2.2, Written Standards of Conduct). They would also be subject to the procurement policies issued by the Procurement Department. The grantee's written procurement procedures must be expanded to give specific guidance for purchase card activity, including the internal controls and the best business practices for users to follow.

Advantages of the Purchase Card - BART has identified a number of advantages in using the purchase card. These include:

  • Vendors are now getting paid much more quickly; i.e., within 1-2 days.
  • Vendors are responding rapidly to the agency's orders; i.e., within 20-30 minutes of an order.
  • If a vendor does not have the needed part, the end user "shops" the street until they can find another vendor who has the part, instead of ordering the part from the initial vendor who would have to "buy" the part and pass it through the blanket purchase order with an additional "markup."
  • There is more price competition with the card than with using the traditional blanket purchase order system. In the past, vendors knew how difficult it was to get a blanket purchase order established, so their pricing tended to be inflexible. With the card, vendors know that BART has the ability to go to other vendors, so there is now more price competition. The bottom-line result is that there are fewer vehicles out for parts and the budget performance has improved.
  • The card provides a complete electronic listing of all cardholder activity. This activity can be analyzed using PC software such as MS Office-Access and Excel to look at trends in the data; for example:
  • Were any individual transactions over the micropurchase threshold of $2,500? Are requirements being artificially split to stay within the $2,500 limit?
  • Were purchases of similar items for different vendors reasonably uniform in pricing? In other words, does the data prove the reasonableness of prices being paid?
  • Is the business being equitably distributed among vendors?
  • Are Disadvantaged Businesses receiving an equitable portion of the business? This can become a problem area with the card, and end users need to work to identify potential DBE vendors. The agency's written procedures for the card should make the cardholders responsible for meeting the agency's reasonable and attainable DBE goals.

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4.1.2 Consolidation of Micro-Purchases

If you have a large volume of repetitive buys, you should consider whether it is feasible to consolidate these purchases into larger quoting packages in order to get better pricing, reduce inventory levels, and make the procurement operation more efficient in terms of effort expended. The best practice described below may be something you should consider for your agency if you have circumstances similar to those at the Whidbey Island Naval Air Station.

Best Practices

This describes an initiative taken by the Purchasing Manager at Whidbey Island Naval Air Station to analyze the repetitive procurements for standard items from the several different shops at this government facility, and consolidate them into larger quoting packages. The result was a dramatic lowering of unit prices and a much more efficient procurement office in terms of effort spent. This procurement manager also used this technique for her next employer, Community Transit, with similar savings.

When she assumed the duties of Purchasing Manager, this individual began to develop lists of items bought repetitively during the last six-month period. She entered the items into a database for easy retrieval and updating. A list of items was developed for each of the functional user shops that initiated procurements. These included: paint supplies, building supplies, plumbing supplies, grounds keeping supplies, liquid oxygen plant supplies, vehicle maintenance, office supplies, electrical supplies and waste & heating plant chemicals. Once the historical purchases information was developed, the Procurement Manager sent the data to each of the shop managers and had them review it and update it for their anticipated needs in the upcoming six-month period.

With the anticipated six-month requirements lists in hand, the Purchasing Manager then developed vendor lists for each of the different shop’s requirements. Vendors were notified that the anticipated needs for the next six-month period were based on actual historical usage so that there was a certain degree of confidence that the items on the list would be ordered during the upcoming period, although no guarantee was given to the vendors that the Navy would buy the same quantities they had bought in the past. It should also be noted that the six-month contract period was chosen after dialogue with vendors who suggested they would be willing to bid prices without contingencies for inflation if the contract was six months and not, for example, one year. So the contract terms were chosen with the vendors’ advice as to what would achieve the best pricing arrangement. For each list of standard items bid, no more than two or three vendors were awarded each list. Then blanket agreements were processed with unit prices that were firm for the six-month period of the contract. This entire procedure was then repeated every six months. The end result was not only dramatically lower pricing and more efficient procurement operations, but also lower inventory levels since the vendors were willing to stock the various items knowing they would in all likelihood get orders for the items. This meant the Navy received the items expeditiously when orders were placed. 16

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4.2 Small Purchases

Requirement

Small purchase procedures may not be used if the services, supplies, or other property costs more than $100,000. If small purchases procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources. FTA Circular 4220.1E Section 9.b.

Definition

Small Purchase - Acquisition of services, supplies or other property that cost less than the federal simplified acquisition threshold, currently fixed at $100,000.

Small Purchase Procedures - Those relatively simple and informal procurement methods used to make small purchases. If these procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources.

Discussion

As a method of procurement, small purchase procedures recognize that up to some statutory level ($100,000 for federal procurements) it could cost more to conduct formal competition than the value expected to be yielded by the formal competition. This procedure requires obtaining only limited competition from an "adequate" number of "qualified" sources (at least two). Solicitations and quotations for small purchases may be either oral or written.

Best Practices

State and Federal Thresholds - As with most other procurement methods, it is important that you determine the dollar threshold for small purchases in your state law and local requirements. In many cases, the definition will not define a small purchase but, rather, will establish at what dollar value competitive sealed bids or proposals are required -- e.g., "before a contract can be awarded in excess of $15,000, the procedures of this statute relating to competitive sealed bids or competitive sealed proposals shall be used." Contracts awarded at the lower of this state level or $100,000 are considered small purchases for the purposes of this discussion and the provisions of FTA Circular 4220.1E.

If your state and local threshold for small purchases is substantially less than $100,000, you may wish to recommend that these requirements be changed to conform more closely to Federal requirements. Alternatively, if the state's requirements above its small purchase threshold are substantially less cumbersome than Federal requirements, you may wish to create an intermediate procedure for small Federal / competitive state purchases. For example, if your state required that in all construction and equipment contracts over $10,000, competition be obtained by a simple posting and solicitation without advertisements, you could establish a procedure for bids between $10,000 and $100,000 that avoided the time and expense of advertising the procurement and relied on direct solicitation to known sources.

Initiating a Small Purchase

What documentation do you use to initiate this procurement method? Most transit properties use some sort of requisition that is typically prepared by the unit that has the requirement (your customer) which details how many widgets are required and by when. Many times, this same document will include estimated pricing and this estimate will frequently dictate which method of procurement you will use. Obviously, if the requirement is for $500,000 worth of widgets, you will use a competitive process (IFB or RFP). Your procedures can encourage your customers to attach a draft specification or scope of work to the requisition, particularly if the small purchase method is to be used; otherwise you may assist your customer (See Chapter 3, "Specifications").

Should you establish a practice of rotating buyers that are involved in using these procedures from one commodity to another? In rare instances, it has been found that a buyer gets "too close" to a particular vendor and, because of the informality of the procedures, that vendor starts to receive most of the purchase orders for those requirements. Purchase order records can be reviewed (perhaps through your agency's accounts payable records) to see if one vendor has received an abnormal amount of purchase orders. On the other hand, a buyer who is familiar with the supply industry characteristics of a commodity, such as the manufacturing cycle, lead time, distribution practices, etc., can bring both efficiency and more optimal buying to the work.

Solicitation

What level of competition is required? Stated another way, how many individuals or firms must be solicited? It is not unusual to have a requirement that three firms be solicited up to an expected contract value of $5,000 and between $5,000 and $15,000 (the hypothetical maximum), five firms would be solicited. If your source list has more firms than you are required to notify, do you have a procedure to rotate sources? For example on one procurement you will contact firms 1 through 5 and on the next one, you will contact firms 6 - 10. It is not unusual to have procedures that require you to rotate your sources in this manner. By doing so, you are broadening your base of competitors and enhancing your competition.

Is the small purchase for architectural or engineering (A&E) services? If so, A&E services may be procured using small purchase procedures. However, the language in FTA Circular 4220.1E that requires the procurement of A&E services using the Brooks Act procedures also applies. 17 The selection must be based initially on qualifications; price may be considered only for the most qualified offeror. You may proceed to the next most qualified if you cannot agree on a fair and reasonable price. 18

What level of documentation is required to solicit prices for small purchase non-Brooks procurements? Can you use oral descriptions only, up to a certain dollar value? Are written descriptions (specifications or statements of work) required above a certain level? It is not unusual for small purchase procedures to allow oral descriptions, (particularly if the procurement is decentralized or the buyer has expertise in the item), up to one estimated dollar level and then require written descriptions above that level. Remember, that for construction using federal dollars, the Davis-Bacon Act requirements apply to all procurements (including small purchases) over $2,000. 19 The level of documentation may also be tied to whether or not an off-the-shelf item is being bought or whether the item or service being bought is as per an agency specification. Oral solicitations and quotations may be allowed at a higher dollar level for off-the-shelf products than for products built to agency specifications.

Is there a requirement that you include a certain number of DBE firms in the firms you contact? This is a fairly common requirement transit properties use for DBE participation. Compliance with your policies can be systematically documented.

How do vendors indicate their price(s) to you in response to your request? Do you accept oral prices? Do you require written quotations? If so, do you allow faxes? You could do any of these. You must, however, determine what complies with the laws governing your property and then develop and follow appropriate procedures. The format and level of detail in these procedures should be commensurate with the size of your agency and they can be well enough promulgated so that they are well known to members of your procurement staff and your internal customers.

Award

What happens if the quotations are all higher than your small purchase threshold? Can you still issue a purchase order or do you have to change methods and perform a competitive procurement? In many states, you will not be able to award an order that is in excess of your state's small purchase threshold. This is why it is a good idea to try to develop an estimate prior to initiating the quotation process. If it is "close", it will probably be better to commence a formal competitive procurement to begin with.

How do I award a small purchase? The most common contractual instrument used to accomplish a small purchase is a purchase order. Typically, after you determine who will provide the best price for the widget, you will prepare a purchase order with the price and other terms and conditions required by your agency and send it to the vendor. In most instances, this document transmission does not create a binding contract -- it is your offer to the vendor to do the work or provide the widget at the price quoted. A contract comes into existence when the vendor demonstrates some level of acceptance of the offer -- usually when accepted in writing, performance commences, or delivery is made. 20

Documentation

How much documentation of the procurement process do I need to keep? One standard you may find useful is to how much would satisfy a third party (an auditor), that you have complied with your agency's policies and procedures and that the price you are paying is "reasonable." This will typically include the requisition (or purchase request), what specification was used (if any), who were quotations requested from, when and what quotations were received and from whom (a simple abstract of quotes received), and a copy of the purchase order. Much of the documentation for small purchases can be accomplished on pre-printed forms or completed on-line if your computer system will allow for that type of input. Remember, it is supposed to be simple but never forget that we must make an audit trail that can be followed -- the clearer and more complete the trail is, the better. Procurement documentation is discussed in Section 2.4.1, "File Documentation."

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4.3 Competitive Procurement Methods

4.3.1 Overview -- Sealed bids v. Competitive Proposals

Requirement

There is no Federal requirement that grantees use the sealed bid or competitive proposal method of procurement for any procurement. These are methods identified by the FTA as methods that may be used as appropriate. 21 The following conditions should be present for sealed bidding to be feasible:

  1. A complete, adequate, and realistic specification or purchase description is available;
  2. Two or more responsible bidders are willing and able to compete effectively for the business;
  3. The procurement leads itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price; and
  4. No discussion with bidders is needed. 22

Sealed bidding is the preferred method for construction if the above conditions are present. 23 If sealed bidding is used, FTA Circular 4220.1E places general requirements on the advertisement, bid period, bid opening, price adjudication, and contract award or rejection of bids.24

If, however, a grantee decides to use the competitive proposal method of procurement, the FTA prescribes requirements for publication including evaluation factors, solicitation, evaluation, selection, and award. 25

For some agencies, state law requires the sealed bidding or competitive proposal method in procuring certain goods or services, or in certain circumstances.

Discussion

If you and your customer (using department) can specify what you need accurately enough, you maybe confident you will receive a satisfactory product or service from any responsible and responsive bidder. In these cases you can maximize price competition and simplify the process by using sealed bids. E.g., supply of diesel fuel normally fits this procurement method.

There are commodities and services that your customers need that are very difficult, if not impossible, to obtain through a sealed bidding process under which award is made to the low responsive responsible bidder. You may not be able to define your requirement precisely enough and/or you may be concerned with performance specifications which are, by their nature, more subjective than design specifications. 26

There may be technical and price tradeoffs in what you are trying to buy. You may be willing to pay a somewhat higher price to obtain a commodity that does more for your system, but there is a limit to what you will pay. You may find that the quantities or time required are unknown. The price risk associated with a fixed price contract may be burdensome on the contractor and would be borne at too high a price to the agency to use that type of contract. Consequently, you need the ability to negotiate cost elements for the contract that could result in a cost reimbursement type contract.

There may be a variety of good sound business reasons why you need the ability to negotiate a contract and are willing to spend the time to do so. The competitive proposal method is a flexible procurement tool for you to use. E.g., development of a new information system to serve a unique need would probably require a negotiated procurement.

Purpose

Sealed bidding (sometimes called "invitation for bid method" or "formal competition") and competitive proposals (sometimes called "request for proposal method, or "competitive negotiation") are the two principal procurement methods. The sealed bid method is preferred because:

  • it is a simple process without complex evaluation criteria or repeated requests for and receipt of offers;
  • it maximizes price competition by basing the selection among responsive, responsible bidders on price alone; and
  • it is the most easily understood by suppliers and the public, maximizing public acceptance and minimizing the opportunity for unethical practice.

However, it requires a very clear specification since it could result in you not getting what you want, and the successful bidder can use ambiguity in the specification to reduce its costs and increase its profit. Nevertheless, this method is required by many state laws for many major transit procurements.

Your customers may not embrace sealed bidding as eagerly. In addition to the burden of specification which often falls on them, they may believe that sealed bidding requires them to set minimums on these parameters just to maximize price competition. Hence, the negative connotation of "low bid" equipment or services. Most states require, or at least permit, use of the competitive proposal method for professional services. Computer system procurements were often classified as professional services, recognizing the design and software development content which made it difficult to specify computer systems for price competition. Today, software systems often have their own exemptions from competitive bidding requirements.

Where it is permissible, there is a growing trend to use competitive proposals. An increasing number of states permit competitive proposals for bus procurements and the American Public Transit Association Standard Bus Procurement Guidelines encourage the use of this method. The competitive proposal method is intended to permit competition on quality and other factors, as well as on price. 27 It is a good practice to become familiar with your state laws and work with counsel to maximize flexibility of the procurement process to be used.

Best Practices

Similarities between the Sealed Bidding and Competitive Proposal Methods of Procurement

The competitive proposal method has many common attributes with the sealed bidding process:

  • Like an Invitation for Bids, the Request for Proposals is a written document published to the "world", soliciting the submission of offers in response to the Request.
  • The objective is to promote full and open competition.
  • The terms and conditions of the solicitation and the resulting contract are spelled out in the Invitation or Request.
  • If determined necessary, an opportunity is provided (through a pre-bid or pre-proposal conference) for prospective offerors to meet with procuring agency officials to get answers to questions prior to the submission of the bids or initial proposals.
  • A reasonable amount of time is provided prospective offerors in which to prepare and submit their offers.
  • Rules are normally provided that specify treatment of offers that are submitted late.
  • Award will only be made to an offeror determined to be "responsible."
Differences between the Methods of Procurement

The competitive proposal procurement method differs from the sealed bidding process in that:

  • A complete, adequate and realistic specification or purchase description allowing for competition primarily on the basis of price alone may not be available.
  • The contract award amount, whether a firm-fixed price or some type of cost reimbursement contract, can only be determined on the basis of costs of the contractor derived from a negotiation process.
  • Discussions or negotiations may be needed to address technical requirements as well as proposed cost or price aspects of the offeror's proposal. Discussions may be conducted with one or more offerors who have submitted proposals.
  • An opportunity may be given to revise proposals and to submit a final proposal at the completion of the discussion phase of the process.

4.3.2 Common Elements of Solicitation Process

4.3.2.1 Advertising and Publicizing Solicitation

Requirement

Section 8.a of FTA Circular 4220.1E requires that all procurement transactions be conducted in a manner providing full and open competition.

Section 9.c. of FTA Circular 4220.1E requires that invitations for bids are to be "publicly" advertised.

Section 9.d of FTA Circular 4220.1E requires that requests for proposals are to be publicized.

State law requirements are sometimes more specific as to the content and manner of advertising, particularly when using the sealed bidding method.

Discussion

IFBs and RFPs must be publicly advertised and publicized (respectively) but the precise manner and content is at your discretion within your state law requirements. While the major local newspapers in your commercial community are the most commonly used media, varying procurements will dictate varying media and varying notice periods to most cost-effectively notify the greatest feasible number of competitors.

Outreach through diverse media may be the most cost-effective means to increase competition, e.g. through market communication networks such as trade associations, commercial procurement listing services, or mailing list enhancement as discussed in Section 4.3.2.2, "Solicitation Mailing List" However, advertising in appropriate media is a prudent manner of ensuring unbiased notification and of making new contacts. In addition to increasing competition, advertising procurement actions also broadens industry participation in meeting industry requirements, as well as provides assistance to small businesses and DBE firms interested in obtaining contracts and subcontracts.

Best Practices

Your state legislature, in recognizing a causal relationship between advertising and competition, may have addressed the need for advertising procurements by enacting a requirement to advertise. As with other procurement issues, you should check to see what, if any, specific requirements you are obligated to follow under your state's law. The requirement for advertisement generally takes the form of requiring a notice inviting bids be published at least once in at least one newspaper of general circulation in the state not later than the fourteenth day before the day set for receipt of bids -- the numbers vary from state to state but these parameters are typical.

There are many variations to this general type of notice requirement including the number of times the notice must be published, the number of newspapers it must be advertised in, the target circulation of those newspapers, and the number of days prior to receipt of bids it must be published. The contents of the notice itself are frequently mandated as well: e.g., must include a general description of the items to be purchased, must state the location at which bid forms and specifications may be obtained, and must state the time and place for opening bids. The same rules and notice requirements may apply to both competitive bids and competitive proposals. If you have scheduled a prebid or preproposal conference, this is also one of the first pieces of information upon which the offerors will act. Remember, what you want to gain from this advertisement are responses from potential bidders or proposers to your up-coming procurement and their interest in receiving the solicitation you plan to issue.

If you are in a position to adopt regulations governing the advertisement of solicitations, you should keep in mind that one of your goals through this effort is to maximize competition. With that as your goal, the following may be of assistance:

  • Deciding into which newspapers to place your notices, determine which (if you have a choice) reaches the broadest readership, particularly in the business community (i.e., prospective bidder or proposer).
  • Because advertisements are such an expense, try to negotiate with the newspaper to include your notices for free as a "public service." It doesn't hurt to ask, particularly if you have competition for the business. Even if you are unsuccessful in having the notices placed for free, you might be able to obtain a reduced rate.
  • Does the city or county have a place where they post notices and is it used by bidders? Can you post there? You may have a place where your agency is required by law to post notices of its meetings (a public meeting act notice) which may be a good place to place these procurement notices as well.
  • Does your agency have a "home page" on the Internet's World Wide Web? Getting the word out on up-coming procurements is one of the primary purposes many transit agencies establish a home page in the first place (the other is posting job vacancies). You may also want to consider using existing state-level home pages or bulletin boards. Don't overlook this as a real medium to reach potential bidders and proposers. The federal government is really encouraging companies of all sizes to utilize computers in the procurement process, and has many initiatives to go "paperless." This is particularly evident in small purchases. As the procurement community becomes more sophisticated in accessing and effectively using the Internet, consider utilizing this relatively inexpensive medium to advertise your procurements to a national audience.
  • If your commercial environment supports many broad-based newspapers, it may be appropriate to competitively procure newspaper advertising.
  • If your advertising volume is significant and your media market complex, you may find that an agency can cost effectively negotiate media availability.
  • One of the most effective ways to increase DBE participation in your procurement processes is to advertise in media read by that target community. Your DBE program may require you to advertise in target-specific newspapers to enhance participation by those entities. Your agency's program may be large enough to distribute a regular publication to all vendors certified under your program or to membership lists of such organizations as minority chambers of commerce. Whatever is being done by your agency in terms of advertising the program, you can take advantage of that opportunity and advertise up-coming procurements as well. Because of time requirements in advance of the actual publication, you may not be able to give all of the detail about a specific procurement, but you still can put the community on general notice about the opportunity.
  • Does the construction industry in your community (AGC, ASA, etc.) advertise to its membership notices of up-coming procurements in the public sector? If so, try to get your notices published there as well. Frequently there is no charge for this service.

We have identified in the "Requirements" discussion above, the only FTA requirements that exist in terms of publicizing notices about up-coming procurements. Even though there are no detailed discussion or set of guidelines other than these general statements. 28 It is a good practice to advertise your procurements in a manner that will encourage maximum competition. Find out if your "general circulation" newspaper has national circulation. That is the sort of information that circulation departments of newspapers love to pass on to prospective customers! Consider advertising your large rolling stock and systems-type contracts in national trade association publications such as APTA's Passenger Transport and other trade magazines. Also, consider advertising your procurements in the Commerce Business Daily (CBD) which is the required publication for federal government contract actions. 29

4.3.2.2 Solicitation Mailing List

Requirement

In addition to the general requirement for full and open competition which we have discussed above, the only additional requirement dealing (indirectly) with a mailing list is the requirement in FTA Circular 4220.1E Section 9.c that, if the IFB method is used, "bids shall be solicited from an adequate number of known sources."

Discussion

The development and use of a solicitation mailing list is a critical part of the procurement process. This list includes all eligible and qualified concerns that have expressed an interest in receiving the solicitation, or that the agency considers capable of filling the requirements of a particular procurement. Over a period of time and after repetitive procurements for the same items or services, your mailing list for some items will stabilize and you will not be adding too many new names to the list, even after an aggressive and comprehensive advertisement campaign. However, it is important that you continue to "manage" that list and ensure it is kept current and that firms expressing an interest or desire to participate in up-coming procurements are added. During the actual solicitation process (after the solicitation is released), the list takes on added significance because it is the record detailing which firms received the solicitation and to whom amendments should be issued.

Best Practices

Procurement Role of Solicitation Mailing Lists - Very simply put, the solicitation mailing list contains the names, addresses and frequently the point of contact for entities that will receive your solicitation.

Development of Solicitation Mailing Lists - This list can be developed from a variety of sources:

  • Prior procurements are reviewed and the names of entities that submitted bids or proposals in response to those procurements are included in the list for this new procurement.
  • If what you are going to buy is currently under contract, the incumbent contractor is normally included on the list. 30
  • Firms that responded to your advertisement expressing an interest in obtaining the solicitation you are issuing should be added to the mailing list.
  • You may encourage your internal customer to provide you with names of firms it considers capable of filling the requirements of the procurement for inclusion on your list. If the specifications for your requirement were prepared by third party consultants or contractors, they may be a source for firms that are considered capable of filling the requirements. 31
  • The DBE program office within your agency can identify any DBE firms that may be interested in receiving the solicitation. Depending upon how your database is established, you may need to identify the Standard Industrial Classification (SIC) Code number (or however your agency identifies firms within your database) and furnish that Code to the appropriate office to aid in their search. Any firms so identified can be added to your list as well.
  • National, state, and local agencies may be able to assist with lists; e.g., your state economic development office or national trade associations.
  • Particularly in construction solicitations, you will want to add to your mailing list plan rooms that are operated by various trade associations or chambers of commerce and any Dodge Room services in your locale. These are ideal locations for specialty subcontractors to review the plans and specifications that are applicable to only their particular specialty without buying the entire solicitation package. The more knowledgeable multiple subcontractors are about your procurement, the better the competition to the prime contractors who will be submitting bids or proposals.

If you will be charging bidders or offerors for your solicitation package (typically the case in construction service solicitations), you may want to send out a pre-solicitation notice indicating the cost and how payment (or deposit) is to be made. Have that payment information returned to your office. You may then include those firms that have provided the required payment or deposit in your ultimate solicitation list.

Similarly, if your mailing list is very long, you may want to mail a pre-solicitation notification to all entities on your list advising them of the upcoming solicitation and asking if they want to receive the solicitation for this procurement. If they fail to respond, you may assume they do not wish to receive the solicitation. This action could result in a smaller (and therefore less expensive) solicitation process, while still allowing everyone on your list the opportunity to compete in the procurement. You may also ask in some or all of these mailings if the firm wishes to withdraw from the list; the quality and maintenance of the mailing lists is important to fostering robust competition.

Management of Solicitation Mailing Lists - You are now ready to issue your solicitation using the list that has been developed. There are a number of management issues associated with the list at this time:

  • When mailing the solicitation to the entities on the list, some agencies include a post card indicating that if the entity does not respond to the solicitation (furnish a bid or proposal) it will be removed from the list for future solicitations unless they indicate (on the post card) that they want to be included on future lists. This is a practical recognition that the issuance of solicitations is an expensive process for the agency and only entities that have a real interest in the procurements should receive future solicitations.
  • If you have a separate mail room, that group may be responsible for the actual physical issuance of the solicitation. You may wish to double check that the list of entities furnished for the solicitation is the same as the list you have maintained -- be particularly concerned that the incumbent contractor (if there is one) is on the list. Notify the mail room that if a solicitation is returned because of an incorrect address or no forwarding address is available for the entity, you are to be notified immediately so that you can try to determine the cause of the return.

Once the solicitation has been issued, using the mailing list to ensure that any solicitation amendments are furnished to all entities that received the original solicitation is important, as discussed in Section 4.3.2.5, "Amendment of Solicitations."

After the solicitation process is completed, the final administrative task associated with the mailing list is to update it. Indicate which firms on the list responded to the solicitation, which firms did not but asked to receive future solicitations (if you asked for this), and which firms did not respond nor indicate they wanted future solicitations. An updated list will make preparation of the next solicitation that much easier to accomplish.

4.3.2.3 Solicitation

Requirement

Section 9.c(2) of FTA Circular 4220.1E requires that invitations for bids be issued with sufficient time to prepare bids prior to the date set for opening the bids. Further, the invitation for bids will include any specifications and pertinent attachments and shall properly define the items or services sought in order for the bidder to properly respond.

Section 9.d(1) of FTA Circular 4220.1E requires that requests for proposals identify all evaluation factors along with their relative importance. 32

Discussion

Your solicitation, whether an invitation for bids or a request for proposals, identifies the procurement, the agency and the contact person(s). It contains simple, clear instructions for preparing an offer, often including a checklist of the items in the offer. It clearly states the time and manner for submitting the offer, and the length of time for which the offer must remain firm (not subject to withdrawal). Many agencies use a three-part, one page form for simple bids; called a "solicitation, offer, and award form." The form invites bids on a list of items, provides space for prices and the bidder's execution of the offer, and space for the agency acceptance.

In more complex procurements where the specification or scope of work is more extensive, a two-part "Offer and Award" form incorporates the specification by reference but still crystallizes the essence of the solicitation in one page to be signed and submitted by the offeror, and signed upon award by the contracting officer. The most expeditious procurements often result from the inclusion of a complete contract in the solicitation. When this is incorporated in the offer, no further terms have to be discussed or executed when the agency accepts the offer.

It is important not to include any unnecessary requirements and keep the solicitation as simple as possible. Large or complex solicitation packages discourage some potential offerors.

Best Practices

Regardless of the method used, there are certain common elements that will be present in a solicitation issued under either the competitive bidding or competitive proposal method of procurement. 33 Many transit properties have developed procurement forms that detail what is included as "boilerplate" in the solicitation process and include the common elements of both methods. Other properties have established, as a procedure, a requirement that "boilerplate" common provisions be included in all solicitations that are then prepared as originals for each procurement. Regardless of which method you use (or any variation of them), the common elements include:

Common Solicitation Contents (IFB and RFP)
  1. A form which acts as the solicitation document - When signed by the bidder or proposer, this acts as the offer which, if accepted by the contracting officer or buyer, results in a binding contract. Although it is typically a single page, it is not unusual for the acceptance document (the contract) to be a separate form. The form typically identifies:
    • A solicitation number for reference;
    • Who to contact for questions;
    • If there will be a pre-bid or pre-proposal conference and where and when it will be held;
    • The date, time, and place bids or proposals are to be received;
    • What additional documents are included in the solicitation and what documents will be included in the contract;
    • Space for the price (offer) to be included;
    • Space where amendments to the solicitation can be acknowledged;
    • Space where the firm can be identified; and
    • Space for the firm official to sign and date the bid or proposal.

    If the form is multi-purpose and also acts as the contract, it will typically have space for the contract number, contract amount, line items awarded (if applicable), and a place for the contracting officer to sign and date the contract.

    If the instructions are lengthy, and because of the many certification forms typically required, it is becoming more common to provide a separate checklist of all the documents or other submissions required in a responsive offer.

    Of special importance is the address to which offers should be submitted. Many agencies utilize post office box addresses for their mail, and that is all that is included in the solicitation. All solicitations normally clearly indicate a mailing address to which offers can be mailed as well as a street address to which offers can be delivered, because of the increased use of overnight and courier services. If your agency has the ability, it is recommended that you have a unique post office box number to which only offers are mailed. In your "delivery" address, you reduce errors by including a specific room number to which offers should be delivered. 34

  2. A document that describes the various representations and certifications that are required to be made by the bidder or offeror in conjunction with the procurement at the time of bid or proposal submission. 35 Many of these relate to responsibility-type issues and typically include:
    • A representation as to the type of business the offeror is (individual, partnership, sole proprietorship, etc.);
    • A representation as to the DBE status;
    • A representation that no gratuities have been offered or given with a view toward securing the contract;
    • A certification of independent price determination (prices in offer have been arrived at independently without any communications for the purposes of restricting competition);
    • A certification regarding compliance with the DBE provisions of the contract;
    • A certification of restrictions on lobbying; 36
    • A certification regarding debarment, suspension, ineligibility and voluntary exclusion; 37
    • A certification regarding compliance or non-compliance with the Buy America provisions of the Federal Transit Act and 49 CFR Part 661 and; 38
    • Any submissions required by state law.
  3. A document that includes solicitation instructions and conditions - These typically include instructions relating to: offer preparation; instructions relating to acknowledging amendments to the solicitation; rules relating to late submissions, modifications and withdrawals of offers; instructions relating to the DBE participation goals and program; instructions as to how the contract will be awarded; advice as to agency and FTA bid/proposal protest procedures; advice as to ability of agency to cancel the solicitation; and establishment of an order of precedence covering how inconsistencies between provisions of the solicitation are to be resolved.
  4. A document that includes special contract requirements or provisions (as opposed to general provisions) relating to this particular solicitation and contract that are not addressed elsewhere in the solicitation - These provisions typically address such things as bonding requirements; insurance requirements; any special permits or licenses required; what property the authority will furnish the contractor and rules relating to that property; liquidated damages; warranties; indemnity provisions; options; contract administration; and rules relating to royalties and patents. If you are going to award a cost-type contract, special provisions relating to those contracts are typically included in the special provisions.
  5. Special provisions required by the FTA through FTA Circular 4220.1E or the Master Agreement which must be included in the solicitation and the contract - Model clauses for compliance with these requirements are discussed in Section 8.1 and Appendix A.1 and include such provisions as EEO clauses; affirmative action clauses; DBE program clauses; Contract Work Hours and Safety Standards Act provisions; Davis-Bacon Act provisions; Title VI of the Civil Rights Act of 1964 compliance provisions; Clean Air and Water Acts provisions; Energy Policy and Conservation Act provisions; Cargo Preference Act clause; Buy America Provisions; Officials Not to Benefit clause, and Restrictions on Lobbying provisions. Some properties include these as part of the special provisions document, and state law may require similar provisions.
  6. The contractual requirements of the DBE programs - (Sometimes included in special provisions.) Although the DBE programs for FTA funded projects must comply with 49 CFR Par 23, the contractual language details included in the contracts vary between the individual authorities. Chapter 8 includes model DBE contract clauses that could be used in your contract.
  7. The last of the "boilerplate" forms are the general provisions. You may have different forms for construction services, A&E services, supplies, services contracts and cost type contracts. It is in the general provisions that you include such clauses as: changes clause; termination for default and convenience; inspection; assignment; the impact of federal, state and local taxes; differing site conditions; excusable delay; variation in quantity; disputes; governing law; indemnification; order of precedence; pricing of adjustments; examination of records; and payment terms.
  8. Each solicitation will have some sort of specification or statement of work or scope of work describing what it is that you are buying. As we discussed in the Specification section of the Manual, the detail furnished will vary from contract-to-contract, but it is against this document that you will measure satisfactory performance of the contractor -- did the contractor furnish you with what you requested?

    There is no real "best" way to create your solicitation. We have presented the common elements of the solicitation and highlighted those issues or matters that solicitation documents typically address. How you package it is in many respects a function of what is already in place in your organization or, if you are creating a solicitation for the first time, a function of what your prior procurement experiences have been.

    The bottom line is that you want to create a document that will get you through the solicitation and contract award process with little or no controversy and through contract performance on-time and within budget while complying with the terms of your contract.

4.3.2.4 Pre-Bid and Pre-Proposal Conferences

Discussion

Pre-bid and pre-proposal conferences are generally used in complex acquisitions as a means of briefing prospective offerors and explaining complicated specifications and requirements to them as early as possible after the solicitation has been issued and before offers are received. This is also an open forum for potential respondents to address ambiguities in the solicitation documents that may require clarification. Notice of the conference is included in the solicitation at the time of issuance.

Best Practices

When utilized properly, a pre-bid or pre-proposal conference is a valuable tool for both the agency and the prospective offerors. There are certain common practices and policies relating to this conference that will aid you in achieving a successful procurement.

You will decide with your customer in your solicitation preparation process whether or not you will conduct a pre-proposal or pre-bid conference. It is recommended that you hold one if you believe that your acquisition is so complex or contains peculiar requirements that can only be addressed by holding a conference for the benefit of your prospective offerors. It may be advantageous if you anticipate that the offerors will not be familiar with your procurement process. Determine if a conference is necessary and put the time and location details in your solicitation.

If you hold a conference, it is helpful to include in your solicitation a format for questions submitted in advance of the conference that will be answered at the conference. Explain that if you have the questions in advance, better and more timely responses can be made to those questions. You normally do not preclude questions from being raised at the conference itself.

Develop an agenda for the conference and arrange to have the appropriate staff members at the conference who can respond knowledgeably to questions. In addition to the procurement official, large agencies generally have a technical representative and a representative from the DBE department, if appropriate, at the conference.

At the conference, have someone present who can develop a record of what transpired, including a sign-in list of attendees. Normally, this list is made available to attendees as a matter of information. One of the uses of this list by potential offerors is determining who else is interested in the project and who might be interested in teaming.

At the conference, advise conferees that remarks and explanations at the conference shall not qualify the terms of the solicitation, unless a written amendment is furnished to everyone. You may actually want to develop a script for this and make it a matter of practice to repeat this at every conference -- it is that important.

Your pre-bid conference or general provisions in your solicitation document may also limit the effect of unwritten statements at the conference or of any other oral or unauthorized changes or qualifications of the solicitation terms. The specifications and solicitation document must stand alone representing the contractual commitment.

During the conference, in addition to responding to any questions raised by the conferees, explain anything unusual about the special provisions or bidding conditions. Your DBE staff member may explain the DBE program and the goals set for the procurement. Your technical staff member may give an overview of the specifications or scope of work. If you have received questions in advance, you can provide both the questions and answers.

At the conclusion of the conference, determine which questions have been raised that will necessitate the issuance of a solicitation amendment. You may have received other questions during this period of time that highlighted the need for an amendment, or an issue might have been raised by internal reviews that necessitated an amendment. It is recommended that you do not leave material questions unanswered - if you don't answer them, you may end up shifting the risk for that ambiguity, conflict or other problem from the contractor back to your agency.

As soon as possible after the conference, finalize the record of the conference and promptly furnish it to all prospective offerors (those on your final solicitation mailing list); whether they were in attendance at the meeting or not. It is important that all prospective offerors be furnished the same information concerning the proposed acquisition. This can be furnished with the amendment if one is to be issued.

Although it is not normally part of a pre-bid or pre-proposal conference, if you want to offer prospective offerors an opportunity to actually visit the site (in an appropriate procurement) it is a good time to do this in conjunction with this conference. You should be sensitive to the cost offerors incur in preparing a bid or proposal and try to allow them to accomplish multiple tasks on the same trip, particularly for those entities that are traveling to your location from another city, state or country.

Mandatory Attendance - The question sometimes arises as to whether grantees may require prospective offerors to attend pre-bid or pre-proposal conferences in order to submit bids or proposals. The answer to this question is that FTA has issued no specific policy statement on this issue. However, the consensus of opinion is that attendance at pre-bid conferences should not be made mandatory. Anything that happens at a pre-bid conference to change what is expected under the contract must be included in the contract document by means of an amendment to the solicitation. It’s true that a better understanding may be obtained by being present for face to face discussions regarding contract issues but the bottom line remains the clarity of the contract. Experience would suggest that pre-bid conferences sometimes bring out the existence of ambiguities or inconsistencies in contract language. These are then changed in the solicitation/contract and made available to all offerors. The result of this process is that changes in the contractual obligations of the parties find their way into the solicitation by means of an amendment to the original solicitation that is issued to all potential offerors. 39 It can also be conjectured that mandatory attendance at the conference could work a hardship on some potential bidders, especially small businesses. Mandatory attendance may also tend to promote poor contract language because of the feeling that everyone understands the intent of the contract as a result of the discussions at the pre-bid conference, with the result that clarifications to the written contract requirements are not issued.

4.3.2.5 Amendment of Solicitations

Discussion

Frequently, in the course of the solicitation process and prior to receipt of offers, you will find something within the solicitation package that needs to be corrected. This is something that can be done easily and may enhance competition if the changes are significant (i.e., impact quantity, specifications, or delivery). Each recipient of the solicitation should receive the amendments and should acknowledge that receipt by the time of submitting its offer. You should consider extending the time for receipt of offers, if necessary, to permit offerors to compete effectively under the modified terms.

Best Practices

In many solicitations, someone will bring to your attention a problem with the package that necessitates a change. The problem may have something to do with the "boilerplate", changes in quantity, the specifications, delivery schedules, opening dates, or drawings. It may have to do with correcting an ambiguous provision or resolving conflicting provisions. Regardless of what (or who) requires the amendment, there are a few simple steps/considerations that are normally followed.

As we discussed in the pre-bid/pre-proposal conference section, even if a change was mentioned during that conference, an amendment to the solicitation should be issued. When you change the written terms of the solicitation, it must be done formally in writing. This serves two purposes: (1) It documents the change in writing so there are no misunderstandings, and (2) It provides the changes to offerors who were not at the conference.

As with other normally repetitive requirements in the procurement process, many agencies have adopted a pre-printed form for amending solicitations. Those forms normally include the following elements (which can also be included in your amendment if you do not use a form):

  • Identify the solicitation number of the original solicitation;
  • Identify the amendment number;
  • Identify the contact person and phone number within your department for further information;
  • Indicate whether or not the time and date specified in the original solicitation is changed as a result of the amendment;
  • Advise offerors of the need to and how they should acknowledge receipt of the amendment;
  • Advise offerors what the changes are; and
  • Have the amendment signed by the appropriate procurement official, most frequently the contracting officer.

Amendments are typically sent to every firm that has been furnished the original solicitation (the IFB or RFP). Once the solicitation has been issued, using the mailing list to ensure that any solicitation amendments are furnished to all entities that received the original solicitation is important, as discussed in Section 4.3.2.2, "Solicitation Mailing List." This is an obvious issue, but some agencies don't realize there is a problem until bids are received that do not acknowledge a material amendment. You then declare the bidder non-responsive. Some agencies include clauses in solicitations making it the offeror's responsibility to obtain addenda. While this may assist in overcoming a protest from a bidder held non-responsive, it will not necessarily transform the bid into a responsive or acceptable one.

You cannot over-emphasize the administrative importance of furnishing amendments to all entities who received the original solicitation. It is important to have a single point of contact within your organization responsible for issuing solicitations and addenda. Some agencies post a notice at the receipt of offers of the addenda that have been issued. While there is little an offeror can do other than hold back the offer at that point, the offeror may be able to perfect the acknowledgment of addenda and live with the rest of the offer as prepared without the addendum.

One of the critical issues when issuing an amendment is whether or not to extend the time and date for receipt of offers. You should consider the impact of the changes you are making in light of the time it will take a prudent offeror to incorporate those changes. This includes the time impact on the work already done in preparing the bid or proposal. The impact could be minimal or very significant and there is no "cookie cutter" answer to how much additional time, if any, should be allowed -- you want to allow sufficient time for the changes to be considered in a meaningful manner.

One "warning": this may be the first time in the solicitation process you run into the schedule your internal customer has established. Your instincts may say that the time and date set for receipt should be extended but your customer may say the change is negligible and no time is warranted. Early planning and communication with your customer may build in some time for changes like this. If not, the consequences may be fewer competitors, a protest, pricing that includes unnecessary contingencies, or post-award discovery of specification conflicts that require compensation for changes.

If a decision is made to amend the solicitation with bids due in two days, consider notifying prospective offerors by telephone, FAX, or telegram of the new date and time and follow that notification up with an amendment to the solicitation. If you have already received offers in your bid room, it is recommended that you notify the offeror of the amendment to inquire if they want their offer returned. 40

There are special rules regarding solicitation amendments that incorporate revisions or modifications of Davis-Bacon Act wage determinations. These rules are discussed in detail in Section 8.1.3.

If, because of schedule distress, you proceed with the procurement without a necessary amendment, adverse consequences are likely when the change is brought forward with the ultimate contractor and the contract must be modified. 41 It is even possible that the change would constitute a cardinal change if attempted after award, and would require a new competition; in this case you have little choice but to amend and postpone.

4.3.3 Common Elements of Offers

4.3.3.1 Receipt of Offers

Discussion

The culmination of your solicitation process is the receipt of bids or proposals. Regardless of the method used, great importance is attached to the time of receipt. Preparations are made to ensure that offers are not delayed and are properly recorded. Your solicitation may contain a checklist of items to be submitted with the offers, and the individual submittals are discussed in the following sections.

Best Practices

Timeliness 42 - Why do you care if a bid or offer is late or not? If the price is the lowest or the best response of the group, what difference does it make if it was received on time or not? The rationale for having rules against considering late bids or offers is tied to the importance of maintaining the integrity of the competitive procurement process and that this outweighs the possibility of any savings the public entity might realize in a particular procurement by considering a late offer.

Unfortunately, late offers are such a common problem that language has been developed to address what rules would be followed if an offer is received late. 43 That language is typically included in the solicitation so that offerors know ahead of time what the consequences will be if their offer is received late at the place designated for receipt. A solicitation provision, and the explanatory rules relating to the provision, generally include some or all of the following:

  1. What are the consequences of an offer that is received after the exact time specified for receipt? Generally, the offer will not be considered at all. 44 You may want to carve out exceptions to this absolute rule, and some will be suggested below. These exceptions consist generally of the sets of circumstances which you can determine in advance and set out in your solicitation which, when proven within a specified time by the offeror, would demonstrate that the delay was due solely to some independent event or action, such as the documented failure of a registered delivery service. If the offer is received after the contract is awarded, there are generally no exceptions. That offer will not be considered at all.
  2. If you decide to allow consideration of "late" offers, under what conditions will you consider them?
    • Will you consider offers that are hand-delivered late? It is the responsibility of the offeror to make sure its offer is at the place designated in the solicitation by the time indicated. If it chooses to use a delivery/courier service or deliver its offer in person, it must allow sufficient lead time to get it there on time. Normally, such excuses as "I was in an accident", "The traffic was heavier than usual", or "I couldn't find a place to park" are not acceptable to excuse a late hand-delivered offer. If, however, the reason the proposal is late is because of problems at your agency (e.g., your security guard directed the courier to the wrong room) you may want to consider those excuses -- in effect, you (the agency) were the reason the offer was late.

    • Will you consider offers that were mailed but not received until after the time and date set? It is not unusual to consider mailed offers if certain facts can be established. If they were sent by registered or certified mail five calendar days (or some greater or lesser number of days) prior to the date specified for receipt of offers, they will be considered if the postmark on both the envelope or offer wrapper and the original receipt clearly establishes the offer was mailed before the five day window. If you want to allow this exception, a provision which clearly and unambiguously establishes the rules which will be acceptable to you will save extended argument and resentment in the inevitable test cases.

    • Will you consider an offer that was mailed (not registered or certified) but you are able to ascertain that it was mishandled in the mailroom? It was properly addressed and, in the normal course of business at your agency, should have been delivered to your bid room on time. However, it was sent to the wrong department or fell behind a desk in the mailroom. Again, if you can establish it was received in your agency prior to the time and date set for receipt but didn't get to you until "late", your policy might want to allow consideration of that offer. If so, spelling that exception out in your solicitation clause avoids many questions.

    • Will you consider offers that were sent via an "overnight" service? If so, which service(s) will you consider? It is not unusual to limit the service to the U.S. Postal Service Express Mail Next Day Service and, even in that limited situation, the package must be dispatched by 5:00 p.m. at the place of mailing two working days prior to the date set for receipt of offers. If you include Federal Express and other reliable overnight courier services, be sure you spell out exactly what service(s) you will allow.

    • As a result of an increase in procurements being conducted via electronic commerce, rules have been developed addressing late offers received through that medium. Generally, the offer must have been received by the contracting agency no later than 5:00 p.m. one working day prior to date specified for receipt of offers. If you are into electronic commerce procurements, you need to consider the consequences of late offers through that medium as well.

"I've got this great policy patterned after the FAR clauses on consideration of late offers and here it is, a day after I opened bids and another bid comes to my office through the mail. What do I do?" If it was mailed "regular" first class mail, you normally would retain the bid, unopened, and advise the offeror that its bid was received late and will not be considered. If the envelope or wrapping indicates it was mailed registered or certified (the clause may have been complied with), you need to notify the bidder that its bid was received late and will not be opened unless, by a reasonable date established in your notification, it can furnish you with the original post office receipt establishing compliance with the exceptions you have adopted in your provision.

Because these issues have such a high probability of being protested or litigated, it is recommended that as soon as you become aware of the receipt of a late offer, you notify your legal counsel for advice on what action to take. Many of the exceptions recognized in the law are very fact-intensive and care must be taken in ascertaining all of the facts and responding appropriately to what facts existed.

Completeness of Offer - Besides the obvious things (like the bid or price schedule), there are a number of matters that are normally submitted with the offer, whether it is a bid or a proposal. These items either are required by law or the natural development of the procurement process has resulted in this being a good (or the best) time for some things to get into the hands of the procurement officials. Many of these matters are taken care of in the various representations and certifications that are submitted with the offer and which normally address responsibility-type questions that aid in processing the ultimate contract for award. Others, such as acknowledgment of solicitation amendments and bid bonds can go to the issue of whether the offeror is responsive -- did it consider a material amendment when it submitted its offer?

In our discussion on common elements of the solicitation (see Section 4.3.2.3), we covered the common practice of developing a separate document to include in your solicitation for all the representations and certifications that you want each offeror to complete and return with its offer to you. If they are all in one place, it is much easier for the offeror to ensure it has furnished you everything you need as well as you don't have to worry about forgetting to ask for something -- Everything you need is on one form.

4.3.3.2 Federally Required Submissions with Offers

Requirement

Section 16 of FTA Circular 4220.1E , entitled "Statutory and Regulatory Requirements" states that:

"A current but not all inclusive and comprehensive list of statutory and regulatory requirements applicable to grantee procurements (such as Davis-Bacon Act, Disadvantaged Business Enterprise, Clean Air, and Buy America) is contained in the FTA Master Agreement. 45 Grantees are responsible for evaluating these requirements for relevance and applicability to each procurement. For example, procurements involving the purchase of iron, steel and manufactured goods will be subject to the 'Buy America' requirements in 49 CFR Part 661. Further guidance concerning these requirements and suggested wording for contract clauses may be found in FTA's Third Party Procurement Manual."

Discussion

The FTA has included a comprehensive listing of contract clause requirements in the Master Agreement. A copy of that Agreement is an appropriate item for the procurement official's desk book of reference materials. We will, in this subsection, highlight generally the federal requirements that are germane to our discussion here of items that should be submitted to the transit property as part of the solicitation process involving either IFBs or RFPs. We will also discuss in more depth four specific certifications that are federally required. 46

4.3.3.2.1 Certification Regarding Debarment, Suspension, and other Responsibility Matters

Requirement

Executive departments and agencies shall participate in a governmentwide system for nonprocurement debarment and suspension. 47

Discussion

Much like the "common grant rule" (49 CFR Part 18), the federal government has adopted a "common rule" on the government-wide effect of debarments and suspensions. DOT's implementation of that common rule is found at 49 CFR Part 29. The policy behind this rule is that a person or entity who is debarred or suspended shall be excluded from Federal financial and non-financial assistance and benefits under Federal programs and activities. As stated in the regulations, debarment 48 and suspension 49 are serious actions which should be used only in the public interest and for the protection of the federal government and not for the purposes of punishment. 50

In order to protect the public interest, it is the policy of the federal government to conduct business only with responsible persons. 51 Persons who have been debarred or suspended are not "responsible" and, unless approved by the FTA, contracts will not be awarded to those persons. 52 The certification required by this common rule must be submitted with the offers, and is also an aid to expedite the procurement process by providing critical information as to the responsibility determination that the contracting officer must ultimately make. 53

Best Practices

The debarment and suspension certification found at Appendix B of Part 29 (and as set forth in Appendix A.1 of this manual) is mandatory for use in contracts over $100,000 involving federal funds.

Include the instructions for the certification as well as the certification. Don't try to save space in your solicitation by only including the certification -- the instructions are too critical.

It is recommended that you make this certification a topic at your pre-bid or pre-proposal conference if the resulting contract will exceed $100,000.

Even though you request this certification from all offerors, failure to receive it with a bid (in the sealed bidding method of procurement) is not a responsiveness question -- this goes to a contractor's responsibility and may be received and talked about after bids are received. It must be received prior to award.

The certification and regulations allow you to rely on your contractor's certification that it is not debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation in your contract as an element of your responsibility determination. However, if you know that the certification is erroneous, you may not rely on the certification.

The certification and regulations state that you may, but are not required to, check the List of Parties Excluded from Federal Procurement and Nonprocurement Programs to determine the eligibility of your contractor and its subcontractors. The List of Parties Excluded from Federal Procurement and Nonprocurement Programsis available from the General Services Administration in either a printed version or an electronic version. The printed version is published monthly and may be obtained by purchasing a yearly subscription. 54 The electronic version is updated daily and provides access to the names of firms and individuals on the list through your computer. 55 GSA also offers a telephone inquiry service to answer general inquiries about entries on the List at (202) 501-4873 or 4740. 56

Although not required by the FTA, some transit properties check the List on all their procurements, whether or not federally funded. Even if you are using local dollars, do you want to award a contract to, or approve a subcontract for, a contractor/subcontractor that has been debarred, suspended, or proposed for debarment by the federal government? Is that entity responsible? You may at least want to inquire about the action prior to making your final responsibility determination. If you know you would want to use debarment information in a non-Federally funded procurement, you may wish to mention it in your solicitation's responsibility clause.

If the apparent awardee of your solicitation (e.g., the lowest responsive bidder) has submitted a conditioned certification, you can use that information in arriving at your responsibility determination and find the firm non-responsible. However, the firm may have submitted information you believe is extenuating enough to warrant award consideration. Remember, if you want to award a contract to a firm that has submitted a conditioned certification, you cannot make an award until you have received approval for the award from the FTA. 57 It is recommended as soon as it appears you will be faced with this situation, you notify your regional FTA office for guidance and instructions on what information they need and submit it promptly.

4.3.3.2.2 Buy America Certification

Buy America requires that the steel, iron, and manufactured goods used in the FTA-funded project must be produced in the United States. 49 U.S.C. 5323(j)(1). For rolling stock procurements, Buy America requires that the cost of components and subcomponents produced in the United States is more than 60 percent of the cost of all components of the rolling stock, and final assembly of the rolling stock must occur in the United States. 49 U.S.C. 5323(j)(2)(C). FTA’s implementing regulations for Buy America can be found at 49 CFR part 661. For additional information on the Buy America requirements, please refer to FTA’s Buy America webpage at: http://www.fta.dot.gov/legislation_law/12921.html.

4.3.3.2.3 Lobbying Certification

Requirement

Section 3.d of the Master Agreement states that:

d. Lobbying Restrictions. The Recipient agrees as follows:

  1. Refrain from using Federal assistance funds to support lobbying, and
  2. Comply, and assure the compliance by each third party contractor at any tier and each subrecipient at any tier, with applicable requirements of U.S. DOT regulations, "New Restrictions on Lobbying," 49 CFR Part 20, modified as necessary by 31 U.S.C. Section 1352.
Discussion

The requirements set forth above have been included in all grants between the FTA and its grantees with a requirement that the certification flow down to all contractors and subcontractors for whom a contract involving federal funds in excess of $100,000 is contemplated. The requirement has two aspects to it: First, the certification itself must be executed and returned with the bid or proposal. Second, in the event funds of any sort have been used for lobbying activities 59 by the contractor or any subcontractor; a Standard Form-LLL, "Disclosure Form to Report Lobbying" must also be completed. It is your ultimate responsibility to ensure that these certifications and disclosure forms are submitted to the FTA. 60

Best Practices

Certifications Required - In all solicitations that are expected to result in contract amounts in excess of $100,000, the certification set forth in Appendix A to 49 CFR Part 20 must be included. The certification is also included in Appendix A.1, "Federally Required Model Clauses" of this Manual under the "Lobbying" contract provisions.

Although it is not required that you include a copy of the Standard Form LLL in the solicitation, it is recommended that you have a copy available to furnish to an offeror if one is requested. A copy is included in the CFR section and may be reproduced. 61 A copy may also be available from your legal counsel or federal grants office because the agency had to furnish a copy to the FTA as well as part of the Grant-making process.

Timeliness - The certification (and Standard Form LLL if applicable) should be executed and returned with the bid or proposal. Because the language of the regulations refers to needing the certification and applicable disclosures at time of award, failure to submit the executed certification with the offer would not be considered a responsiveness issue in a competitive bidding procurement.

Subcontracts - You may not always know who your prime contractor subcontracts with, particularly in fixed price contracts. It is recommended that during any pre-performance conference you have with the prime, you remind him or her of the requirement to forward the certification and disclosure statements made by subcontractors at any tier who have subcontracts in excess of $100,000 through the tiers to the contracting officer.

4.3.3.3 Other Submissions

4.3.3.3.1 Acknowledgment of Solicitation Addenda
Discussion

Although the topic has been discussed in different contexts, 62 one of the most critical submissions that should be received with offers is an acknowledgment of any amendments to the solicitation. These are the changes to the terms of the solicitation (including to the "boilerplate", the drawings, specifications, scope of work, etc.) that in all likelihood have an impact on price or schedule. If an amendment is not acknowledged, you do not know if the offeror is really offering the same product or service that you want.

Best Practices

There are two ways most agencies allow offerors to acknowledge receipt of amendments.

As we discussed in the section on the Solicitation, 63 many agencies include on the solicitation form itself, space for solicitation amendments to be acknowledged.

A second way is for the offeror to actually sign and date the amendment cover sheet and return it either at the time of receipt or include it with the offer.

Seldom is it required by the agency, but it is not unusual for an offeror to fill in the space on the solicitation form and return the amendment too. No problem from your standpoint -- just "overkill" by a concerned offeror. If you see this situation frequently, you may want to check the instructions you have provided to offerors and determine if there is some ambiguity about your acknowledgment requirements.

If you receive a bid or proposal and one or more of the issued amendments are not acknowledged, what do you do?

Many times you are initially only looking at the low bidder's bid -- look at the other bidders and see if they acknowledged the amendment. If not, there may be a mailroom or timeliness problem.

Are the changes to the solicitation made by the amendment material?

If the amendment is material, accumulate the documents and seek the advice of your legal counsel. Particularly in an IFB procurement, you may have a low bid that is non-responsive and cannot be considered for award. Depending upon how your agency conducts RFPs, the failure to acknowledge an amendment is not usually "fatal" and you can ask for an acknowledgment during negotiations or discussions.

You may wish to include in your procedures or solicitations a provision for your determination regarding the responsiveness of offers which do not acknowledge material addenda. Such a provision will reinforce your discretion.

4.3.3.3.2 Bid guarantee

Requirement

In discussing bonding requirements, Section 11 of FTA Circular 4220.1E provides:

For those construction or facility improvement contracts or subcontracts exceeding $100,000, FTA may accept the bonding policy and requirements of the grantee, provided FTA determined that the policy and requirements adequately protect the Federal interest. FTA has determined that grantee policies and requirements that meet the following minimum criteria adequately protect the Federal interest:

  1. A bid guarantee from each bidder equivalent to five (5) percent of the bid price. The "bid guarantee" shall consist of a firm commitment such as a bid bond, certified check, or other negotiable instrument accompanying a bid as assurance that the bidder will, upon acceptance of its bid, execute such contractual documents as may be required within the time specified;

Section 15.m of the Master Agreement states that:

  • (m) Bonding - The Recipient agrees to comply with the following bonding requirements.
    1. Construction Activities - The recipient agrees to provide bid guarantee, contract performance, and payment bonding to the extent deemed adequate by FTA and applicable Federal regulations, and comply with any other bonding requirements FTA may issue.
    2. Other Activities - The Recipient agrees to comply with any other bonding requirements or restrictions FTA may impose. 64

State laws are sometimes specific in requiring or prohibiting security and guarantees in public procurements. Performance bonds are often required, and the requirement may also affect bid guarantees.

DISCUSSION

The primary function of obtaining a bid guarantee is to financially protect the owner from loss should the successful offeror fail to execute further contractual instruments and furnish performance bonds or insurance certificates as required. As required by the FTA, this financial protection on construction contracts is 5% of the amount of the offer. Bid guarantees are usually used only where there is a requirement for performance and/or payment bonds are required prior to the commencement of performance.

We will discuss in other sections of the Manual bonding requirements in particular types of procurements, such as for construction, 65 equipment and supplies, 66 and rolling stock. 67 In this section, we will discuss the submission requirements for the various types of bid guarantee, such as bid bonds, certified checks, and other allowable negotiable instruments.

As with many other aspects of the procurement process, the use of bid security and the types of security may be addressed in your state laws. In these cases, you will be obligated to follow those laws as long as they meet the minimum requirements of the federal regulations set forth above.

Best Practices

Solicitation - If a bid guarantee is to be required, a solicitation clause is included that details:

  • the requirement;
  • the amount of the guarantee (typically 5 percent of offer price) and how it should be calculated;
  • acceptable forms of guarantee (usually, cashier's check, letter of credit, or bond from a licensed agency); and
  • that the guarantee must be submitted with the offer.

Nonresponsiveness - You can include in your policy regarding bid guarantees the actions to be taken if one is not furnished in accordance with the solicitation requirement.

  • Normally in a bidding environment, if the proper guarantee is not furnished with the bid, the bid is non-responsive. If you allowed the bidder to submit the missing guarantee or correct a defective guarantee after the bids were "exposed", you would be allowing "two bites from the apple." Once the bids are known, the bidder could decide to submit (or not) the bid guarantee based on how much money is left on the table!
  • In a competitive proposal process, if a guarantee was required and was not submitted, your solicitation document would determine whether it could be asked for during negotiations. But what do you do if you could award a contract without negotiations, (a right you will frequently reserve to yourself)? If you have to ask one offeror for its bid guarantee, is that considered discussions or negotiations. If so, that would necessitate opening discussions with all offerors in the competitive range? 68 For these reasons, and because proposers have other means of effectively withdrawing from competitive proposal processes, proposal guarantee is less frequently used than bid guarantee (even if a performance bond is ultimately required).

What if the bid guarantee is not signed, but the bid is? What if you only received one offer and the guarantee was not included with that offer? What if the guarantee is received late? What if the amount of the guarantee is insufficient? What if the guarantee is not dated or has an incorrect date? These are all questions that could arise and can be considered in your policy formulation. 69 Your policy would provide, e.g., that deficiencies affecting offer price would be material and would establish nonresponsiveness.

Custody of guarantee - What do I do with the bid guarantee? It is recommended that if the guarantee is a bond or letter of credit, it be retained with the procurement file. If it is other than a bid bond, it is recommended that it be placed in a secure area (safe or locked file cabinet) with a notation in the procurement file its location.

Unused guarantee - guarantees have a financial impact on proposers as long as they are in effect. Therefore, you will want to return it to the unsuccessful offerors as soon as it is prudent to do so (e.g., you have awarded the contract or the offeror is too far down the bid list to reasonably expect an award). You may establish a rule that all offerors beyond a certain rank (e.g., the fourth lowest and all higher bids, all proposers outside the competitive range) will immediately have their guarantee returned.

Return unused guarantees to contractors after the contingencies have been met -- all contractual requirements have been met and the required performance and payment bonds and insurance certificates are in place as protection for the owner in the event of default or non-performance of the contractor.

Collection of Bond - Although you will seldom be involved in collecting funds from a bonding agency under a bid bond, collection is like the capture of the king in chess. It dictates many of the moves you will want to make to use a bid bond effectively without imposing unnecessary burden on your offerors. The conditions which discharge the bond should be specified in your solicitation. Generally, the principal condition that discharges the bond or guarantee is the furnishing of a performance bond. Often the terms of the bid guarantee also guarantee that the offeror will provide executed contract documents, insurance certificates, payment bonds, or evidence of DBE compliance.

Once the performance bond is in place, it guarantees performance of all other contractor obligations. The most likely reasons a performance bond would not be furnished (which are the conditions you might look for in deciding whether to require bid guarantee) are: a financial condition so weak that bonding companies will not participate, such a large amount of bonds already issued that the bond cannot be obtained, second thoughts about the contract based on the information revealed up to the point in time of bonding, or a frivolous bid.

If the performance bond is not provided, you can specify the right under your bid guarantee provision to immediately accept the next ranked offer and to collect from the defaulting offeror the price and value difference between the offers. (Estimating this difference is one way to set the amount of the bid guarantee.) If the guarantee is a bond or equivalent letter of credit, you may need to obtain a judgment against the offeror before you can actually collect from the bonding company or bank. As indicated above, it is critical to most suppliers who provide bid guarantee that they retain the confidence of bonding companies. The bonding company's concern may assist in collection from a defaulting offeror.

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4.4 Sealed Bids (Invitation for Bids)

4.4.0 Overview

Requirement

The FTA does not require use of the sealed bid (invitation for bids) method of procurement for any particular procurement. This method is simply one of many that may be used, as appropriate. If, however, the grantee decides this method of procurement is appropriate, Section 9.c. of FTA Circular 4220.1E sets forth some definitions, parameters for use, and some specific requirements to be followed:

c. Procurement by Sealed Bids/Invitation for Bid (IFB). Bids are publicly solicited and a firm-fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price.

  1. In order for sealed bidding to be feasible, the following conditions should be present:

    1. A complete, adequate, and realistic specification or purchase description is available;

    2. Two or more responsible bidders are willing and able to compete effectively for the business;

    3. The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price; and

    4. No discussion with bidders is needed.

  2. If this procurement method is used, the following requirements apply:

    1. The invitation for bids will be publicly advertised and bids shall be solicited from an adequate number of known suppliers, providing them sufficient time to prepare bids prior to the date set for opening the bids;

    2. The invitation for bids, which will include any specifications and pertinent attachments, shall define the items or services sought in order for the bidder to properly respond;

    3. All bids will be publicly opened at the time and place described in the invitation for bids;

    4. A firm fixed-price contract award will be made in writing to the lowest responsive and responsible bidder. When specified in bidding documents, factors such as discounts, transportation costs, and life cycle costs shall be considered in determining which bid is lowest;

      Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and

    5. Any or all bids may be rejected if there is a sound documented reason.

  3. The sealed bid method is the preferred method for procuring construction if the conditions in paragraph c(1) above apply.

State law typically places additional and more specific requirements on the sealed bidding process.

Discussion

Having said there is no FTA requirement that grantees use the sealed bidding method of procurement, it should be recognized that, as a practical matter, many more grantee procurements are accomplished with this method as opposed to the competitive proposal/request for proposal method which will be discussed in more detail below.

There is a mixture of history and tradition behind the use of sealed bidding in the public sector which is frequently embodied in legislative requirements at both the federal and state levels. Although federal legislative requirements mandating the use of this method have been relaxed in recent years, many states still require its use for many commodities or services being procured and it is still the "preferred" method for the acquisition of construction services in the public sector, even by the FTA. Sealed bidding is perceived to be a faster method of procurement; who gets the contract can be determined fairly objectively; and the fixed price contract which results is easy to understand and budget, as well as manage after award.

Purpose

As with so many other aspects of public procurement, we must begin with a recommendation that you check you state or local law or ordinance to determine if a legislative body has decided for you what flexibility, if any, you have to use a procurement method other than the IFB method. If you are limited on what methods you can use under what circumstances, you will be obligated to comply with those laws, ordinances or regulations. We will address this method in this section as though there were no limiting constraints on your ability to use this method. As a practical matter, the constraints you are likely to be faced with would be limitations on your ability to use the competitive proposal method rather than the sealed bidding method.

Because of the way this Manual has been drafted, it is important to read Section 4.3 in conjunction with this section because many of the features or elements of both the IFB and RFP methods of procurement are, if not the same, very similar. Rather than duplicate the discussion of those features in our discussions of both methods, we suggest you read that section first and then this section on the sealed bidding method.

Best Practices

When do I use the sealed bid/IFB method of procurement?

  • In deciding whether or not to use the sealed bidding method of procurement, the conditions detailed in Section 9.c(1) of FTA Circular 4220.1E are excellent and very self-explanatory. Go down the list, do all of the conditions exist? If you need more information about a particular condition, this Manual is designed to provide you with that additional detail. For information about specifications, refer to Chapter 3, "Specifications." For more information about "responsibility", refer to Section 5.1, "Responsibility of Contractor." For questions about what a firm fixed-price contract is, refer to 2.4.3.1 "Fixed Price Contracts."

What steps are involved in the sealed bidding method of procurement? Most of these steps have been addressed in Section 4.3, "Competitive Procurement Methods," but the following is an overview of those necessary steps:

  • Preparation of the Invitation
    • The invitation must describe your requirements as completely, clearly, accurately and unambiguously as possible. Stated another way, the invitation should define the items or services sought in order for the bidders to properly respond. In addition to the danger of inadequate goods or services, the claims arising from errors make this a daunting task, but not an impossible one. 70
    • Requirements that restrict or act as restraints on full and open competition should be avoided. 71
    • The invitation typically includes all documents (whether actually attached or incorporated by reference) furnished to all prospective bidders for the purpose of bidding.
  • Publicizing the Invitation
    • The invitation must be publicly advertised and distributed to prospective bidders. 72
    • The amount of time after publication and distribution of the invitation to prepare and submit their bids and prior to the time and date set for opening of bids is important.
  • Submission of bids
    • Sealed bids are submitted to you by bidders by the time and place stated in the invitation.
    • Bids are publicly opened at the time and place described in the invitation.
  • Evaluation of bids
    • FTA requires that sealed bidding be used only if no discussion with bidders "is needed"; bids are, as a rule, evaluated without any discussions with bidders. 73
  • Contract Award
    • A fixed price contract will be awarded to the responsible bidder whose bid, conforming to the terms and conditions of the invitation, 74 is the lowest in price.
    • If stated in the invitation, price-related factors may be considered in determining the lowest price -- e.g., discounts, 75 transportation costs, life cycle costs. A provision in the IFB that explains how the calculation of bids will be made will avoid confusion at the time of bid opening. The explanation can include options, escalators, currency issues, unit prices, etc. To preserve the right to exercise options with Federal funds, FTA requires that the option prices be evaluated in the selection process. You can also address how the rare instance of tie bids will be treated, e.g., with the traditional coin toss.

4.4.1 Solicitation

Discussion

In addition to the material in Section 4.3.2.3, (the common elements of the solicitation process for both the IFB and RFP), the rigidity and precision of the sealed bid method require that your solicitation anticipate the procedural issues that may arise. Although these items may be appropriate to an RFP as well, an IFB should be particularly clear regarding requested amendments and approval of items equal to those specified, bid opening time and place, the price schedule, the offer form, and the clarity of the technical specifications.

Best Practices

In this section, we will provide you with a nominal checklist of things for you to consider in the development of your solicitation -- some of the items noted here may not be applicable to every procurement.

Identification of Solicitation

  • Solicitation number
  • Date of solicitation issuance

Identification of agency

  • Name and address (street and mailing if different) of your agency
  • Name and telephone number (voice and facsimile) of contact within your agency

Instructions to bidders

  • Date, time, and place of bid opening
  • Instructions channeling communication regarding the procurement-typically with the designated procurement official only
  • Instructions relating to rules regarding late submission of bids
  • Instructions relating to how amendments of the solicitation should be acknowledged
  • Instructions on what documents should be returned with bid
    • Bid guarantee
    • Price schedule
    • Representations and certifications
    • Bid samples
    • Descriptive literature
  • Notification of bid acceptance period is a concept that may also be addressed in the competitive proposal method, but is more prevalent in the IFB process. You can tell bidders in the solicitation that they must allow a minimum period in which your agency can accept their bid after its submission. Further, if they want to include a lesser period than your minimum, the bid will be rejected as nonresponsive. What is your normal processing time for bids -- 30, 60, 90, 120 days? Be realistic but also understand that the longer the period you allow to accept, the greater will be the contingency the bidder put in its bid to reflect price fluctuations in the marketplace. Also take into consideration that you can (and sometimes will) request offerors to voluntarily extend their offers for an additional period if you encounter a delay.

Boilerplate attachments or
exhibits

  • Instructions and Conditions of Solicitation
  • General Provisions
  • Special Provisions
  • Bonds (Bid, Performance, Payment)

Specifications, Scope of Work, Drawings

 

4.4.2 Bid Opening

Requirement

"All bids will be publicly opened at the time and place prescribed in the invitation for bids;" 76

Discussion

The day that you have all been waiting for has arrived. Bids for your project are due in Room 407 at 2 P.M. Will we get any bids? Where will the price of the bids be in relation to the estimate? What do I do if all of the bids exceed my budget? What if there's only one bid? What if a bidder delivers its bid at 2:02 P.M.? What do I actually do at 2 P.M.? Do I read the bids out loud? What if the bidders want to look at the bids we received?

These are some of the many concerns that you probably have every day you receive bids. Although many of these issues are beyond the scope of this manual since they are defined by your agency and its own peculiar personality, a few of these issues are very important to the sealed bidding procurement process. The time and date set for the receipt of bids and the public announcement of those bids are very critical to the success and integrity of a public procurement process.

Best Practices

As with the other sealed bidding issues, the procedures surrounding the receipt and opening of bids may be dictated by your state law or procedures. As a general concept of public procurement, the opening of bids is the point in time when completion of the procurement (acquisition) process begins and the contract administration process starts. It also initiates the rules relating to "responsiveness" and "responsibility" which are discussed in Sections 4.4.3 and 5.1 respectively.

The process of receiving bids

As you approach the date and time set in your solicitation for receipt of bids, you will begin to receive bids. A simple step to eliminate many questions that could arise later is to keep the bids unopened in a secured location, preferably a locked bid box, file cabinet, or safe.

  • The identity and number of bids received need not be disclosed within your agency prior to the time and date set for receipt of bids except to those personnel with a real "need to know."
  • As discussed in Section 2.3.2, "Independent Grantee Cost Estimate," when you receive the "independent estimate" it can also be secured, logically in this same location. It is also a good practice to have on your "procurement checklist" to be sure you have received this estimate, particularly if this is a federally-funded procurement.
  • On the day of receipt of bids (maybe an hour ahead of time), you may want to establish a place in the room where the bids will be read where bids can be deposited and time-stamped in.
Opening, reading, and recording bids
  • Bid opening is a public event and is open to the general public.
  • As the time for receipt of bids approaches on the day bids are due, if you are the bid opening official, consider checking the time with a reliable source and using that time as the official time.
  • Shortly (10 minutes?) before the time for receipt of bids, you may also want to call your office, the mailroom, the security desk, and anywhere else you can think of where a bid might be and get it logged in. "Do you have an envelope indicating it is a bid for IFB No. 123-4456? If so, please bring it to Room 407 immediately."
  • Bidders are apt to be coming into the room at the last minute to submit bids. Don't be surprised when a breathless bidder comes running into the bid room frantically waving a bid and wanting you to consider it.
  • At the designated time, you may announce to those in attendance that the time set for receipt of bids has arrived and that no further bids will be received.
  • At that time, personally and publicly open the bids, read the bids aloud (if practical) to those persons present, and have the bids recorded. Some procedures also include opening, reading aloud, and recording the independent estimate. Other agencies believe this information could help a disappointed bidder to interfere with the process, or could be used by a single bidder to the agency's disadvantage.
  • The bids are usually recorded on a document called an Abstract of Bids and this document is available for public inspection after completion.
    • Unless it unduly interferes with the conduct of your business, you may allow time after the bids are read for interested members of the public to review the bids submitted under the immediate supervision of an agency official and under conditions that preclude the possibility of a destruction, substitution, addition, deletion, or alteration of the bid.
    • If irregularities or discrepancies are discovered during this review process, or if you noticed something irregular during the public reading, it is best to simply note them and not discuss these in public. These matters are best discussed only with appropriate agency personnel, including the appropriate procurement, engineering, maintenance, and legal staff members. 77
Late bids

Many instructions for bidders include a clause that addresses the late submission, modification, and withdrawal of bids. The clause may be required by state law or patterned after a Federal provision. 78 The clause specifies any circumstances (e.g. documented failure by specific mail or delivery services) that are exceptions to the general rule - - bids received at the place designated in the IFB after the exact time set for bid opening are late and will not be considered under any circumstances. 79 Whether or not the late bid would have been low in price is of no consequence. It must be rejected, the argument goes, because maintaining the integrity of the sealed bid procurement process is more important than the possible advantage to be gained by considering a late bid in a particular procurement. 80

  • Although the burden of getting the bids to the bid opening location on time is on the bidder, it is easier to take extra precautions to ensure all bids are at the proper location at the proper time, than to explain later the integrity of the process. As we alluded to earlier, you might want to consider the following as "preventive" measures designed to reduce the possibility of this happening to you:
    • Consider placing clear instructions in the mailroom and at the reception area as to what is to happen with bids and bidders, particularly on the day bids are due.
    • Consider calling your mailroom, your office, and the location where bids are "normally" received and secured shortly before the time for receipt of bids and inquire if any bids were received in the last mail delivery or delivered to the other location(s).
    • Include labels or envelopes clearly marked with Bid # and date and time due in the solicitation package for use by bidders.

4.4.3 Single Bid

Requirement

Within the discussion of sole source contracts, the FTA Circular 4220.1E, Paragraph 9.h - Procurement By Noncompetitive Proposals (Sole Source) also deals with the situation when a number of offerors are solicited but only one response is received: Sole Source procurements are accomplished through solicitation of a proposal from only one source, or after solicitation of a number of sources, competition is determined inadequate. . . . 81

FTA Circular 4220.1E, Paragraph 10 requires grantees to perform a cost or price analysis in connection with every procurement action:

  • 10.a. Cost Analysis. A cost analysis will be necessary when adequate price competition is lacking and for sole source procurements . . .unless price reasonableness can be established on the basis of a catalog or market price of a commercial product sold in substantial quantities to the general public or on the basis of prices set by law or regulation.
  • 10.b. Price Analysis. A price analysis may be used in all other instances to determine the reasonableness of the proposed contract price.

Definitions

Single Bid - Only one bid has been received at the time and date set for bid opening.

Single Responsive Bid - Only one responsive bid received at the time and date set for bid opening. This may result from having only one bidder or from all other bidder(s) being nonresponsive.

No Responsive Bids - All bids received at the time and date set for bid opening are nonresponsive.

Discussion

State or Local Law - As with many other areas of procurement, procedures for handling a single bid in response to an invitation for bid may be addressed specifically by your state or local law. In the absence of a prescribed procedure, this section presents ways to analyze and move forward with your procurement.

Adequacy of Competition - When only one bid is received in response to a solicitation that was issued to multiple sources, you will first have to determine if there was adequate competition. The FTA interpretive comment in the Annotated FTA Circular 4220.1E, paragraph 10, makes clear the fact, that when only one bid is received, this does not, in itself, mean that competition was inadequate. In order to make this determination, it may be necessary to talk to those firms solicited to find out why they did not submit bids. If the reason is a restrictive specification or a delivery requirement that only one bidder could meet, you have a situation of inadequate competition. If this is the case then the procurement is a sole source and you must process it as such with internal agency approvals, or cancel the solicitation, change the requirements to allow for more bids, and re-solicit bids. On the other hand, if the reasons given by the non-responders are unrelated to the specification and/or solicitation terms, then you may presume competition was adequate and proceed with the award as a competitive one. You should document your file so that there is a clear audit trail for reviewers to understand how you reached your determination.

Cost or Price Analysis - If the competition is deemed to be adequate, then a price analysis must be performed to determine the reasonableness of the bid price. 82 If, on the basis of a price analysis, you are able to document your determination that the price is fair and reasonable, and if the bid is responsive and the bidder responsible, you may proceed with award. If, however, you cannot determine the reasonableness of the bid on the basis of a price analysis, then you will have to request a detailed breakdown of costs and profit from the bidder and perform a cost analysis.

If competition is deemed to be inadequate, and you decide to process the award as a sole source, then you will have to perform a cost analysis (i.e., request from the bidder a detailed breakdown of the estimated costs and profit) unless you can establish the reasonableness of the price based on the bidder’s catalogue or market price (note that the item must be sold in substantial quantities to the general public), or the price is set by law or regulation. For a discussion of cost and price analysis techniques, see BPPM Section 5.2 - Cost and Price Analysis. If the bidder refuses to furnish a cost breakdown for your analysis, then you will have to request a waiver from FTA of the Circular requirement in paragraph 10.a that a cost analysis be conducted on every sole source procurement, or cancel the procurement and re-solicit bids. 83

Negotiation - If you have been unsuccessful in determining through a price or cost analysis that the bid price is fair and reasonable, you may wish to enter negotiations with the offeror to attempt to establish a different price that can ultimately be determined to be reasonable. Some authorities view this as canceling the sealed bidding method of procurement and converting, through documentation, the procurement either to a competitive proposal (a negotiated procurement) or a sole source procurement. This is another area that may be controlled or regulated by state law. For instance, your state may require that construction services only be awarded by accepting a sealed bid, with no exceptions. (If this is the case, you really have no choice but to cancel the solicitation and, if your requirement continues, to re-advertise the procurement.) If, however, your state allows flexibility and you are able to justify conversion of the procurement to a negotiated process, this may allow you to negotiate a contract with a price that is fair and reasonable so that award can be made.

4.4.4 Responsive Bidder

Requirement

The concept of "responsiveness" is discussed in Section 9 of FTA Circular 4220.1E as an integral element of the sealed bidding method of procurement:

c. Procurement by Sealed Bids/Invitation for Bid (IFB). Bids are publicly solicited and a firm-fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price.

Subparagraph 9.c(2)of FTA Circular 4220.1E, in discussing the requirements to be used if the sealed bid method of procurement, lists the following:

(d) A firm fixed-price contract award will be made in writing to the lowest responsive and responsible bidder. When specified in bidding documents, factors such as discounts, transportation costs, and life cycle costs shall be considered in determining which bid is lowest;

Definition

Responsive - If an offer conforms in all material aspects to the requirements of the solicitation at the scheduled time of submission and does not require further discussions with the offeror, the offer is responsive.

Discussion

Although it may be stated differently in the rules or statutes governing your procurement processes, the concept of awarding a contract to the lowest responsive and responsible bidder is a common precept in public contracting at the Federal, state, and local levels throughout the country. It is helpful to maintain the distinction among these concepts in reviewing bids, and to consider them in the stated sequence. First identify the lowest bid, then find the lowest responsive bid, then find the lowest responsive and responsible bidder.

Evaluation Sequence

The following is a sequence of evaluation that is useful for explanation and may also be useful in practice; however, the concepts and correct determinations are far more important to successful procurement than is the sequence. Examination of bids logically begins with the lowest bidder. Once the lowest bidder is determined, look to see if the bidder is responsive. "Responsiveness" is a concept critical to the sealed bidding process. In public contracting, in order for a bid to be acceptable, it must conform in all material respects to the requirements stated in the invitation. Responsiveness is determined from the bid documents themselves and, with very few exceptions, is determined with no discussions or further input from the bidder.

The precise definition of "responsiveness" may vary from jurisdiction to jurisdiction and the definition applicable to your organization may be stated in your procurement regulations or statute. If the initial low bidder is not responsive (the bid does not conform to the material requirements of the invitation), you need go no further with that bidder. Instead you may go back and look at the second lowest bid and determine if it is responsive.

Once you have determined that you have a low priced bidder who is responsive, you then begin the more subjective process of determining the bidder's responsibility.

"Responsibility" is also a term with specific connotations in procurement. What is involved in determining a bidder's responsibility may vary from jurisdiction to jurisdiction.

FTA defines "responsibility" to be a contractor who possesses the ability to perform successfully under the terms and conditions of the proposed procurement. In determining whether a contractor possesses this ability, you may consider such matters as contractor integrity, compliance with public policy (e.g., EEO record, attainment of DBE goal, not debarred or suspended, etc.), record of past performance, and financial and technical resources. Unlike responsiveness, which normally can be finally determined based on the bids, a determination of responsibility may be affected by new information up to the time of contract award. Thus, in ascertaining whether or not a bidder is responsible, discussions may be held with the bidder to discuss these factors so that, by the time of award, a positive determination can be made. If you do not determine that the bidder is responsible, look through the list of bidders again to determine a low, responsive, responsible bidder to whom a contract can be awarded.

Strict Responsiveness

To understand the concept of "responsiveness" and its practical rigidity in the public contracting environment, recall that the IFB issued by the agency is designed so that all bidders who respond can make comparable offers under the same terms and conditions. When a bidder submits its bid to the entity in response to the IFB, the entity must be able to accept that bid as submitted, thereby creating a binding contract. 84 The following discussion of responsiveness will cover general principles and parameters of Federal procurement precedents. You may have to ensure compliance with your state's laws and precedents and your agency's procedures. The best practice is to establish a clear, unambiguous agency policy on which bidders can rely, so that, in preparing their bids, they can be confident that no material deviations will be allowed to any bidder in complying with the solicitation and its specifications.

Purpose

Requiring strict responsiveness, i.e. compliance in all material respects with the IFB "enables bidders to stand on an equal footing and maintains the integrity of the sealed bidding system." 85 Examples of bids typically considered nonresponsive include:

  • The bid fails to conform to material requirements;
  • The bid does not conform to applicable specifications (unless the invitation allowed alternates);
  • The bid fails to conform to delivery schedule or permissible alternates;
  • The bid imposes conditions that would modify the requirements of the invitation or limit the bidder's liability to the entity;
  • There is a condition of the bid which affects the substance of the bid (i.e., affects price, quantity, quality, or delivery of the items offered) or works an injustice on other bidders;
  • The bid contains prices for line items that are materially unbalanced, i.e., figures in the bid conflict with the total bid price;
  • date;
  • The bidder fails to furnish a bid guarantee in accordance with the requirements of the invitation; 86 or
  • Failure to submit Buy America Certification.

Responsiveness is a fairly objective concept and is ascertainable at the time of bid opening. 87 Further, the bidder's intent to be bound by the IFBs requirements can normally be determined from the bid itself. 88 A "second bite at the apple" is a phrase commonly heard in discussions pertaining to the precept that responsiveness be determined at the bid opening solely from the bid documents and without explanation. You will not want an apparently low bidder to re-evaluate its bid after the public opening and effectively withdraw the bid by refusing to respond or responding in a subversive way; the bidder should not have a second bite at the apple. This means that the bid package must be examined thoroughly. Some of the questions you may ask are:

  • Does the cover letter take exception to any material terms and conditions?
  • Is the bid ambiguous? Is it susceptible to two or more reasonable interpretations?
  • Were all material amendments to the solicitation acknowledged?
  • Was the bid signed?
  • Were all material representations and certifications completed?
  • Is the Buy America certificate required by 49 CFR Section 661.6 or Section 661.12 signed? 89
  • Were required descriptive literature and bid samples included with the bid?
  • If required, was a bid bond or bid guarantee submitted?
  • Was the bid defective?
  • Was the price offered firm and definite?
  • Were the material items or information required by the invitation submitted with the bid?
  • Was the bid received at the place designated in the invitation at the exact time specified or was it late?

If something is questionable, is the issue one of responsibility or responsiveness? 90 Your customers may want to gain greater confidence in the bids by specifying, purportedly as a condition of responsiveness, that bidders have specific capacities. You may also find a defect (e.g. in certifications or requested information) that relates primarily to the ability of the bidder to perform. Precedent for direct Federal procurement is that merely by the language in an IFB, a contracting agency cannot change a matter of responsibility (ability to perform) into one of responsiveness (unequivocal offer to perform). 91 The best practice is to maintain this distinction.

Materiality - Whole courses are taught on sealed bidding and the issue of responsiveness. The list of questions and issues raised in this discussion should not be considered as all-encompassing. Instead, they are intended to raise sensitivity to some of the issues that impact responsiveness. It should be apparent from this discussion that the single most important concept impacting responsiveness is "materiality" -- does the inclusion or omission of the fact, item, or requirement affect price, quantity, quality, or delivery of the items offered? If so, the bid is probably nonresponsive. If not, the bid is probably responsive. There are, however, many facts and situations that do not clearly fall within these parameters and become issues that may require analysis and input from your legal advisor. If in doubt, ask!

DBE - Although DBE program compliance is more often a responsibility requirement, some processes make DBE compliance a condition of responsiveness. This issue is discussed further in the discussion of DBE submissions and award in Chapter 7, "Disadvantaged Business Enterprise."

4.4.5 Bid Mistakes

Discussion

It may not be as certain as death and taxes, but inevitably and unfortunately, a mistake may be discovered in your low bid. A mistake doesn't necessarily mean you cannot award a contract to the low bidder, but that could be the result. How you typically treat the mistake will depend upon what the mistake is and when it is discovered. State law in some states explicitly addresses bid mistakes.

Best Practices

Mistakes in bids are usually discovered after bids are opened 92 and before the contract is awarded. The mistake, or suspicion of a mistake, may be discovered by the procurement official in its review of the bids. Some procedures call for the identification of clear defects (e.g., absence of a bid bond) at the bid opening and the rejection without reading of the bid. This minimizes the discussion and likelihood of protest. The mistake may be discovered by an unsuccessful bidder (not just the low bidder) when it is reviewing the bids after bid opening. Or it may be discovered by the apparent low bidder upon returning to its office after bid opening -- sometimes driven to an examination of its bid after it has learned how much money was "left on the table!" Regardless of how it is discovered, it is a problem in the sealed bidding method of procurement because of the strict rules of responsiveness, because bids have been exposed, and because the integrity of the procurement process is at stake.

The four generally accepted categories of bid mistakes are:

  1. Minor informalities or irregularities in bids prior to award of the contract;
  2. Obvious or apparent clerical mistakes discovered prior to award;
  3. Mistakes other than minor informalities or irregularities in bids, or obvious or apparent clerical mistakes that are discovered prior to award; or
  4. Mistakes discovered after award.

If a mistake fits within one of these categories, three things can happen: the mistake can be corrected, the mistake will be recognized and the bid allowed to be withdrawn, or the mistake will not be recognized and the bid not allowed to be withdrawn.

We will discuss each of these categories of mistakes and what the consequences of each are if it is established that a mistake has been made. One final thought before that discussion: many transit properties in their procurement regulations have adopted rules relating to the treatment of these categories of mistakes and, in most cases, have patterned their rules after the rules in either the FAR 93 or the Recommended Regulations for the American Bar Association's Model Procurement Code for State and Local Governments. 94 If you have rules addressing this common problem, it makes the administration of your procurement process much easier because the rules are known, not decided on a case-by-case basis.

The following tables analyze the types of mistake and one set of actions; many variations on the illustrative rules presented here are successfully in use.

Minor informalities or irregularities in bids prior to award of the contract.

Merely a matter of form and not of substance.

May be an immaterial defect in a bid that can be corrected or waived without being prejudicial to other bidders.

The defect is "immaterial" when the effect on price, quantity, quality, or delivery is negligible when contrasted with the total cost or scope of the requirement being procured.

Remedy: the contracting officer shall give the bidder an opportunity to cure the deficiency or waive it, whichever is in the best interests of the owner.

Examples of minor informalities or irregularities include failure of the bidder to:

Return the incorrect number of signed bids required by the IFB (1 submitted, 3 required).

Sign the bid, but only if the unsigned bid is accompanied by other material indicating the bidder's intent to be bound, such as a bid guarantee or letter signed by the bidder referring to and clearly identifying the bid itself

Acknowledge receipt of an amendment to the IFB, but only if it is clear from the bid itself that the bidder received the amendment and intended to be bound by its terms 95 or the amendment involved had no (or a negligible) effect on price, quantity, quality, or delivery.

Furnish required information that goes to the issue of responsibility (e.g., number of employees bidder has, information concerning parent company and any affiliates, certifications concerning EEO and Affirmative Action programs, certification concerning Lobbying 96).

Obvious or apparent clerical mistakes discovered prior to award.
97

Mistake must be obvious or apparent on the face of the bid.

This is the category of mistake most frequently discovered by the contracting officer during its examination of the bid after bid opening

If you know, or have reason to know or suspect, that a mistake in a bid has been made, there is a real issue of whether you can, in good faith, accept that bid.

The bidder may also discover this category of mistake and bring it to your attention and request that it be allowed to correct the mistake.

Examples include:

Obvious misplacement of decimal point.

Obvious reversal of the price f.o.b. destination and price f.o.b. origin --higher price for you picking the product up at the origin than for the bidder to deliver the product to the place designated by you.

Obvious mistake in designation of unit.

Typographical errors.

Error in extending unit prices.

Transposition errors.

Arithmetical errors.

Procedure: What do you do if you have this category of mistake?

Recommend you make your legal counsel aware of situation so proper legal advice can be obtained as you proceed through the mistake evaluation process. This is an area that is prime for a later protest by either the firm requesting relief from a "mistake" or from another bidder that feels it could be impacted by your decision regarding the mistake.

Request verification of the bid. This is necessary to assure the contracting officer that the bid as confirmed is without error, or to elicit the allegation of a mistake by the bidder. This process normally includes the following steps:

Prepare a written request to the bidder that it verify its bid price.

The request puts the bidder on notice of a mistake suspected by the contracting officer as appropriate. For instance, the bid is so much lower than the other bids or the agency independent estimate as to indicate a possibility of error. Or, highlight important or unusual characteristics of the specification. Point out the fact that there were changes in the specifications or requirements from previous purchases of a similar item. Your notice can include any information, which is proper for disclosure, that lead you (as the contracting officer) to believe that there is a mistake in the bid.

Evaluate the verification response from the bidder. If the bidder verifies its original bid, you may consider the bid as originally submitted. If, however, the bidder alleges a mistake was made, it is recommended you take the following actions.

Advise the bidder to make a written request to withdraw or modify its bid.

Advise the bidder that it must support its request with any and all evidence to support the position it is taking.

Advise the bidder of definite time deadlines in which to provide the information requested.

Be suspicious -- don't forget that everyone's bid has been exposed to the world!

Remedy: After verification, the contracting officer may correct an apparent or obvious clerical mistake. It is recommended that you:

Attach the verification to the original bid.

Reflect the correction in the award document.

Document the procurement file to indicate why you took the action you did.

You should only allow a bid to be corrected if the bid, as submitted, was responsive -- you should not allow correction of a bid that would make a non-responsive bid a responsive bid.

If correction of the bid would displace one or more lower bids, it is recommended that you not allow correction unless the evidence of the mistake and bid actually intended are ascertainable substantially from the invitation and bid itself as opposed to evidence brought in to you by the bidder in response to your request for verification.

Do not allow the bid to be withdrawn.

Mistakes other than minor informalities or irregularities in bids, or obvious or apparent clerical mistakes that are discovered prior to award.
98

These mistakes are generally raised by the bidder along with a request to withdraw its bid. Examples include:

A pricing element from a vendor was received but not included in the bid -- the electrical subcontractor's quote was not included.

The material cost for an element of work was included but the labor to install it was not included.

Procedures: It is recommended that you follow the procedures outlined in the previous discussion when a bidder alleges a mistake has been made. Pay particular attention to the evidence the bidder furnishes that establishes the existence of the mistake -- remember, it is not obvious from the bid itself. Be particularly sensitive to the bidder that wants out of its bid simply because it made a judgmental error in preparing its bid and, after bid opening, discovered it "left too much money on the table."

Remedy: You should allow the bidder to withdraw its bid if:

The mistake is clearly evident on the face of the bid document but the intended correct bid is not similarly evident; or

The bidder submits proof which clearly and convincingly demonstrates that a mistake was made.

You may make a determination to correct the bid and not allow its withdrawal if:

The bidder requests permission to withdraw a bid rather than correct it; 99

The evidence is clear and convincing both as to the existence of a mistake and as to the bid actually intended; and

The bid, both as originally submitted and as corrected, is the lowest bid received.

Mistakes discovered after award.
100

Although it is much rarer than other allegations of mistake, a contractor may raise the issue of mistake in bid after award of the contract is made.

Obviously, the burden of proving a mistake was made at this time is great and must be carried by the contractor. 101

Remedy: What you do with mistakes discovered and proven after award are really policy questions that you should consider when adopting your regulations. There really is no "best" practice in this area but it appears that transit properties have taken one of the two approaches outlined below:

The "hard line" approach: do not allow correction except where the contracting officer makes a written determination that it would be unconscionable not to allow the mistake to be corrected. 102

The FAR approach 103 offers more alternatives other than the "unconscionable" approach:

The mistake may be by contract amendment if correcting the mistake would be favorable to the transit property without changing the essential requirements of the specification.

Additionally, a determination could be made to (a) rescind the contract; (b) reform the contract to delete the items involved in the mistake or to increase the price if the contract price (as corrected) does not exceed that of the next lowest acceptable bid under the original IFB; or (c) allow no change to be made.

It is recommended that you proceed very carefully through this process and with advice of legal counsel.

4.4.6 Bid Withdrawal

Discussion

It's two days after bid opening. You're sitting at your desk basking in the great procurement you conducted and all the competitive bids you received. The phone rings, breaking the self-congratulatory mood, and you pick it up. "Hi, I'm Mr. Low Bidder and we have decided we really don't want this contract and want to withdraw our bid!" Talk about messing up your day. What do you do next?

Section 4.4.5 addresses the rules relating to the withdrawal of bids because of a mistake in bid. Those rules govern almost all of the instances in public contracting in which a bidder is allowed to withdraw its bid after bid opening in the sealed bidding process. Bidders are usually permitted to modify or withdraw their bids prior to bid opening.

Best Practices

When to allow withdrawal of bids

If you receive a written request from a bidder prior to the time and date set for receipt of bids that it wishes to withdraw a bid it has previously submitted, that request is honored under most procurement policies. If the request to withdraw is received after the time and date set for receipt of bids, the same rules apply to that request as would apply to the late receipt of a bid.

As we discussed in Sections 4.3.2.3, "Solicitation," and 4.4.1, Solicitation (Sealed Bids), we recommended inclusion of a clause that addresses the Late Submissions, Modifications, and Withdrawals of Bids. This clause sets forth the only contractual period during which bids can be withdrawn. Subparagraph (g) of the FAR clause, which forms the basis for many transit property clauses, provides:

(g) Bids my be withdrawn by written notice or telegram (including mailgram) received at any time before the exact time set for receipt of bids. If the solicitation authorizes facsimile bids, bids may be withdrawn via facsimile received at any time before the exact time set for receipt of bids, subject to the conditions specified in the provision entitled 'Facsimile Bids.' A bid may be withdrawn in person by a bidder or its authorized representative if, before the exact time set for receipt of bids, the identity of the person requesting withdrawal is established and the person signs a receipt for the bid.

If a bidder has established the existence of a mistake in its bid prior to award of the contract, it should be allowed to withdraw its bid if:

  • The mistake is clearly evident on the face of the bid document but the intended correct bid is not similarly evident; or
  • The bidder submits proof which clearly and convincingly demonstrates that a mistake was made.
What if the request to withdraw does not fit into those categories?

For the reasons that follow, you will probably not allow the bidder to withdraw its bid without legal counsel. This is an issue that may be impacted by an interpretation of your state law on public contracting, particularly in the absence of a clause as will be discussed next.

Of critical importance to being able to take this position is the inclusion in your solicitation document of two clauses which we have referred to in previous sections of the Manual. The first clause (which we have included a suggested provision earlier in this discussion) is the Late Submissions, Modifications, and Withdrawals of Bids clause. The second is a clause addressing the bid notification period as discussed in Section 4.4.1, "Solicitation". Just as an example, the following is the clause that accomplishes this level of protection by federal agencies:

Period of Acceptance of Bids

In compliance with the solicitation, the bidder agrees, if this bid is accepted within ____ calendar days (60 calendar days unless a different period is inserted by the bidder) from the date specified in the solicitation for receipt of bids, to furnish any or all items upon which prices are bid at the price set opposite each item, delivered at the designated points(s), within the time specified in the Schedule. 104

There is nothing magical about the particular language in this clause, but the legal context is very important. If this language is part of the solicitation that the bidder signs when submitting its bid, as part of its offer, it is telling you that you have 60 days to accept its bid. It has agreed to hold its offer open for that period of time and you can take that long to act upon that offer. Under this example, you do not, however, have 61 days to accept the bid!

"What is the rationale for this result? I thought you could always withdraw your offer prior to it being accepted." There is a lot of law on this subject, but one of the earliest articulations of this philosophy is contained in the quote from a 1909 decision of the United States Court of Claims that is still good law on this issue:

What are the rights of bidders as to the withdrawal of their bids after they have been opened and they have been informed thereof, but before they have been accepted? The agents of the Government stand upon a different footing from private individuals in the matter of advertising for the letting of contracts in behalf of the United States. They have no discretion. They must accept the lowest or the highest responsible bid, or reject all and re-advertise. Private individuals are not required thus to act. Hence it is apparent that the government agents should be allowed a reasonable time after the opening of bids before they are allowed to be withdrawn, so they can be afforded opportunities to ascertain whether collusion or fraud had been perpetrated against the United States by the parties engaged in the bidding. It is also apparent that if the rule of allowing immediate withdrawals after the results of the bidding are known, frauds innumerable could be perpetrated against the United States and thus public justice would be greatly hampered. 105

You need to check with your legal counsel to see how this language might be addressed under your particular state law. If the matter has not been challenged and you are faced with a challenge, this case is a good starting point to see how and why this rule has developed in the way it has. This rule is also referred to as the "firm bid rule."

"But I didn't have that language in the solicitation. What do I do?" Again, the answer may well lie in your state laws and your lawyer will have to advise you on what to do.

However, in the absence of this clause, you might want to check Section 2.205 of the Uniform Commercial Code which may be the law in your state. 106 In addressing the FAR clause (or a predecessor clause), the General Services Board of Contract Appeals opined (and reiterated the Scott rationale):

This rule for Government procurements also finds support in commercial settings. Under the Uniform Commercial Code, UCC 2-205, 'firm' offers are irrevocable. In Western Adhesives, GSBCA No. 7449, 85-2, BCA Section 17,961, the appellant attempted to dispute the validity of a contract and default termination on the basis that it withdrew its bid prior to award. The Board found that Government acceptance of a bid during an extended acceptance period granted by the bidder created a valid contract because the solicitation was a formally advertised procurement for which bids were irrevocable during the acceptance period. Failure to perform after acceptance justified default termination. The Board concluded, 'this appeal turns on the firm bid rule. A bid submitted in a formally advertised procurement -- sealed bid -- is irrevocable, and an acceptance after an attempted withdrawal will create a contract.' Western Adhesives, 85-2 BCA[Section 17.961] at 90,018. 107

If a bidder withdraws its bid according to the allowances in the prior section, you will normally proceed to the next lowest bidder without expecting compensation from the erring bidder. However, if the bidder is refused permission to withdraw, and attempts to withdraw by failure to perform (e.g., failure to produce a performance bond), you may be in a position to terminate the bidder for default, minimize your damages by awarding to the next lowest bidder, and recover the damages including the bid differential from the defaulting contractor. You should evaluate all the costs of undertaking this course of action, (including long run effect on competition and pricing) if any, before proceeding.

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4.5 Competitive Proposals (Request for Proposals)

4.5.1 Solicitation & Receipt of Proposals

Requirement

Requests for proposals shall be publicized. 108

RFPs shall identify all evaluation factors along with their relative importance. 109

Proposals will be solicited from an adequate number of qualified sources. 110 You shall make award only to responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed agreement. Consideration shall be given to such matters as contractor integrity, compliance with public policy, record of past performance, and financial and technical resources. 111

Awards will be made to the responsible firm whose proposal is most advantageous to the grantee's program with price and other factors considered. 112

In architectural and engineering services procurements, grantees shall use competitive proposal procedures based on the Brooks Act, which requires selection based on qualifications and excludes price as an evaluation factor provided the price is fair and reasonable. (See Section 6.5 Architect-Engineering Services.") 113

Discussion

A request for proposals typically includes all of the elements of an invitation for bids, and in addition shall contain the evaluation factors and their relative importance, e.g., by stating that the factors are listed in declining order of importance. The request can specify the information needed to perform the evaluation, and may require that cost/price information be physically separated so that the technical evaluation can be performed separately from price evaluation. RFPs are typically publicized in newspapers and/or trade journals, and are issued to qualified mailing lists maintained in a manner similar to IFB lists. (See Section 4.3.2.2, "Solicitation Mailing List")

Purpose

The required feature that principally distinguishes an RFP from an IFB is the listing of evaluation factors. These factors typically include not only responsibility factors (such as financial, human, and physical capacity to perform), but also technical factors (such as the degree to which the proposer is expected, based on information submitted and available, to achieve the performance objectives, to provide the quality expected, and on the relative qualifications of the proposer's personnel). Many RFPs go beyond listing these factors in order of importance, and also describe the evaluation process in detail, listing weights for each factor, illustrating the scoring method, and specifying the procedure for weighing price into the selection.

The purposes for disclosing of the evaluation process are so that:

  • offerors can more accurately respond to your needs rather than solely rely on the technical specifications alone;
  • proposers will be able to clearly present the information you need to conduct your evaluation; and
  • the appearance of favoritism or unethical practice in offeror selection will be diminished.

The competitive proposal process involves a subjective evaluation process and discussions that are typically confidential. Public acceptance and acceptance by disappointed offerors might be less than in the case of sealed bids, if the evaluation and selection process is not well documented and disclosed in advance.

Best Practices

Evaluation and Award - The following is a listing of elements commonly found in the competitive proposal method of procurement.

  • Both a technical and cost proposal are requested so that they may be evaluated, frequently by separate staff. Where the appearance of technical objectivity is important, it is a better practice to initially evaluate the technical proposals without knowledge of costs, so that an objective and impartial evaluation can be obtained.
  • The evaluation factors to be considered in the award are identified in the RFP along with the relative importance of each. While this requires only the ranking of the factors without quantifying the importance or describing the process for applying the factors to proposals, some agencies disclose their selection process in detail.
  • Disclosure Disadvantages. Disclosing the specific weights and scoring processes may encourage proposers to distort their proposals, and may strengthen the disappointed proposer's attack on the agency decision;
  • Disclosure Advantages. The full description of the process guides proposers in understanding your needs, bolsters the objectivity of your evaluation team, encourages candor from the proposers during negotiations, and encourages competition through the perception of fair treatment.
  • Many standard RFPs notify prospective offerors that award may be made on the basis of initial proposals submitted without any negotiations or discussions. The implication is clearly, that the initial proposal should be their best effort.

Proposal guarantee - Although performance bonds are often appropriate and required by RFPs, the use of a proposal guarantee is less common than bid guarantee. Because the proposers generally have unavoidable opportunity during negotiations to render their proposals unacceptable, part of the purpose of bid guarantees cannot be achieved in the case of proposals. (See Section 4.3.3.3.2, "Bid guarantee" and Section 8.2.1, "Performance Bonds") However, if it is particularly important that the initial proposals be firm commitments by the offerors, that frivolous proposals not be submitted, or that proposers be able to provide performance bonds, then a proposal guarantee in the form of a cashier's check, letter of credit, or approved bond may be cost-effective.

4.5.2 Evaluation of Proposals

Requirement

FTA Circular 4220.1E, paragraph 9.d, requires the following when procuring by competitive proposals:

d. Procurement By Competitive Proposal/Request for Proposals (RFP). . . . If this procurement method is used the following requirements apply:

  1. Requests for proposals will be publicized. All evaluation factors will be identified along with their relative importance;
  2. Proposals will be solicited from an adequate number of qualified sources;
  3. Grantees will have a method in place for conducting technical evaluations of the proposals received and for selecting awardees;
  4. Awards will be made to the responsible firm whose proposal is most advantageous to the grantee's program with price and other factors considered; and
  5. In determining which proposals is most advantageous, grantees may award (if consistent with State law) to the proposer whose proposals offer the greatest business value to the Agency based upon an analysis of a tradeoff of qualitative technical factors and price/cost to derive which proposal represents the “best value” to the Procuring Agency as defined in Section 6, Definitions. If the grantee elects to use the best value selection method as the basis for award, however, the solicitation must contain language which establishes that an award will be made on a “best value” basis. 114

In architectural and engineering services procurements, grantees shall use competitive proposal procedures based on the Brooks Act, which requires selection based on qualifications and excludes price as an evaluation factor provided the price is fair and reasonable. (See Section 6.5 Architect-Engineering Services.") 115

Discussion

FTA Circular 4220.1E - The most recent edition of the FTA Procurement Circular added an item (5) in paragraph 9.d. -Procurement By Competitive Proposals/Request for Proposals (RFP) in order to recognize the concept of best value in evaluating offerors’ proposals and selecting successful contractors in negotiated procurements. The FTA Circular, paragraph 6.g, defines best value in these terms:

Best Value: A selection process in which proposals contain both price and qualitative components, and award is based upon a combination of price and qualitative considerations. Qualitative considerations may include technical design, technical approach, quality of proposed personnel, and/or management plan. The award selection is based upon consideration of a combination of technical and price factors to determine (or derive) the offer deemed most advantageous and of the greatest value to the procuring agency. 116

For purposes of this discussion it may be helpful to distinguish the concept of “best value” selections from the more traditional practice of identifying the lowest price, technically acceptable proposal (although that too actually represents what the grantee feels will be the “best value” selection given the nature of the requirements it is procuring). Both approaches will require technical evaluations and price analysis, and both will require the solicitation to clearly inform the prospective offerors of how the selection decision will be made:

  • Best value - requires tradeoffs between price and non-price factors to select the best overall value to the grantee.
  • Lowest price technically acceptable proposal - requires selection of the lowest price proposal meeting the minimum RFP requirements.

The FAR Background - The concept of “best value” owes its origin to acquisition reforms espoused in the Clinton-Gore administration’s “Report of the National Performance Review: Creating a Government That Works Better and Costs Less.” In that report, it was recommended that Federal acquisition regulations should be revised and restated with a major objective being (among others) a “ . . . shift to a new emphasis on choosing best value products.” 117 That reform objective was eventually translated into a completely re-written Federal Acquisition Regulation (FAR) Part 15 - Contracting By Negotiation. 118 Now the FAR makes best value the one stated objective of every negotiated procurement:

15.302 - Source Selection Objective: The objective of source selection is to select the proposal that represents the best value.

Best Practices

The Federal Approach

The FAR describes a “best value continuum” in negotiated procurements where agencies are free to use any one of a combination of source selection approaches. For example, in acquisitions where the requirement is clearly definable and the risks of unsuccessful performance are small, cost or price may play a dominant role in source selection; i.e., the selection may be based on the lowest price technically acceptable proposal. 119 Where, however, the agency’s requirement is less definitive, or where there is development work, or greater performance risk, then the less important price will be and the more important will be technical or past performance considerations in the source selection. 120

The FAR goes on to describe both the tradeoff process that is used when selecting a proposal other than the lowest price technically acceptable proposal, as well as the process to be used when the lowest price technically acceptable proposal method is appropriate. Several important principles may be noted from the FAR guidance on source selection that grantees should consider in their own acquisitions:

  1. Best value selection methodology affords the agency an opportunity to structure the source selection process in a way that is suitable for the nature of the agency’s requirement. No longer is the emphasis on defining one’s “minimum needs,” with its corollary selection process of choosing the lowest price technically acceptable proposal. While that approach will probably be the one most often used by grantees, agencies are now encouraged to structure selection procedures based on the realities of their requirements, and they are not expected to force-fit all acquisitions into a lowest-price-technically-acceptable-proposal mold when that may result in unacceptable performance risks or preclude the agency from selecting products that are a better value to them than the lowest price products or services.
  2. When the agency decides that its requirements are sufficiently defined to use the lowest price technically acceptable selection process, the evaluation factors that establish the requirements of acceptability must be stated in the solicitation. Solicitations must specify that award will be made on the basis of the lowest evaluated price of proposals meeting or exceeding the acceptability standards for non-price factors.
  3. When the agency decides that its requirements are not defined with sufficient precision, or where there are performance risks, so that selection of the lowest priced proposal is not in the best interests of the agency, then a tradeoff process should be used to select the best value proposal. In this case the importance of the non-price evaluation factors that will affect the contract award must be stated in the solicitation. The Federal approach in the solicitation is to state whether all evaluation factors other than price, when combined, are significantly more important than, approximately equal to, or significantly less important than price. This permits the agency to make tradeoffs between price and technical merit. It also permits the offerors to know what is important to the agency - whether to focus on higher quality at the expense of cost, or lower cost at the expense of quality. It is not necessary to publish the specific weights (numerically) of the individual evaluation factors, only their relative importance (i.e., conceptually or adjectivally). However, there is nothing that prohibits the disclosure of weights, and in some cases the disclosure of weights can aid offerors in the development of their approach. By disclosing weights, offerors can focus on those criteria which are truly important to the grantee.
  4. It is important to note that the perceived benefits of the higher priced proposal must merit the additional cost, and the rationale for tradeoffs must be documented in the file. It is not sufficient to say in the file that company X received a higher total score than company Y, and therefore deserves the award. Scores, without substantive explanations of the relative strengths and weaknesses of the competitive proposals, including the perceived benefits to the agency, are an insufficient basis for paying a higher price. The file must explain why company X represents the best value to the agency. The necessity of documenting the specific reasons why proposal A offers a better value to the grantee than proposal B is why a mathematically driven selection decision is not appropriate.
Proposal Evaluation Mechanics

There are many different methods of conducting proposal evaluations to determine best value, and many opinions as to which is the best approach. Grantees may employ any rating method or combination of methods, including: color or adjectival ratings, numerical weights and ordinal rankings. Whatever the method, the important thing is that a statement of the relative strengths, deficiencies, significant weaknesses, and risks supporting the evaluation ratings be documented in the contract file.

Some agencies have employed a quantitative approach of assigning scores to both technical and cost proposals, thereby compelling a source selection that is basically mathematically derived. Proponents of this method usually argue it is the most “objective,” and therefore the fairest, approach to determining a winner. On closer examination, however, all approaches are to one degree or another, subjective. The decision regarding what score to assign any given factor is subjective, and any formulas employed after the initial scoring cannot make the process an “objective” one. Further, grantees must be allowed the flexibility of making sound, factually based decisions that are in their agency’s best interests. We also believe that any approach that assigns a predetermined numerical weight to price, and then seeks to “score” price proposals and factor that score into a final overall numerical grade to automatically determine contract award, is a mistake. Rather, we believe that agencies should evaluate the prices offered but not score the price proposals. Prices should be evaluated and brought along side the technical proposal scores in order to make the necessary tradeoff decisions as to which proposal represents the best overall value to the agency. Agencies should carefully consider the technical merits of the competitors and the price differentials to see if a higher price proposal warrants the award based on the benefits it offers to the agency as compared to a lower price proposal. This is a subjective decision-making, tradeoff process.

The difficulties in trying to assign a predetermined weight to price and then scoring price proposals is that no one is smart enough to predict in advance how much more should be paid for certain incremental improvements in technical scores or rankings (depending on what scoring method is used). For example, no one can predict the nature of what will be offered in the technical proposals until those proposals are opened and evaluated. Only then can the nature of what is offered be ascertained and the value of the different approaches proposed be measured. It is against the actual technical offers made that the prices must be compared in a tradeoff process. Agencies cannot predict in advance whether a rating of “Excellent” for a technical proposal will be worth X$ more that a rating of “Good,” or whether a score of 95 is worth considerably more or only marginally more than a score of 87. It is what is underneath the “Excellent” and the “Good” ratings, or what has caused a score of 95 vs. a score of 87, that is critical. The goal is to determine if more dollars should be paid to buy the improvement, and equally important, how many more dollars those improvements are perceived to be worth. It could well be that the improvements reflected in the higher ratings are worth little in terms of perceived benefits to the agency. In this case the grantee does not want to get “locked in” to a mathematically derived source selection decision. This may very well happen when price has been assigned a numerical score and the selection is based on a mathematical formula instead of a well-reasoned analysis of the relative benefits of the competing proposals.

Some agencies have recognized the pitfalls of using arithmetic schemes to make source selection decisions. They have opted to not use numerical scores to evaluate technical proposals and they have gone to adjective ratings instead; e.g., “Acceptable,” “Very Good,” and “Excellent.” They have also heavily emphasized the need for substantive narrative explanations of the reasons for the adjective ratings, and the Source Selection Official then focuses on the narrative explanations in determining if it is in the agency’s best interest to pay a higher price for the technical improvements being offered. In this scenario price is evaluated and considered alongside technical merit in a tradeoff fashion using good business judgment to choose the proposal that represents the best value to the agency.

Proposal Evaluation Criteria

The solicitation will be more easily planned and developed, the criteria will be more accurately listed and ranked, and the evaluation process will be smoother and more objective if the evaluation process is thoroughly planned in advance. The evaluation process begins with the identification of the criteria that will be most meaningful in assessing the relative advantage of the proposals to your agency. You will generally include:

  1. Past Performance - The solicitation should advise offerors of your approach in evaluating past performance, including evaluating offerors that have no relevant performance history, and should also advise offerors to identify past relevant contracts for efforts similar to your requirement. The solicitation should also allow offerors to provide information on problems encountered on the identified contracts and corrective measures taken. This evaluation should also consider the past performance of key personnel and subcontractors that will perform major or critical aspects of the work. This evaluation of past performance, as one indicator of an offeror’s ability to perform the contract successfully, is separate from the responsibility determination discussed in Section 5.1.

  2. Technical Criteria - Technical factors regarding the specific methods, designs, and systems proposed to be used by the offeror will be considered and they must be tailored to the specific requirements of your solicitation. These factors must represent the key technical areas of importance that you intend to consider in the source selection decision. Technical factors should be chosen to support meaningful comparison and discrimination between competing proposals. If the agency has established minimum standards for determining technical acceptability of proposals, these standards must be clearly set forth in the solicitation.

  3. Key Personnel - An evaluation of key personnel is often suggested when the procurement involves services or requirements where management of the work is a critical factor in determining its success. Qualifications and experience of key personnel may be an important evaluation factor. Some agencies have required oral presentations by key personnel during which the agency officials may ask these key personnel relevant questions to determine the depth of their knowledge in critical areas.

  4. Cost or Price - Cost or price must be considered in every procurement, even those for professional services (e.g., legal, accounting, etc.), unless the services are those defined by Federal statutes as requiring a qualifications-based selection. 121 Competition normally establishes price reasonableness. Therefore, when contracting on a fixed price basis, comparison of the proposed prices will normally satisfy the requirement to perform a price analysis and no cost analysis will be necessary.

    If the contract Is to be a cost reimbursement one, then a cost realism analysis should be performed to determine what the grantee should realistically expect to pay for the proposed effort. Grantees should never simply accept at face value the total estimated cost in the proposal and base a selection decision on the proposed amount since many offerors tend to understate the estimated cost in hopes of winning the contract as the “low bidder.” A cost realism analysis would use each offeror’s specific labor and overhead rates as estimating factors (assuming they are not understated) and the agency’s own estimates for labor hours, travel, materials, etc. The award decision would be made with the cost realism analysis in mind.

  5. Relative Importance of Price and Non-Price Factors - The solicitation must advise offerors if the selection is to be made on a “best value” basis. And as already noted, the solicitation must also advise offerors if price is approximately equal to, less than, or greater in importance than the technical evaluation factors as a whole.

One agency with extensive experience in conducting negotiated procurements uses language in its solicitations that informs offerors of how the agency will select that proposal that is the most advantageous to the agency, which may not necessarily be the highest ranked technically nor the lowest proposed price. They also inform offerors of how price may become a more important selection factor than technical merit when the technical proposals are evaluated as essentially equal. Following is the language used:

The Authority will make the award to the responsible Proposer whose proposal is most advantageous to the Authority. Accordingly, the Authority may not necessarily make an award to the Proposer with the highest technical ranking nor award to the Proposer with the lowest Price Proposal if doing so would not be in the overall best interest of the Authority. . . .

The overall criteria listed below are listed in relative order of importance. As proposals are considered by the Authority to be more equal in their technical merit, the evaluated cost or price becomes more important so that when technical proposals are evaluated as essentially equal, cost or price may be the deciding factor. 122

Evaluation Criteria:

  1. Technical Qualifications (With Details)
  2. Overall Price
  3. Other Relevant Matters (With Details)

 

 

 

 

 

 

 

 

 

4.5.3 Competitive Range

Requirement

Grantees will have a method in place for conducting technical evaluations of the proposals received and for selecting awardees. 123

As discussed in this section, "competitive range determination" is a concept that can be used when developing methods for selecting awardees under the competitive proposal method of procurement.

Discussion

At this stage in the competitive proposal procurement, you have received the proposals from interested offerors and have begun the process of evaluation and selection. Negotiation and the repeated analyses and evaluations required can be very time consuming and there is often a wide range of competence or cost-effectiveness in the initial proposals. You may not wish to expend this effort on all the proposals for two reasons:

  • certain proposals, upon evaluation, may be so much worse than others for price or other reasons, that the possibility of accepting a subsequent offer is so remote as to make negotiations unnecessary; and
  • you may have enough proposals so that you can be assured of negotiating the best buy in dealing only with several of the best; negotiating with more would be wasteful of both your resources and the marginal proposers'.

For these reasons, a commonly used technique is to conduct negotiations only with offerors determined to be within the competitive range. In assessing the competitive range, competition remains an important objective, and the effort in determining the competitive range is to preserve those proposals which stand a reasonable chance of being found acceptable, not to unduly limit competition by eliminating viable proposers.

Purpose

Competitive range is a difficult concept to define in specific terms which would apply to all potential procurements, because professional judgment must be used in establishing the competitive range. Procedures and factors for determining the competitive range may differ from procurement to procurement.

The competitive range can be determined so that it is:

  • Not used to unfairly eliminate offerors;
  • Based on factors and criteria known to all offerors;
  • Applied uniformly to all proposals; and
  • Well documented in the procurement files.

One of your considerations may be that as many offerors as possible be given the opportunity to be considered within the competitive range, so as to attain the goal of full and free competition. Only those offerors whose proposals are determined to be so deficient or so out of line as to preclude meaningful negotiation need be eliminated from the competitive range.

The competitive range can consist of those offerors whose proposals have a reasonable chance of being selected for award, i.e., are acceptable as submitted or can be made acceptable through modification. All responsible offerors whose proposals are determined to be within the competitive range would be invited to participate in any oral and/or written discussions.

Best Practices

While it is not possible to identify all of the specific steps and analyses that could be performed in determining which proposals are within the competitive range, the following are provided for consideration in making this determination:

  • The determination of which proposals are within the competitive range is usually made by the evaluation team (or procuring official, if there is no evaluation team).
  • Competitive range determinations can be made using cost/price, technical and other factors identified in the solicitation.
  • Detailed independent estimates prepared by the initiating department or project office can be considered when assessing the cost/price aspects of competitive range.
  • The evaluation team's scoring of offerors' technical and management proposals is a logical basis for establishing which proposals are within the competitive range, as is scoring of other evaluation/award criteria specified in the solicitation. However, you may paint yourself into a corner if you commit to competitive range determinations based on predetermined "cutoff scores."
  • Borderline proposals need not automatically be excluded from the competitive range, if they are reasonably susceptible of being made acceptable. Remember that as a general rule, if there is doubt as to whether a proposal should be in the competitive range, the goal of competition is served by including it.
  • Only those proposals that are judged to be so deficient or so out of line as to preclude further meaningful negotiations need be eliminated from the competitive range.
  • Competitive range determinations are significant documents in the procurement file. This documentation is helpful to serve as a basis for debriefing offerors, and for responding to inquiries and protests. Many systems notify, in writing, any offerors whose proposals have been eliminated from consideration for award. Such notification occurs at the earliest practicable time after this determination is made.
  • Written and/or oral discussions are usually conducted with all offerors determined to be within the competitive range.
  • At the conclusion of discussions with offerors in the competitive range, the procuring official may ask all offerors to submit their best and final offers in writing. This combines complete fairness for each offeror, with competitive incentive for each to make its best realistic offer. For a discussion on best and final offers, reference Section 4.5.5.2, "Request for Best and Final Offer."

4.5.4 Discussions and Clarifications

Definitions

Negotiation - A procedure that includes the receipt of proposals from offerors, permits bargaining and usually affords offerors an opportunity to revise their offers before award of a contract.

Discussion - Any oral or written communication between a procurement official and a potential offeror (other than communication conducted for the purpose of minor clarification) whether or not initiated by the procurement official, that (1) involves information essential for determining the acceptability of a proposal, or (2) provides the offeror an opportunity to revise or modify its proposal.

Clarification - A communication with an offeror for the sole purpose of eliminating minor irregularities, informalities, or apparent clerical mistakes in a proposal.

Discussion

You may wish to obtain clarifications from one or more proposers, or hold discussions with all proposers immediately after receipt of proposals. However, it is also possible to proceed with evaluations and determination of a competitive range as described in the following sections, before discussions are held. Most typically, the first discussions are oral presentations made by a short list of proposers within a competitive range. If discussions are held with any proposer at any phase of the procurement, holding discussions with all remaining proposers (not already excluded from the competitive range as described in Section 4.5.3, "Competitive Range") will increase the likelihood and the appearance of the most accurate and objective evaluation and negotiation.

Best Practices

You are not required to conduct discussions with any offeror provided: (1) the solicitation did not commit in advance to discussions or notified all offerors that award might be made without discussion, and (2) the award is in fact made without any written or oral discussion with any proposer. Normally, however, you will need to conduct discussions. If this is the case, you will preserve the competitiveness and fairness of your procurement by conducting discussions with all offerors who submitted proposals in the competitive range. The competitive range is determined on the basis of cost or price and other factors and includes the proposals that have a reasonable chance of being selected for award. The content and extent of the discussions is a matter of your judgment based on the particular facts of the procurement.

Confidentiality has many advantages during the evaluation process. The name and number of proposals received is not normally considered a public record and need not usually be released to the competitors or the public at large. Your control of this information may ease the proposers' competitive tension and allow you to conduct more meaningful negotiations. Competitive information provided relative to both the technical and cost proposals may include trade secrets protected by statute and can usually be kept confidential during the evaluation process, and, in some instances, after the award of contract. However, state public information laws and the Federal Freedom of Information Act can also affect your latitude, particularly if there is public interest in the procurement and inquiries are made by non-competitors.

If you enter negotiations or discussions (as opposed to simple requests for clarification) with one offeror, an automatic impression of unfairness is avoided by entering them with all remaining offerors. An occasional mistake is to circumvent the process merely by requesting "clarifications" when you are in fact conducting discussions. If the questions, and the concurrent opportunity to respond, are sufficient to lead an offeror into areas of perceived deficiency in its proposal, discussions have been held. If discussions are held, what should the content be or how should they start? Competition and fairness are served by conducting meaningful discussions with offerors.

This includes advising them of deficiencies in their proposals and affording them the opportunity to satisfy the requirements by the submission of revised proposals. You are not, however, obligated to afford offerors all-encompassing discussions, or to discuss every element of a technically acceptable, competitive-range proposal that has received less than a maximum possible score. Also, if a proposal is technically unacceptable as submitted and would require major revisions to become acceptable, you are not required to include the proposal in the competitive range for discussion purposes.

Sometimes you may be in the uncomfortable position of having concluded discussions only to discover there is a significant mistake or an aspect the evaluators do not understand in one proposal. Since allowing one bidder to correct its proposal would constitute discussions with that firm, discussions must reopened with all bidders in the competitive range and the must be allowed the opportunity to submit revised proposals.

During discussions with offerors, you may be requested to ask all proposers to submit proposals with an advantageous approach proposed by one of them. Someone on your team may suggest that a technique used by proposer A would complement proposer B's approach well and could result in an advantageous offer from B. Also, after price proposals have been evaluated, someone may suggest that a proposer with a high technical score should be asked if it can meet a price which happens to be the price of a competitor. Such techniques are considered technical leveling, technical transfusion or auctioning The disadvantage of these techniques is that proposers may react adversely. Because they are concerned about their position relative to their competitors, and want to keep their strengths confidential from their competitors, they may become more secretive in their discussions with you if they sense you may relay their ideas, pricing, or positions to their competitors. This is not to discourage discussion of price or suggesting major revisions in a proposal, but rather to discourage the disclosure, even indirect, of one proposer's information to another. They may hold back their strengths and valuable information, waiting for a BAFO. This can greatly inhibit the negotiation of the most advantageous proposal.

4.5.5 Additional Submissions

4.5.5.1 Request for Revised Proposals

Discussion

The most common tool used by procurement officials in competitive negotiations is a request for a revised proposal. Typically, the deficiencies of a proposal are listed and explained. A complete revised proposal, including price (except under the Brooks Act) is requested from each offeror in the competitive range. Unless explicitly stated otherwise, the revised offer extinguishes the prior offer. The proposer should identify all changes in the revised offer. The submission of the revised offers can trigger another round of evaluations, determination of a new competitive range, and discussions. You may repeat this cycle as many times as necessary to obtain the most advantageous offers. If you conclude you have obtained the most advantageous offer possible, you may recommend award.

Purpose

The purpose of the request for revised proposals, like the original request for proposals, is to harness the competitiveness and creativity of the proposers to produce the most advantageous proposal for your customers. You and the proposer may understand only gradually each other's capabilities and constraints. Each written proposal may raise new questions and new possibilities. You can elicit the best improvement each time a revised proposal is prepared by listing clearly the deficiencies of the current proposal as you understand it.

Although you expect proposers to respond primarily to your requests in preparing revised offers, you also want to learn how your requests affect other aspects of their proposals. Based on the format of the proposals and the nature of the changes you are requesting, you may require that revised proposals be submitted in a form that will both easily allow you to identify the changes and also form the basis of a coherent contract, if accepted.

Private parties in bilateral negotiations would probably make counter-offers to each other to advance the process. There are disadvantages to your making a counter offer in a competitive proposal procurement. Not only would a counter-offer on your part extinguish the proposer's last offer, it would place the proposers (possibly more than one) in the position to accept or reject. Therefore counter-offers are usually not made by procuring agencies.

4.5.5.2 Request for Best and Final Offer

Definition

A best and final offer (BAFO) can be requested of each offeror in the competitive range at the conclusion of discussions (negotiations) with those offerors. If an offeror does not respond to your request, your procedures may allow you to consider the most recent offer to be the best and final offer.

Discussion

As the procuring official, you are now at the stage of your competitive negotiation process where you are ready to receive final offers from the offerors still within the competitive range. You now ask for a "best and final offer" from those offerors. If the other offers have no viable chance of being made competitive by this time, then you may request the BAFO from only one proposer; of course there is little competitive pressure under those circumstances. Upon timely receipt of the BAFO(s) and final evaluation by the agency, you should be in a position to recommend award to a firm or individual in accordance with the terms and conditions of the solicitation.

Purpose

During the course of the evaluation process of the competitive proposal procurement, you have entered into discussions (negotiations) and clarifications 124 with those offerors still in the competitive range. 125 As a result of those discussions, you may have amended some parts of the solicitation and may have asked for revised proposals during the negotiation process. You now feel that you have completed negotiations and are ready to ask for and then evaluate the offerors' best and final offers. If you believe there is a significant possibility that even if a BAFO is requested, you will probably want to improve further on the next offers, then you are not ready to request BAFOs and should, instead, request revised offers. This provides the offerors an opportunity to respond to the requests and to provide their best offer in response to the current solicitation.

Best Practices

The ability to enter into discussions with offerors in the competitive range is one of the greatest advantages of utilizing the competitive proposal method of procurement. This process allows offerors to resolve questions and concerns they may have about the commodity or service being procured and the public agency to resolve questions and concerns it may have about the offerors' proposals. At some point during the negotiation process, a decision is made that all out-standing issues have been resolved to the satisfaction of the parties involved. This is the time to formally conclude the discussions by requesting that each offeror remaining in the competitive range submit its best and final offer. The request normally would include the following elements:

  • Specific notice that discussions are concluded;
  • Notice that this is the opportunity for the offeror to submit a best and final offer;
  • A definite, common cutoff date and time that allows a reasonable opportunity for the preparation and submission of the best and final offer; and
  • Notice that the final offer must be received at the place designated by the time and date set in the request and is subject to any provisions dealing with late submissions, modifications and withdrawals of proposals set forth in the solicitation.

Following receipt of the best and final offers, you will evaluate them in accordance with terms of the solicitation and recommend award in accordance with those terms.

Request for subsequent best and final offers - It is the preferred practice to only ask for one "best and final offer." Requests for additional best and final offers should be avoided if at all possible. 126 However, additional technical or price/cost-related issues may surface as a result of the offeror's final submission or other factors that preclude a reasonable justification for contractor selection and award. If it is clearly in the procuring agency's best interests, discussions may be reopened and the issues resolved. Again, at the conclusion of the round of discussions, an additional request for best and final offers would be issued to all offerors still within the competitive range.

4.5.6 Award Based on Initial Proposals

Requirement

You shall make award only to responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed agreement. Consideration shall be given to such matters as contractor integrity, compliance with public policy, record of past performance, and financial and technical resources. 127

Awards will be made to the responsible firm whose proposal is most advantageous to the grantee's program with price and other factors considered. 128

You may accept one of the initial proposals if it can be clearly demonstrated that acceptance of the most favorable initial proposal without discussion would result in a fair and reasonable price. Therefore, as a general matter, it is advantageous for solicitations to contain a notice that award may be made without discussion of proposals received, and that proposals should be submitted initially on the most favorable terms possible, from a price and technical standpoint.

You are not required to conduct discussions with any offeror provided: (1) the solicitation did not commit in advance to discussions or notify offerors that award might be made without discussion, and (2) the award is in fact made without any written or oral discussion with any proposer. This is often the case where the proposal is for services where rates are regulated and the competition is on the basis of service, e.g., certain types of insurance. If you accept an initial offer, the determination of fair and reasonable price will be an important document in your file. Normally, however, you will need to conduct discussions.

4.5.7 Withdrawal of Proposal

Definition

Firm offer - A promise to undertake specified obligations in exchange for consideration which promise may be accepted for a specified or implied period of time; a firm offer cannot be withdrawn during the period for which it remains firm.

Discussion

Your solicitation normally states a date and time by which offers must be submitted, and a period following that date during which the offers remain firm. (See Section 4.3.2.3, "Solicitation") Competition is best served and unnecessary alternate proposals are avoided by allowing proposers to withdraw or modify their proposals up to the time due. However, after the due date, the proposals are usually firm and cannot be withdrawn during the validity period. To ensure the legitimacy of proposals and discourage frivolous proposals, you should have the right to accept an initial proposal without regard to whether the proposer has had second thoughts.

Purpose

As in the case of sealed bids, it is important to the integrity of your procurement that all offers are serious and not submitted for exploratory reasons or to cast a certain light on other offers. Although the negotiation process, in contrast to sealed bidding, reduces the incentive to this sort of gamesmanship, the concern is still valid, particularly where you may wish to accept an initial offer. It will be important to proceed from offer to offer, eliminating offerors from the competitive range on a firm basis, to ensure that you arrive smoothly at a conclusion. It is customary, therefore, not permit proposals to be withdrawn after submission.

Best Practices

The terms of your solicitation and your requests for revised offers or BAFOs can state a period during which the offers remain firm. (See Section 4.3.2.3, "Solicitation") A good practice is to note this period on the offer form used by proposers to summarize their proposals.

Solicitations also often state that modifications or withdrawals will be permitted until the time due. In the case of a revised offer or BAFO, your solicitation can provide that the withdrawal of the offer would result in the continued validity of the most recent offer.

4.5.8 Debriefing Unsuccessful Offerors

Discussion

Proposers excluded from the competitive range or from award may request a debriefing or you may offer to provide a debriefing. A candid explanation of the process can serve the purposes of defusing any potential dispute by the disappointed proposer and encouraging future proposals. If a dispute is already probable, there is no requirement to notify or debrief unsuccessful offerors, but the litigation and other risks must be carefully weighed.

Best Practices

Your decision not to include a proposer in the competitive range or to recommend award to another proposer may have to be explained to the public and to the offeror. 129 If the reasons and rationale are documented, you can proceed with confidence. Here, the advantages of an objective, quantified scoring process 130 implemented by a qualified committee become obvious; even if you choose not to reveal the details of the scoring, you will be more convincing when speaking with the support of a wealth of independent, objective data. In some cases, the details of the scoring may be subject to disclosure as public information after the contract is awarded.

By notifying the disappointed firm expeditiously, you will not permit doubts to grow, you can approach the firm on the basis of openness and candor, and you will share the common perspective of the events to date of your decision, rather than any subsequent developments which may cast a different light. Be prepared to discuss the reasons with the offeror. This may be a good opportunity to educate a firm or individual on the competitive proposal process. Avoid comparisons to the successful offeror. Focus on the strengths and weaknesses of the offer itself -- be specific. If done properly and professionally, you may see this "smarter" proposer again in a future procurement. This is your ultimate goal, to maximize competition.

On the other hand, unless your procedures require you to notify the disappointed proposer immediately, you may be able to wait to inform the firm until contract award is made to the successful proposer. Particularly if you have reason to believe a firm is inclined to dispute or delay the action, you may be able to proceed unilaterally without encouraging any delaying tactics. To maximize the likelihood of award without delay, this alternative school of thought faces a number of problems. The disappointed firm may be suspicious because you have not contacted him/her about any further discussions, or may otherwise learn that its offer is not being considered for award. If you wait until award is made (which is a public action), the proposer will be left with only two choices, to do nothing or to file legal action. If the firm chooses the first course of action, he/she may be reluctant to propose on your jobs again because they may believe "games" were played. If the proposer chooses the second course of action, to file either a protest or a lawsuit, this may result in a delay in the commencement of contract performance and substantial other costs to your agency.

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4.6 Non-Competitive (Sole Source) Proposals

4.6.1 Justification for Use

Requirement

In addressing the various methods of procurement that may be used, Section 9.h. of FTA Circular 4220.1E provides:

Procurement By Noncompetitive Proposals (Sole Source). Sole source procurements are accomplished through solicitation or acceptance of a proposal from only one source, or after solicitation of a number of sources, competition is determined inadequate. A contract amendment or change order that is not within the scope of the original contract is considered a sole source procurement that must comply with this subparagraph.

  1. Procurement by noncompetitive proposals may be used only when the award of a contract is infeasible under small purchase procedures, sealed bids, or competitive proposals and at least one of the following circumstances applies:
    1. The item is available only from a single source;
    2. The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation;
    3. FTA authorizes noncompetitive negotiations;
    4. After solicitation of a number of sources, competition is determined inadequate; or
    5. The item is an associated capital maintenance item as defined in 49 U.S.C. Section 5307(a)(1) that is procured directly from the original manufacturer or supplier of the item to be replaced. The grantee must first certify in writing to FTA: (i) that such manufacturer or supplier is the only source for such item; and (ii) that the price of such item is no higher than the price paid for such item by like customers.
  2. A cost analysis, i.e., verifying the proposed cost data, the projections of the data, and the evaluation of the specific elements of costs and profit, is required.

Discussion

Sole source solicitations may not be issued nor may noncompetitive proposals be accepted except under the unusual conditions listed above. Often, there are practical means of obtaining competition which are not at first apparent. If a non-competitive proposal is accepted, a careful cost analysis must be done. Because of the strict scrutiny applied to sole source procurements, painstaking documentation of the justification for the noncompetitive proposal and of the cost analysis is valuable in the long run. FTA approval for noncompetitive negotiation is not required unless you are relying on justification (c) in the Circular. This places a heavy burden on you to ensure you use noncompetitive negotiation only in the public interest and according to the Federal requirements. State requirements may be more restrictive than Federal.

Purpose

Public procurement essentially operates in an environment where full and open competition is the primary goal or aspiration and, in many cases, is a mandate. 131 However, there may be very legitimate reasons or situations when, as opposed to "full and open" competition, limited or no competition exists The FTA, through the requirements set forth above, has established guidelines when sole source procurements may be used if FTA funds are involved.

Even though we will address federal requirements in this section, you should also be aware of any limitations or restrictions that your state law or agency regulations may place on you.

Because procurement by sole source is a noncompetitive procurement, it is treated as an "exception-to-the-norm" in public procurements and, as a result, your ability to use it requires justification and, frequently, pre-approval before you award a sole source contract. In this context, "justification" equates to paperwork and documentation, the bane of all procurement professionals but a necessary part of our genetic make-up.

Best Practices

As quoted above, FTA Circular 4220.1E establishes a matrix that should be followed in justifying the use of noncompetitive or sole source procurements.

Step One - You must first determine that your requirement cannot be obtained under small purchase procedures, 132 sealed bids, 133 or competitive proposals. 134 Does more than one source exist? Does adequate time exist to obtain your requirement through a competitive process? Is Item B (for which competition exists) an acceptable substitute for Item C (for which there is only one source)?

  • Stated another way, contracting officers should take reasonable steps to avoid using sole source procurement except in circumstances where it is both necessary and in the best interest of the agency.
  • If one of the three methods can be used (or is feasible), even if you would rather not, sole source is not an option for you.

Step Two - If one of the competitive processes is not feasible in your situation, you may use sole source procurement if at least one of the following circumstances is present:

  • The item is available only from a single source
  • - In justifying the use of this circumstance, you will frequently address such factors as:

Single Source Factors:

How did you arrive at the conclusion this item represents your minimum need or requirement? Is this a "nice to have" with all the "bells and whistles" or does it really represent your requirement or minimum need?

How did you determine availability? Did you check on prior procurements for the same or similar items?

Are there other sources? Are they responsible? Are identical or compatible parts or equipment available from any other source?

Who prepared the specification or statement of work? Did a vendor or contractor assist? If so, will they benefit somehow by the decision to proceed with a sole source contract?

Examples:

Utility services (how many sources do you have for electricity in your community?) Limited rights in data, patent rights, copyrights, or secret processes (If one entity owns the patent on a process or product you require, can anyone else meet your need?) Relocation of a major natural gas distribution line from your rail right of way (the natural gas utility company is the only source available to work on the gas line)

  • The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation
    • Two factors: public exigency or emergency and no time to competitively procure!
  • When your agency's need for the supplies or services is of such an unusual or compelling urgency that the agency would be seriously injured unless sole source procurements were utilized, it can be justified.
  • In an emergency situation, it is not unusual for health and safety issues to be a factor in the decision to proceed with a sole source.
  • If the agency itself is responsible for being short of time -- i.e., lack of advance planning, delays in procurement administration due to shortage of procurement personnel or incompetence of procurement personnel, money in the budget balance expires the end of next month, particular caution should be exercised in making a determination regarding whether the emergent consequences of delay warrant noncompetitive negotiation and to what extent the agency contributed; an independent opinion may be warranted.
  • If the emergency is to repair a hole in the roof of your maintenance facility where a tree limb fell through it because of the storm last night, is the sole source procurement a patch job or a replacement of the roof because it was getting old anyway? One school of thought is that you should only perform the minimal work necessary to alleviate the exigency or the emergency. Don't use it as an excuse to do remedial work or buy a year's supply of something you intended to do competitively next month anyway.
  • While many state laws parallel the other conditions under which Federal funds may be used for non-competitive proposals, state laws for emergency situations are often more restrictive. Furthermore, the most critical delay in an emergency may be obtaining your agency's authority, e.g. at a monthly board meeting; inquire about (and recommend changes to, if appropriate) your Board's policy for emergency procurements.
  • FTA authorizes noncompetitive negotiations
    • You may have a situation you feel warrants the utilization of sole source procurements but it doesn't quite fit into one of the other circumstances. You are a small transit property with a vehicle monitoring system you installed last year. The accuracy and utility of the system is exceeding all expectations and you now need to display the schedule adherence information in three new downtown transfer locations. Could you go sole source to Brand X? If you justify why (compatibility requirements, interfaces with proprietary software, unavailability of interested competition,, etc.), this may be the sort of procurement you should discuss with the FTA and request its permission to use sole source.
  • After solicitation of a number of sources, competition is determined inadequate
    • You have issued an IFB and only received one bid from a responsible contractor, but you cannot determine its price to be reasonable. If you are satisfied about the bidding environment and the reasons why you only received one bid, you can negotiate a sole source contract to arrive at a reasonably priced contract.
  • The item is an associated capital maintenance item as defined in 49 U.S.C. Section 5307(a)(1) that is procured directly from the original manufacturer or supplier of the item to be replaced

Step Three - DOCUMENTATION of justification. It is recommended that you document very thoroughly and carefully the rationale you went through to justify your sole source procurement. Your agency may have very specific requirements for "Findings and Determinations" that must be followed. You may have pre-approval requirements at a certain dollar threshold that must be met -- your Board of Directors may require its approval of any proposed sole source procurement in excess of $250,000 prior to the commencement of the negotiations. You may have other documentation requirements peculiar to your agency, state, or local government that you must meet prior to the initiation of negotiations which must be met.

4.6.2 Negotiation of Contract

Discussion

"Once I have justified the use of procurement by noncompetitive proposals, what do I do next? How do I negotiate this thing?"

Best Practices

Single Offer after Competitive Solicitation - As previously discussed in Section 4.4.3, "Single Bid," you may conclude after receiving only a single bid that competition is inadequate and that you should negotiate with the single bidder to establish a fair and reasonable price. You may be in this situation because you only received one bid or proposal from one source or you have determined that the competition you received was otherwise "inadequate." To proceed in this case, you must meet the requirements for noncompetitive negotiation. However, you do not need to issue a new solicitation because your requirement is adequately stated. You may, after meeting the requirements of the previous section, proceed to negotiate a reasonably priced contract using the negotiation procedures discussed in Sections 4.5.2, "Evaluation of Proposals," through 4.5.8, "Debriefing Unsuccessful Offerors."

All Other Cases - In other circumstances you have justified, it is recommended that you request a proposal from the source. There is no need to advertise - there will be no competition! Your request for a proposal can be as formal as you want -- from letter requests up to a full blown solicitation document. Regardless of the form used, you want to:

  • refer to, or attach, all terms and conditions of the solicitation. You still need to comply with federal representation and certification requirements. You still will want to have special and general provisions. You may have additional agency requirements that must be met. What is the DBE goal for this procurement -- how will it be met?
  • refer to, or attach, the specifications or statement of work for the supply or service being procured.
  • request the applicable cost or pricing data. 135

Allow adequate time for the contractor to prepare its proposal prior to submission back to you.

Review the proposal with impacted internal agency staff -- really prepare for your negotiations with this sole source.

Negotiate the final terms and conditions of the contract using the negotiation procedures you would use in your competitive proposal method of procurement. 136 These negotiations can be more pointed and open because there is no competitive environment involved -- the integrity of a procurement process is not involved so issues like "technical leveling" and "transfusion" do not have to be considered.

As discussed in Section 5.2, "Cost and Price Analysis," {and as required by FTA Circular 4220.1E Section 9.h.(2)}, a cost analysis is required. This includes verifying the proposed cost data, the projections of the data, and the evaluation of specific elements of costs and profit.

4.6.3 Associated Capital Maintenance Item

Requirement

Original Equipment Manufacturer components may be procured by competitive negotiations only if:

(e) The item is an associated capital maintenance item as defined in 49 U.S.C. Section 5307(a)(1) that is procured directly from the original manufacturer or supplier of the item to be replaced. The grantee must first certify in writing to FTA: (i) that such manufacturer or supplier is the only source for such item; and (ii) that the price of such item is no higher than the price paid for such item by like customers. 137

Definition

Associated capital maintenance item - Equipment, tires, tubes, or material, each costing at least 0.5 percent of the current fair market value of rolling stock comparable to the rolling stock for which the equipment, tires, tubes, and material are to be used. 138

Discussion

If you can purchase a replacement part or component for rolling stock only from the original manufacturer, and the item costs at least 0.5% of the vehicle price, then you may procure the item by noncompetitive proposal provided you make the requisite certifications in advance to FTA and determine the price to be reasonable based on a cost analysis.

Best Practices

In order to "qualify" to use this circumstance to justify sole source, the FTA has established the following requirements:

  • The item must be an associated capital maintenance item as defined above.
  • The item must be procured directly from the original manufacturer or supplier of the item to be replaced.
  • Prior to execution of the contract, you must first certify in writing to the FTA that such manufacturer or supplier is the only source for such item, and that the price of such item is no higher than the price paid for such item by like customers.

Approval of the FTA is not required -- just certification of the grantee (you).

When you read these requirements carefully, you are still essentially justifying a sole source {as in FTA Circular 4220.1E Section 9.h.(1)(a)} and certifying that fact to the FTA. Also, even though you are certifying that the price of the item is no higher than the price paid for such item by like customers, you are still required to perform a cost analysis as part of the contract negotiation and award process.

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4.6.4 Unsolicited Proposals

Discussion

The subject of unsolicited proposals is one not covered in transit law or the common grant rule. In cases like this, FTA would look to the Federal Acquisition Regulations (FAR) provisions as a guide concerning the circumstances under which a sole source award would be appropriate. The FAR covers this subject as FAR Part 15.6. The FAR is available online at http://www.arnet.gov/far/.

When unsolicited proposals are submitted to a grantee, the agency must never assume that the product being offered in the unsolicited proposal is the only, or best, product available to meet the needs or objectives of the agency. The essential consideration in whether or not to accept an unsolicited proposal without competition (i.e., to make a sole source contract award) is whether or not the proposal is presenting an innovative, proprietary concept that is itself essential to accomplishing the agency’s objective. If a company is merely presenting a rationale for doing certain work that could be done by others if given the chance to compete, then there is no permissible basis to award a sole source contract.

In the case of a proprietary software product that is being offered to achieve a certain goal, the transit agency receiving the proposal could not, for example, release the offeror’s proprietary programming codes in a competitive solicitation. But the agency should, if it deems the mission one it wants to pursue, compete the contract award in terms of describing what the agency’s objective or mission is in order to see what other firms might offer in terms of software solutions.

New York City Transit (NYCT) requires that any contract resulting from an unsolicited proposal be justified in writing by the Procurement Office, regardless of the department that received the proposal. Each proposal is reviewed to determine if the goods or services being offered are essential to NYCT and whether the proposer is simply offering something that can be obtained through open and competitive bidding. If it is determined that the goods or services being offered would benefit NYCT, and could be obtained through competitive bidding, then there is not sufficient justification for a sole source award.

Revenue Contracts - The subject of unsolicited proposals is discussed in the context of revenue contracts in BPPM section 1.3.3.8 – Revenue Contracts. With respect to unsolicited proposals in the context of companies seeking to use FTA funded assets for business purposes, the BPPM offers the following guidance:

“Unsolicited Proposals - These may come forth when companies see an opportunity to use the transit system (an FTA-funded activity) to enhance their business interest. It may appear from such proposals that no other company could offer the same product or service. However, this does not justify a sole source contract. If the idea or activity is of interest to you, the concept should be evaluated on its own merit and revenue producing potential. If the decision is to implement it, then a competitive process should be used to select the contractor, unless you determine that the proposed concept itself is proprietary.”

New York City Transit (NYCT) was approached recently by a company, which submitted an unsolicited proposal, wanting to install an electronic information system on the subway cars. The company wanted to program the system so that riders would know what was overhead, e.g. Wall Street, theater district. New York City decided to investigate the concept first to determine if it was something that they wanted to do to enhance the subway system. Deciding that they liked the idea, they then prepared an RFP and solicited vendors on a competitive basis.

Metropolitan Atlanta Rapid Transit Authority (MARTA) received an unsolicited proposal from a company about use of subway right-of-way for linking Atlanta with fiber optic cable using MARTA's system-wide conduits. MARTA determined that they had unused conduits and could lease space in them to various telecommunication companies. They contacted the regional FTA office and received their approval for a non-exclusive RFP to seek competitive proposals for twenty-year leases. This has produced successful revenue contracts.

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4.7 SPECIAL PROCUREMENT METHODS

4.7.1 Multi-Step Procurements

Discussion

You have discussed in detail the differences between the competitive bidding process and the competitive proposal process but I've got one of those 'tweeners' -- something that falls somewhere between those two processes. There are a number of various technical approaches that would probably meet our requirement and, if we determined which firms met our minimal technical requirements, we could compete amongst them on the basis of the lowest responsive, responsible bidder. But we may have to enter into discussions with all offerors in order to determine technical acceptability. Can this be done?

FTA Circular 4220.1E permits a great number of procedures that vary from the classic procedures discussed in most of this Manual. For example, a variation that has long-been recognized in public procurement is referred to as the two-step, sealed bidding method of procurement. While it has some characteristics of both sealed bidding and competitive proposals, it complies with all FTA Circular 4220.1E requirements for the competitive proposal process. This process allows, in the first phase, for the submission of unpriced technical proposals in response to the request. In the second phase, only those firms that have been found to be technically qualified in the first phase are invited to submit sealed bids, as though it were a regular sealed bid procurement. Award is then made to the lowest, responsive and responsible bidder. . This process allows, in the first phase, for the submission of unpriced technical proposals in response to the request. In the second phase, only those firms that have been found to be technically qualified in the first phase are invited to submit sealed bids, as though it were a regular sealed bid procurement. Award is then made to the lowest, responsive and responsible bidder.

Best Practices

Overview

Two-step bidding is a two phase process generally consisting of a technical first phase composed of one or more steps in which bidders submit unpriced technical proposals (and discussions are held with offerors of those proposals, if necessary) to be evaluated by the transit property, and a second phase in which those bidders whose technical offers are determined to be acceptable during the first phase have their priced bids considered.

The process is designed to:

  • Obtain the benefit of sealed bidding by award of a contract to the lowest responsive, responsible bidder, and, at the same time,
  • Obtain the benefit of the competitive proposal method of procurement through the solicitation of technical offers and conducting discussions to determine the acceptability of the technical offers.

The process may be recognized by your state law as a separate method of procurement or may be allowed as a variation of a sealed bidding statute, particularly in those states where limitations on the use of the competitive proposal method exists.

Conditions for Use

Transit properties generally follow one of two stated policies. Either this method may be used when it is not considered practical to initially prepare a definitive purchase or contract description which is suitable to permit an award based on price. Or alternatively, in the absence of factors or laws that require the use of sealed bidding, some authorities 139 establish a preference of the two-stepped process over negotiations when all of the following conditions are present:

  • Available specifications are not definite or complete or may be too restrictive without technical evaluation (and any necessary discussion), of the technical aspects of the requirement to ensure mutual understanding between each source and the Authority;
  • Definite criteria exist for evaluating technical proposals;
  • More than one technically-qualified source is expected to be available;
  • Sufficient time will be available for use of the two-step method; and
  • A firm-fixed-price contract or a fixed-price contract with economic price adjustment will be used.
Phase One of Process

This process normally includes the following steps:

Solicitation phase - In addition to the normal requirements for an IFB, 140 the first phase solicitation also generally provides:

  • That unpriced technical offers are requested; 141
  • That the procurement is a two-step sealed bid procurement and that priced bids will be considered in the second phase and only from those bidders whose unpriced technical offers are found to be acceptable in the first phase;
  • The criteria to be used in evaluating the unpriced technical offers;
  • That the Authority, to the extent determined to be necessary, may conduct oral or written discussions regarding the technical offers;
  • A statement that bidders should submit proposals that are acceptable without additional explanation or information and that the Authority may make a final determination regarding the acceptability of the proposals based solely on the basis of the proposals as submitted and may proceed with the second step without requesting further information from any bidder;
  • That bidders may designate those portions of the technical offers which contain trade secrets or other proprietary data which are to remain confidential; and
  • That the item being procured shall be furnished generally in accordance with the bidder's technical offer as found to be technically acceptable and shall meet the requirements of the solicitation.

Amendments to solicitation in two-step process:

  • Amendments issued prior to the receipt of technical offers are important to all prospective bidders as in a "normal" IFB. 142
  • Amendments issued after receipt of the technical offers need be submitted only to those bidders who submitted unpriced technical offers and they should be allowed to submit new technical offers or amend those previously submitted. 143

Receipt of unpriced technical offers. Unless required by law, unpriced technical offers need not be publicly opened.

  • Offers are typically opened in front of two or more authority employees as witnesses.
  • Offers are usually not disclosed to unauthorized persons.

Evaluation of unpriced technical offers should be in accordance with the criteria set forth in the solicitation. The unpriced technical offers should be categorized as

  • Acceptable;
  • Potentially acceptable (i.e., reasonably susceptible of being made acceptable); or
  • Unacceptable, in which case the contracting officer records in writing the basis for this finding and makes it part of the procurement file. 144
  • Any proposal which modifies or fails to conform to the essential requirements or specifications of the solicitation can be considered nonresponsive and categorized as unacceptable.
  • When an unpriced technical offer has been determined to be unacceptable, the bidder may be notified of that fact and is not normally afforded additional opportunities to submit supplemental information amending its technical offer.

Discussions involving unpriced technical offers may be conducted with any offeror who submitted an acceptable or potentially acceptable technical offer.

  • Discussions can be conducted in accordance with the principles discussed in Section 4.5.4 involving the competitive proposal method of procurement.
  • Once discussions have commenced, any offeror who has not been notified that its offer has been found unacceptable may submit supplemental information amending its technical offer at any time until the closing date established.
  • Such submission may be made at the request of the Contracting Officer, or upon the offeror's own initiative.

Phase Two of the process may be initiated without discussions if there are a sufficient number of acceptable proposals to ensure adequate price competition under Phase Two. Based upon the results of Phase 1, you may wish to revise the technical specifications (minimum technical requirements) in your Phase 2 IFB, in a manner that does not conflict with the final unpriced proposals. While you have no assurance that the prices will be close to each other, you know to what degree the proposals have competitive technical merit.

Phase Two of the Process

The procedures discussed in Section 4.4, "Sealed Bids," can be followed in Phase Two. Each bidder who submitted an unpriced offer that was determined to be acceptable in Phase One is invited to submit a priced offer. The IFB states that the bidder shall comply with the specifications and the offeror's acceptable technical proposal. No additional public notice or advertisement of the IFB need be given because such notice was given during the Phase One Process.

Award would be made to the lowest, responsive responsible offeror as discussed in Section 4.4, "Sealed Bids."

4.7.2 Governmental Prices and Contracts

4.7.2.1 Procurements from General Services Administration Schedules

Current Status

The Federal Supply Schedule program has provided Federal agencies with a simplified process of acquiring commonly used supplies and services in varying quantities at lower prices while obtaining discounts associated with volume buying. Congress, in enacting Section 1555 of the Federal Acquisition Streamlining Act of 1994 (Public Law 103-455), 145 extended the cooperative purchasing provisions of GSA enabling legislation:

(b)(2)(A) The Administrator may provide for the use of Federal supply schedules of the General Services Administration by any of the following entities upon request:(i) A State, any department or agency of a State, and any political subdivision of a State, including a local government. . .

However, Section 4309 of the National Defense Authorization Act for Fiscal Year 1996 146 suspended the authority of the Administrator of the General Services to allow state and local governments to use the federal supply schedules. The provision suspended the authority until the later of the period ending 18 months after the date of enactment of this Act or the period ending 30 days after the date after the Administrator has reviewed a General Accounting Office report that assesses the effects of state and local governments use of the federal supply schedules and has submitted the report and comments on the report to Congress. The Act also directed the General Accounting Office to include in its report to the Administrator an assessment of the impact on costs to federal agencies from the use of federal supply schedules by state and local governments.

In light of this recent legislation, what is the status of state and local government (including most transit properties theoretically) being able to use the GSA federal supply schedules? It is understood that at least one transit property (Washington Metropolitan Area Transit Authority) has at least limited authority from the GSA to utilize the federal supply schedules. However, we are not aware of other Authorities being able to utilize those Schedules. With this legislation, we must await at least until August 1997 (18 months from the date of enactment of the Defense Authorization Act of 1996) before we know what the GSA and GAO reports to Congress will say and it could be longer than that if the required reports are later than then. This does not appear to be a source that we should expect to be able to use anytime soon.

At such time as this matter is clarified, the FTA, through this Manual, will provide instruction and guidance to its grantees

4.7.2.2 State and Local Schedules

Requirement

An additional general procurement standard applicable to third-party procurements included in FTA Circular 4220.1E encourages (at Section 7.e) the use of intergovernmental procurement agreements as follows:

(e) Intergovernmental Procurement Agreements.

  1. Grantees are encouraged to utilize available state and local intergovernmental agreements for procurement or use of common goods and services. When obtaining goods or services in this manner, grantees must ensure all federal requirements, required clauses, and certifications (including Buy America) are properly followed and included, whether in the master intergovernmental contract or in the grantee’s purchase document.
  2. Grantees are also encouraged to jointly procure goods and services with other grantees. When obtaining goods or services in this manner, grantees must ensure all federal requirements, required clauses, and certifications are properly followed and included in the resulting joint solicitation and contract documents.
  3. Grantees may assign contractual rights to purchase goods and services to other grantees if the original contract contains appropriate assignability provisions. Grantees who obtain these contractual rights (commonly known as ‘piggybacking’) may exercise them after first determining the contract price remains fair and reasonable.
Discussion

FTA has historically encouraged grantees to consider combining efforts in their procurements to obtain better pricing through larger purchases. Joint procurements offer the additional advantage of being able to obtain goods and services that exactly match each cooperating grantee’s requirements. FTA believes this is superior to the practice of "piggybacking" since "piggybacking" does not combine buying power at the price stage and may limit a grantee’s choices to those products excess to another grantee’s needs.

Does your State, county, city, or other local government have a schedule program similar to the GSA Federal Supply Schedule? Are you legally eligible to utilize those schedules? In many ways, this is a topic that is so state and locale-specific, it is impractical to address with any specificity in this Manual. This is an area of the Manual where we solicit comments and best practices from your jurisdiction that would (or could) have application on a national basis.

Purpose

One of the challenges of a transit authority's procurement office is to try to be more responsive to its customers from timeliness and cost-efficient perspectives. It is almost inevitable that someone will take months trying to decide what is required and then is perplexed that the procurement staff cannot procure it "yesterday!" We devoted an extensive discussion in Chapter 2 on the importance of planning in the procurement process and the need for cooperative efforts among the different staff elements of the Authority.

One of the ways that Federal and State governments (to a greater extent) and local governments (to a much lesser extent) have tried to address the timeliness issue is through the use of "schedule" contracts that can be mandated for use on a government-wide basis. If an entity at the state-wide level has a contract that consolidates all requirements for sedans and buys those off a schedule contract, all public purchasers theoretically benefit from this larger quantity buy and do not have to go through a procurement process to obtain those benefits.

Best Practices

Ascertain if your State has a schedule program. It may be for standard commodities such as office supplies and equipment including vehicles of all sorts and sizes as well as computer equipment on either a lease or purchase basis.

Ascertain if your authority is eligible to participate in the program and, if so, how.

  • Is an intergovernmental agreement required before you can participate?
  • Is the order issued with the State agency or the contractor?
  • Do you have any flexibility to make minor changes to the item being bought?
  • How is the order funded?

These questions, and obviously many others, all must be worked out with the "parent" agency. It may be difficult to track all of this information down the first time, but after you go through the process once, it will be much easier with each successive procurement you process through these centralized contracts. You will then be able to gauge the savings in time and money that may accrue to your agency by using these contracts.

The same questions can be addressed at the local level. A program might exist at a city, county, parish, school district or any other public special districts. One of the most effective ways to participate in cooperative purchases at the local level is through some sort of inter-local cooperative purchasing agreement. To be able to do this may require special legislative authority, but most States have some sort of Intergovernmental 147 and/or Inter-local 148 Cooperation Act. These statutes usually define not only what can be the subject of agreements consummated pursuant to their provisions, but also define who can participate and under what conditions.

Never underestimate the buying power (in terms of quantity you) bring to the local public government buying community, particularly in such areas as diesel, vehicle parts, office supplies and vehicles.

There is some real public relations benefit for your agency by being actively involved in the local government buying community in helping all public bodies get "more bang for the buck" through volume buying of similarly-used commodities

4.7.2.3 State versus FTA Requirements

Requirement

The requirements and standards of FTA Circular 4220.1E apply to procurements entered into under such agreements using FTA funds. 149

DISCUSSION

"I've got no control over what the State puts into its contracts in terms of FTA requirements. The State is concerned with State laws and that contracts fully comply with the competitive requirements of the State. What do I do?"

There really is no easy answer! The problem most agencies face with this requirement is not the competitive methods utilized by the State (or local) governmental entity in establishing these contracts -- most States have a small purchase procedures, sealed bidding and sealed proposal methods of procurement that in all likelihood comply with the federal standards set forth in FTA Circular 4220.1E and discussed earlier in and discussed earlier in Section 4.3.1. Most States similarly buy architect and engineering services in a procedure similar to the federal requirements of the Brooks Act and as discussed in FTA Circular 4220.1E paragraph 9.e and in Section 6.5 "Architect-Engineering Services."."."."."."."."."."."

The problem most of us face is squaring State laws or regulations that differ substantively with the FTA requirements of FTA Circular 4220.1E.

  • How do we reconcile the requirements of 49 CFR Part 23 dealing with the DBE program with a State contract that does not meet those requirements? If your State has a program that credibly meets the 10% minimum goal contemplated, perhaps you could get a waiver from the FTA and participate in that State program. The problem in many States is that the certification requirements at the State and local level are not as extensive and exhaustive as the requirements imposed upon transit properties by Part 23. Again, because of these differences, you may not be able to participate. Even if your procurement is not suitable for a DBE goal, there is a DBE affirmative action requirement that the State may not meet.
  • Recent changes in the applicability of the Buy America provisions of 49 CFR Part 661

Until more clarification is obtained and as long as operating assistance is an issue, you may not be able, realistically, to participate in these procurements. You can, however, effectively participate at the truly local level where you can either control the procurement (you buy the diesel fuel using all the federal requirements) and allow the city and school district draw off your contract or, because of the one-on-one interface this process requires, you are able to have the city or school board include the federal requirements in its unleaded regular gasoline contract you want to order from. That works!

Again, we specifically solicit input from you on your successes (and failures) in the area of utilizing State and local government contract schedules or inter-local/intergovernmental procurement agreements and how they have been reconciled with conflicting State and Federal requirements.

4.7.3 E-Commerce: Reverse Auctions

Requirement

Reverse auctions are subject to all the procurement requirements of FTA Circular 4220.1E, Paragraph 7.q.

"E-Commerce is an allowable means to conduct procurements. If a grantee chooses to utilize E-Commerce, written procedures need to be developed and in place prior to solicitation and all requirements for full and open competition must be met in accordance with this Circular."

We would note that some states, such as New York, require a sealed bid procedure for competitive procurements. Where state law requires sealed bidding, reverse auctions may not be legal. In these situations grantees may still make use of online bidding but the bids must be kept sealed and not disclosed. Grantees must check their state procurement statutes to determine if reverse auctions are permissible. For example, the state of Texas recently enacted legislation allowing reverse auctions. Grantees should consult with their counsel to determine whether reverse auctions are legally permissible under State law.

Discussion

One of the innovations arising out of e-commerce has been the use of reverse auctions. The term reverse auction refers to a live online auction in which the roles of buyer and seller are "reversed." In a normal (forward) auction, sellers offer to sell at prices determined by the bids of buyers. In a reverse auction, buyers are offering to buy something at prices being bid by sellers. "Reverse" refers to the relationship of buyer and seller and who does the bidding. Sellers bid for the right to sell to the buying organization and buyers agree to buy at the price established by the auction process. In a reverse auction proceeding the buyer advertises and defines on line the commodity for which it is soliciting bids. The buyer may also post a price at which the bidding will begin. These prices will usually be the buyer’s "last good buy" price or an industry standard price, and it should be a price that will encourage suppliers to bid. If the price is set too low, it will discourage sellers from participating. Suppliers, whose identity is kept confidential, then post prices online anytime within the duration of the auction (usually one day to several weeks) so that suppliers can see their competitors’ bids and respond immediately with counter offers. Suppliers can reevaluate and adjust their bid in response to other bidders’ offerings. Some auctions provide for automatic time extensions if a bid is placed in the last five minutes of an auction, in which case an automatic five-minute extension prevents last-second bidding and keeps all participants on an even playing field. It is possible to have several automatic time extensions when bids are submitted in the last five minutes of the event. The transparency of the marketplace creates rigorous competition among the participants, which tends to drive prices lower. Reverse auctions live up to their name by having prices fall. Experience to date with reverse auctions indicates that savings of 15% - 20% from prices previously paid may be possible, especially if additional vendors can be found to bid on the requirement.

Most of the work to be done in a reverse auction takes place prior to the actual event. This includes identifying suppliers who will bid, pre-qualifying them and informing them about the technology that is being used. It is important to define everything up front, including quality, delivery terms, payment terms, location of use, quantity required and in what lot size. In some cases buyers have issued a Request for Proposals (RFP) as a first step in a "best value" competition in order to evaluate prospective bidders’ products, capabilities, etc. A reverse auction is then conducted among qualified suppliers as a technique to elicit the best possible prices.

Anything that can be described well can be reversed auctioned. This includes goods and services. The key is that the item have features that are measurable, with a clear purchase description in terms of quality and specificity, so that suppliers are bidding on a requirement that is clear to everyone. Doing this will ensure you are able to compare bids for essentially identical goods or services. In deciding if a reverse auction is right for a particular commodity, the agency will need to determine if it has long-term relationships with any one or two suppliers for the commodity, and if so, why? What is valuable about the relationship? Would an auction harm the relationship? Another consideration will be whether there are enough suppliers of this commodity to make it competitive. Any efforts taken to increase the number of bidders who participate in the auction will pay dividends in the end. Finally, the commodity must be such that there is a sufficient profit margin to make prices compressible, so that suppliers have room to bid. And finally, as has already been suggested, reverse auctions need not be limited to lowest - price contract awards; they may be used in "best value" procurements where technical proposals are required and price auctions follow, with contract award being made to the firm offering the best overall value to the buying agency, with both price and technical merits considered.

Best Practices

Federal Government Experience - A number of Federal agencies are now using reverse auctions. The Federal Government began to use this technique with the re-write of the FAR Part 15 in 1997. FAR 1.102.4(e) now states that if a practice is not expressly addressed or prohibited by statute or regulation, Government employees should feel free to innovate and use sound business judgment in making procurement decisions. With respect to auctions, FAR 15.306(e)(3) requires bidders to agree to disclose their prices prior to their participation in an auction event. Based on the FAR, government procurement personnel may use reverse auctions as long as the vendors agree to participate. (Grantees are not required to follow the FAR, and this information on Federal procedures is provided for information purposes).

Navy Department - The Navy Department’s first auction was for aircraft ejection seat mechanisms. This auction lasted 51 minutes, with three bidders, and Navy estimates it saved over 28% off the historical price for these mechanisms. Navy has conducted over fifteen additional reverse auctions since the first in May 2000, for supplies as well as services, using both price and best value as evaluation criteria. Following are some of the "lessons learned" by the Navy Department, as published at their web site: 151

  • The reverse auction technique may not drastically change or streamline the procurement process.
  • It is a highly effective pricing tool.
  • Prior to opening the auction, all participating vendors should log on and verify their connection to the system.
  • A set period of time for the reverse auction should be established based on the number of participants and the complexity of the acquisition.
  • The time established for the auction needs to be flexible in case there is an offer at closing time. For example, if a bid is received within one minute of the closing time for the auction, the auction period should be extended for an additional number of minutes to allow bidders to respond to the last bid.

Marine Corps - The U.S. Marine Corps has also published their experiences with reverse auctions. The Marine Corps took concerted efforts to build a database of vendors for various product types and to include more vendors, train them on the reverse auction tool, and get them to participate in their first auction. The result was significantly increased competition. The average auction has lasted 30 minutes with award made directly thereafter. The average savings for the eight auctions thus far have been 25% from the estimated values based on historical and retail prices. The Marine Corps reports that vendors actually prefer this process to the sealed bid process. The Marine Corps Regional Contracting Office Southwest (RCO SW) received the Department of the Navy Competition Excellence Award for the implementation of this innovative practice.

Army - The Army is using reverse auctions for best value types of procurements. Following is an excerpt from the Army procurement procedures guide as reproduced in the DOD Defense Acquisition Deskbook:

Applicability to Best Value Acquisitions

Reverse auctions are legal as long as the identity of the bidders is not disclosed. You may use them for trade-off acquisitions as a pricing tool. Once you have finished with technical discussions, you may conduct a reverse auction to establish the offerors’ final prices. Provide these prices, along with the rest of the evaluation results, to the Source Selection Official for his/her use in selecting the proposal that represents the best value. A potential benefit is that competition will drive the prices down as the offerors have visibility of the other prices being proposed.

You may use reverse auctions to purchase a variety of products and services. Reverse auctions work especially well on acquisitions of manufactured items. While you can use reverse auctions to buy commodities, these items usually have smaller profit margins and therefore, the potential benefits are less.

When using reverse auctions in a best value acquisition, ensure the auction does not drive prices down to the point that the resultant contract does not provide enough incentive for the contractor to provide quality supplies and services.

Use of reverse auctions is appropriate at different points in an acquisition. For example, you may use them to achieve the offerors’ final price or you may use them to downsize the number of offerors, but decide not to use them for the final negotiations. 152

Air Force - The Air Force Contracting Policy Memo on Reverse Auctions (February 19, 2001) was issued after research on how reverse auctions are being used in private industry, and the memo provides a number of "lessons learned." Among these were:

  • Reverse auctions are being used by industry more for "best value" acquisitions than for lowest price acquisitions. (The Sun Microsystems’ case discussed below under "Private Industry Experience" illustrates this.)
  • Suppliers are normally pre-qualified, including past performance, and then a reverse auction is used for the submission of competitive prices.
  • A responsibility determination is performed on the apparent successful bidder.

The Air Force procured a motorized security gate for one of its facilities and requested technical proposals first. Those firms submitting acceptable technical proposals then submitted prices online through a reverse auction. The apparent low bidder was then required to submit a cost proposal for evaluation. Finding the proposal satisfactory, a contract was awarded. Air Force was pleased with the results of the process.

Treasury Department – The U. S. Treasury Department (IRS) conducted, in May 2001, its first auction and one of the largest Federal auctions to date: $131 million for PCs, laptops and monitors. Treasury estimates it saved about $68 million in a very successful auction. An example of the savings achieved was the reduction in the unit price of a top-end desktop computer from a pre-auction price of $1,434 to $625 (a savings of 56 percent). There were three distributors that submitted bids, representing IBM, Gateway and Dell. The IRS requirements were solicited on a best value basis. 153

Treasury has also had success with small buys. Many of those buys were below $25,000 and several were below $1,000. More than $300,000 in purchases have been made in 2002, with some impressive results. Customs saved 43 percent on the purchase of a shredder and the Financial Crimes Enforcement Network saved 87 percent on two 265-megabyte memory kits. Vendor interest has been great. For example, the Bureau of Public Debt has been averaging 72 bids per auction. In all, close to 2,000 bids have been received from over 330 firms. Another noteworthy achievement is that the Bureau of Public Debt, the ATF and Customs have awarded 100 percent of their auction results to small businesses. 154

General Services Administration (GSA) – GSA maintains a reverse auction web site for Federal agencies. On July 25, 2002 the GSA Federal Technology Service awarded a number of contracts for reverse auction services to various companies ("enablers") that provide services ranging from conducting the complete auction ("Hosted Services") to providing enabling software so that the user agency can conduct its own auctions ("Desktop Services"). The enablers that received GSA contracts are listed on the web site. 155

GSA conducted a reverse auction pilot program from May 2000 to May 2001. GSA reports that various government agencies participating in the pilot program realized savings of 12% - 48% through the reverse auction process. For example, the Defense Financing and Accounting Service paid 22 percent, or $2.1 million less, than normal prices for desktop computers, laptops and printers. The National Institutes of Health (NIH) paid 25 percent, or $395,000, less than normal prices for utility wipes, a type of cleaning supplies. The Coast Guard paid 22 percent, or $300,000, less than normal prices for spare parts for HU-25 Falcon jets.

The Deputy Assistant Commissioner for Service Development, GSA Federal Technology Service, Mr. Manny DeVera, is credited with developing "Ten Commandments for Reverse Auctions:"

Reverse Auction
Ten Commandments

  1. Link reverse auction strategy to acquisition strategy. When developing the acquisition strategy ask, "Could reverse auctioning apply to this requirement?"
  2. Follow the Federal Acquisition Regulation. These guiding principles still apply. 156
  3. Choose a solid performing enabler. (Enablers are firms that perform reverse auctions.) With the troubles currently being experienced in the digital economy, a few enablers may not be around in the future and could present risks.
  4. Educate suppliers in advance of conducting a reverse auction. Full service enablers provide this service in their fees.
  5. Be prepared for publicity and use it to your advantage. Publicity happens because reverse auctions are relatively new and the media, trade associations, senior government officials and others are all carefully watching the government’s entry into this new way of doing business. Enablers are also aggressively publicizing their activities.
  6. Begin with simple requirements and move gradually to more complex ones. The more experience an organization has with conducting auctions, the more complex requirements they can put out for bid.
  7. Establish the rules of the reverse auction up front. Some examples of these rules are the bid increments to be used, time extensions, logistics and other considerations.
  8. Conduct a mock auction. The adage "practice makes perfect" is very appropriate here.
  9. Consider conducting an auction where bidders bid to provide a quantity of a commodity, as opposed to price based bidding. For example, reverse auctions are being conducted where the buyer has a set amount they want to spend, say $1 million for PCs, and is not focused on the unit cost. In these auctions, bidders base their bids on the number of PCs that they will provide for the $1 million.
  10. The Contracting Officer is in control of the reverse auction event at all times. .. .. .. .. .. ..

FIRSTGOV.gov - The U.S. Government’s official web portal is firstgov.gov. 157 Inserting “reverse auctions” in the Search box will give you access to more than 186 million web pages from federal and state governments where you will find information regarding these agencies’ experience with reverse auctions.

Private Industry Experience – The private industry sector has been using reverse auctions since the mid-1990’s. A recent white paper presented data indicating that 20 percent of all private industry firms may be using on-line auctions (real-time bidding) to procure a portion of their goods and services. 158

A current magazine article discusses the experience of one major private industry player in the reverse auction arena – Sun Microsystems. Sun implemented its Dynamic Bidding program in May 2000 with a goal of 20 percent reduction of their targeted budget, and they achieved this in their first pilot auction. It has since been used for more than 100 procurements and covers all the commodities Sun buys. One of the important facets of the Sun method is that the company uses a "best value" approach to source selection with their price auctions. Sun believes its supplier relationships are strategic and it will not switch to an untested company simply to get a lower price. Past performance in areas such as quality, manufacturing flexibility, facility location and engineering support are also considered in the final decision. Sun emphasizes that the reverse auction approach does not replace the strategic relationship between companies. Prices bid are only one factor in the final selection decision process, but the auctions mean that less time is spent on negotiating the price, terms and conditions than was previously the case. "The end result is that it takes Sun an hour to find the true market price, eliminating weeks or even months of negotiating back and forth. It has also resulted in significant bottom-line savings for Sun. They used this process on $1 billion of their direct spend in fiscal year 2001, and have raised the goal for this fiscal year." 159

A recent article in an E-business publication suggested a number of areas that might be good candidates for reverse auctions. 160 The author’s recommendations for reverse auctions include:

  • Strategic Relationship is Less Important
    The author believes it is difficult to build cooperative relationships with suppliers through an auction process and thus auctions are more suitable for purchases of off-the-shelf, near-commodity direct materials.
  • Price is Main Decision Factor
    Auctions work best for categories where the main discriminator between suppliers is price.
  • Many Qualified Suppliers
    Auctions need adequate competition to succeed. Where there is limited competition because of a scarcity of suppliers, a commitment of supply is more important than any incremental price savings that could be achieved through an auction.
  • Low to Medium Strategic Importance
    The most strategic categories should not be subject to a stand-alone auction. This would include components critical to the company’s end product. In these cases the auction, if conducted, should be combined with some sort of face-to-face discussions with key suppliers.
  • Purchases Can Be "Lotted"
    It may be cumbersome to run individual auctions for each of many line items. Line items can be bundled into "lots" and suppliers will be required to bid on all the parts in that lot or none. This concept of "lotting" works well with office products.
  • Benchmarks
    When a company is satisfied with a current supplier but feels a need to test the market to ensure they are receiving a competitive price, they may do this through an auction. Potential suppliers can be required to respond to an RFP in order to qualify for the auction. The key is to adequately document one’s service, delivery, payment terms and other "non price" requirements up-front to ensure that suppliers are bidding on an apples-to-apples basis.

Transit Agency Experience – Transit Agency experience with reverse auctions has been extremely limited in comparison to both the private sector and the Federal government. The Los Angeles County Metropolitan Transit Authority (LACMTA) has used this process successfully on a limited basis but does not feel it has significant potential for their needs. 161 LACMTA believes it can work well for common materials but may be inconsistent with good long-term partnership relationships with suppliers. For example, where there is a need for technical support or for quick reaction time in order to meet critical agency needs, the auction process does not lend itself to the kind of agency/supplier relationships that are required for long-term mission success. But LACMTA believes that if price is the only consideration, and supplier partnerships for the commodity also is not a consideration, then reverse auctioning can work well.

The Southeastern Pennsylvania Transportation Authority (SEPTA) conducted a pilot program to test the process on a procurement of fluorescent tubes and they were successful. But they also do not feel that their agency will adopt this technique to any significant degree. One of the lessons learned by SEPTA is the criticality and difficulty of informing potential bidders of the auction and getting them prepared to bid. 162

The Houston Metropolitan Transit Authority (MTA) is considering the use of a reverse auction for furniture. 163

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Chapter Footnotes

1 - See Section 1.3.2 "Federal Contractual Sphere."

2 - United States v. John C. Grimberg Co., 702 F.2d 1362, 1367 (Fed Cir. 1983) (in banc).

3- See Chapter 6 for a discussion of the procurement methods commonly used for each object of procurement.

4 - FTA Circular 4220.1E Section 7.f.

5 - 49 CFR Section 661.7, Appendix A to Section 661.7, subparagraph (e).

6 - As a practical matter, you may wish to adopt the statutory threshold for the Davis Bacon Act of $2,000 as the micro-purchase threshold for construction services. This is what has been done with the Federal Acquisition Regulation -- See FAR Section 13.601(a) which defines micro-purchases for construction as being limited to $2,000. However, if you have a requirement for $2,300 of construction, you no longer need competitive quotations, but you still need Davis Bacon wage rate submissions and compliance.

7 - FTA Circular 4220.1E Section 8.c.

8 - You must not split a procurement that would be in excess of $2,500 (three widgets worth $1,500 apiece for a total of $4,500) into smaller purchases (three sequential purchases of $1,500) in order to use this method of procurement.

9 - Although it is written for the more detailed "price analysis" required in competitive procurements, FAR Section 15.805 discusses price analysis techniques that may be used or adapted to support your determinations for these micro-purchases.

10 - FAR Section 13.106(a)(3).

11 - These changes were published as part of Federal Acquisition Circular 90-40 in Volume 61 of the Federal Register on pages 39189 through 39199 (61 Fed. Reg. 39189-39199 (July 26, 1996)).

12 - FAR Section 13.103(e).

13 - FAR Section 13.106(a)(3)(i) and 1.603-3(b). See also Section 2.1.2, "Autonomy" regarding decentralization, generally.

14 - FAR Section 13.106(b).

15 - GAO/NSIAD-96-138 (8/6/96). GAO Reports are available on the Internet at the Government Printing Office.

16 - For further information, contact Ms. Sandra Kuykendall at skuykendall@islandtransit.org

17 - See FTA Circular 4220.1E Section 9.e -- "Grantees shall use [the Brooks Act] for contracting for A&E services. . . (emphasis supplied)" See Section 6.5 "Architect-Engineering Services" for a complete discussion.

18 - See Section 6.5 "Architect-Engineering Services.""

19 - See discussion of these requirements in Section 8.1.2, "Davis Bacon Act."

20 - A "delivery order" as opposed to a purchase order, is issued typically under the terms of a requirements type contract that has been competitively procured under formal procedures. The delivery order is simply an ordering mechanism under that contract and is not an independent contract like a purchase order.

21 - FTA Circular 4220.1E Section 9.

22 - FTA Circular 4220.1E Section 9.c.(1).

23 - FTA Circular 4220.1E Section 9.c.(3).

24 - See Section 4.4, "Sealed Bids," and FTA Circular 4220.1E Section 9.c.(2)

25 - See Section 4.5, "Competitive Proposals," and FTA Circular 4220.1E Section 9.d.

26 - See Chapter 3, "Specifications," for a discussion of these and other specification issues.

27 - The Brooks Act procedures, required for Architectural and Engineering services and described in Section 6.5, go one step further by prohibiting price competition and requiring selection based solely on technical criteria.

28 - In 1990, the FTA published Procurement Guidelines for Third Party Contracting which included, in Chapter II, Paragraph 7.I, a statement that "All IFBs should be advertised in a manner that promotes participation in the bidding by all qualified and capable firms. Advertising only in the local news media is not normally adequate." This document was canceled by the publication of FTA Circular 4220.1C in 1995 and no further guidelines have been issued. The concept of "all qualified and capable firms" is a viable one under federal law, and suggests that you should tailor your publicity programs to the supply markets for your procurement. This is why we have discussed national and local advertisement in the text of this subsection and why, under the subsequent discussion of mailing lists, it is important that all known firms that provide the item or service being procured be solicited.

29 - If you are interested in more details about the CBD and other federal government policies relating to publicizing contract actions, those details are spelled out in FAR Part 5. FAR Section 5.207 details with the specifics of preparing and transmitting the notices for inclusion in the CBD.

30 - If you are not satisfied with the performance of the current contractor, the appropriate remedy is not to arbitrarily decide not to issue the firm a solicitation for the follow-on procurement. If your performance concerns are well documented, you have two alternatives. First, include the firm on the list, address performance record under any appropriate technical criteria If it is ultimately the apparent awardee, address your performance concerns as part of the responsibility determinations -- the firm may be able to address your concerns at this time to your satisfaction. Second, if the performance concerns are irretrievably deep, it may even be possible to initiate debarment or suspension at the local, State, or Federal level. Debarments and Suspensions as well as Responsibility Determinations are specific topics that are discussed in subsequent sections of this Manual.

31 - If you do receive names of firms from the consultant that prepared the specifications, it is recommended you try to ensure there are no conflict of interest situations existing (e.g., the recommended firm is wholly-owned subsidiary of the specification preparer) or that the specifications are not drafted in such a manner as the only product that will meet the specification requirement is the product of the firm they want added to the list. Don't let this caveat discourage your solicitation of recommendations from that consultant (they are a very good source), just be sensitive to the firms provided.

32 - While the IFB requirements of Section 9.c.(2) are good practices for both IFBs and RFPs, the evaluation criteria requirement of Section 9.d.(1) is relevant only to RFPs and is discussed in Section 4.5.1, "Solicitation & Receipt of Proposals."

33 - As a matter of information only, reference is made to the FAR Section 14.201-1 and 15.406-1 for the "Uniform Contract Format" and FAR Section 14.201-9 for the "Simplified Contract Format" used in bidding fixed price contracts. These are optional formats used by Federal departments which include a good discussion of what is included in those formats and why.

34 - A very helpful item to include with your solicitation package is an address label which includes the exact address you want offers mailed to and a separate address label which includes your street address and room number for offers that are delivered to you. With these labels, offerors can affix the applicable one to their offer and you will be assured it is coming to the right place. It is also a good idea for you to include the solicitation number on the labels which is of aid to your mailroom and your staff responsible for receipt of offers.

35 - These representations and certifications have legal significance that should not be overlooked by either the offeror or the agency. The offeror certifies, for instance, that it is not presently debarred or suspended by any federal agency. The contracting officer can rely on that certification and does not have to "look behind it" in determining the firm's responsibility. If it is later discovered that the firm was in fact debarred by a federal agency, it has made a false certification. There are administrative sanctions that can be imposed (contract terminated for default) and possible criminal sanctions under either federal or State laws (or both) for submitting a false statement.

36 - This certification is discussed in more detail in Section 4.3.3.2.3, "Lobbying Certification."

37 - This certification is discussed in more detail in Section 4.3.3.2.1, "Certification Regarding Debarment, Suspension, and Other Responsibility Matters."

38 - This certification is discussed in more detail in Section 4.3.3.2.2, "Buy America Certification."

39 - FAR Part 15.201(f), for example, requires the CO to make available to "all potential offerors," upon request, any information distributed at a pre-solicitation conference. The clear presumption of the FAR is that "potential offerors" may not be (and need not be) present at the confernce.

40 - If you cannot identify who the offeror is in this situation without opening the bid or proposal, it is recommended that you open it in the presence of a witness. Write down the name and address of the offeror only, and reseal the envelope or package. Return it to the offeror with a cover letter that the package was opened only so the offeror could be identified. It is also recommended that a memorandum to the file be made by you and your witness describing what happened and why. You might want to copy the outside of the envelope to show no identification but it is recommended that no copies be made of any of the offer documentation.

41 - See Section 9.2, "Changes" for a more general discussion of the costs of changes.

42 - See also the discussion of timeliness in Section 4.4.2, "Bid Opening."

43 - As a matter of reference, your attention is invited to FAR Section 52.214-7 and 52.215-10 for language addressing late submissions, modifications, and withdrawals of offers that is incorporated in FAR-covered solicitations for IFBs and RFPs respectively. For commentary in the FAR itself relating to those solicitation clauses, See FAR Section 14.304 and 15.412 respectively. Primarily because of the body of law that has developed interpreting these clauses, many transit properties have either adopted this language or have modified it slightly to meet their individual requirements.

44 - Some practitioners erroneously refer to the consequences of a late offer as one of "non-responsiveness." In fact, you never open the offer (unless needed to for identification purposes) and thus cannot determine whether it is responsive to the material requirements of the solicitation (the general definition of responsiveness). Had the offer been received on time, it may well have been responsive but, in this case, the offer is not even considered!

45 -These requirements and applicable clauses will be discussed in depth in Chapter 8.

46 - See also Chapter 8, "Contract Clauses," and Appendix A.1, "Federally Required Model Clauses."

47 - 49 CFR Part 29, "Debarment and Suspension (Nonprocurement) and Governmentwide Requirements for Drug-Free Workplace (Grants)."

48 - "Debarment. An action taken by a debarring official in accordance with these regulations to exclude a person from participating in covered transactions. A person so excluded is 'debarred'." 49 CFR Section 29.105.

49 - "Suspension. An action taken by a suspending official in accordance with these regulations that immediately excludes a person from participating in covered transactions for a temporary period, pending completion of an investigation and such legal, debarment, or Program Fraud Civil Remedies Act proceedings as may ensue. A person so excluded is 'suspended'." 49 CFR Section 29.105.

50 - 49 CFR Section 29.115(b).

51 - 49 CFR Section 29.115(a).

52 - See Section 3b of the Master Agreement, Form FTA MA(12).

53 - Because it is discussed as an aspect of responsibility, and can be objectively determined at any time up to the time of award, late submission of the debarment certification can be permitted.

54 - You may subscribe by writing the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402 or by calling the Government Printing Office Inquiry and Order Desk at (202) 783-3238.

55 - The list can be accessed 7 days a week, 24 hours per day and aside from normal costs of local or long-distance telephone calls, the access is free to the user. To obtain a copy of the user's manual for accessing the system, contact GSA at (202) 501-4740.

56 - GSA advises that responses to these inquiries should be furnished within one working day.

57 - See Section 3b of the Master Agreement, Form FTA MA(12).

58 - The text of the regulation refers to Part 25.108, but this section has been moved to Part 25.104.

59 - The payment to any "person" to influence or attempt to influence an officer or employee of any federal department or agency, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress in connection with the awarding of any federal contract, the making of any Federal grant, the making of any federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any federal contract, grant, loan, or cooperative agreement. 49 CFR Section 20.100(a).

60 - Because the language of the regulations refers to needing the certification and applicable disclosures at time of award, unless your solicitation specified otherwise, failure to submit the executed certification with the offer would probably not be considered a responsiveness issue in a competitive bidding procurement, and would not disqualify the offer.

61 - The "Lobbying Disclosure Act of 1995" (Pub. L. 104-65) made some amendments to 31 U.S.C. Section 1352 which simplified the information that needed to be disclosed on this Form. Those changes are detailed at 61 Fed. Reg.1412 (January 19, 1996) and will be eventually incorporated into a new Standard Form. Three items of the SF-LLL are impacted: Item 10a is amended by revising "Name and Address of Lobbying Entity" to read "Name and Address of Lobbying Registrant"; in Item 10, the statement "(attach Continuation Sheet(s) SF-LLL-A, if necessary)" is removed; and Items 11 through 15 are removed.

62 - See discussion at Section 4.3.2.5, "Amendment of Solicitations."

63 - See discussion at Section 4.3.2.3, "Solicitation."

64 - The requirements of Section 15.m of the Master Agreement mirror those of Section 11 of FTA Circular 4220.1E and refer the grantee to the provisions of 49 CFR 18.36(h).

65 - See Section 6.1, "Construction."

66 - See Section 6.2, "Equipment and Supplies."

67 - See Section 6.3, "Rolling Stock."

68 - See discussion in Section 4.5.4, "Discussions and Clarifications."

69 - As an example of how these and other situations have been addressed in the federal environment, See FAR Section 28.101-4.

70 - See Chapter 3, "Specifications," for guidance on specification development.

71 - See Section 2.4.2.1, "Full and Open Competition Principle," for a discussion of full and open competition and the effect of restraints on competition.

72 - See discussion of advertisement and publicizing invitations in Section 4.3.2.1, "Advertising and Publicizing Solicitation."

73 - One instance requiring discussion is the evaluation of apparent errors; See Section 4.4.5, "Bid Mistakes."

74 - See discussion in Section 4.4.4, "Responsive Bidder."

75 - As stated in the Requirements discussion, discounts, such as prompt payment discounts, should only be used in the calculation of low bid if the history within your agency indicates discounts offered are usually taken advantage of.

76 - FTA Circular 4220.1E, Section 9.c.(2)(c).

77 - You should understand that if an unsuccessful bidder discovers an error, they will likely file a protest (or formal query) almost immediately. It is very important, therefore, that you proceed very carefully. Some procedures, to discourage false hopes and resulting arguments, prohibit the reading of bids that are clearly defective (e.g., missing bid guarantee).

78 - See the extensive discussion of this in Section 4.3.3.1, "Receipt of Offers," where we addressed the considerations that are typically weighed when policies are adopted concerning the receipt of offers. The FAR provision typically used as a "model" is FAR Section 52.214-7.

79 - See, e.g., J.C. Kimberly Co., Comp. Gen. B-255018.2, 94-1 CPD 182 79 (A bid that was hand carried to the bid opening room seconds after the bid opening officer declared that time had arrived was properly rejected as late.) One of the exceptions addressed in FAR Section 52.214-7 and elaborated upon in FAR Section 14.304-1(a)(2) addresses the situation when late receipt of the bid is due solely to mishandling by the agency after receipt at the agency location.

80 - Id. See also, Swinerton & Walberg Co., Comp. Gen. B-242077.3, 91-1 CPD 318.

81 - This paragraph was changed from prior versions of the circular to eliminate the phrase “or acceptance” of a single proposal when discussing what constitutes a sole source procurement. FTA believes that, upon receiving a single bid (or proposal) in response to a solicitation, the grantee should determine if competition was adequate. This determination may include a review of the specifications to determine if they were unduly restrictive or contacting sources that chose not to submit a bid or solicitation. It is only if the grantee determines that competition was inadequate that the procurement should proceed as a sole source procurement. The mere fact that only one bid or proposal was received does not automatically mean competition was inadequate since many unrelated factors could cause potential sources not to submit a bid or proposal.

82 - Section 5.2 - Cost and Price Analysis discusses various price analysis techniques, and they include (among others) comparison to previous purchases, comparison to a valid grantee independent cost estimate, and value analysis.

83 - You may have, for example, data from previous purchases, an independent cost estimate, etc. with which to compare the bid price, but not have a “catalogue or market price of a product sole in substantial quantities to the general public’ as required by paragraph 10.a of the Circular.

84 - "Bid responsiveness involves the question of whether the bid as submitted, represents an unequivocal offer to do exactly what the government has specified, so that acceptance of the bid will bind the contractor to meet the government's requirements in all material aspects." Hankins Lumber Co., Comp. Gen. B-248101, 92-2 CPD ;50.

85 - FAR Section 14.301(a).

86 - FAR Section 14.404-2.

87 - Northwestern Motor Co., Comp. Gen. B-244334, 91-2 CPD 249.

88 - Record Press, Inc., Comp. Gen. B-229570.2, 88-1 CPD 161.

89 - 49 CFR Section 661.13(b) provides:

The grantee shall include in its bid specification for procurement within the scope of these regulations an appropriate notice of the Buy America provision. Such specifications shall require, as a condition of responsiveness, that the bidder or offeror submit with the bid a completed Buy America certificate in accordance with Section 661.6 or Section 661.12 of this part, as appropriate. (emphasis added)

90 - The Comptroller General, in Staples-Hutchinson & Associates, Inc., Comp. Gen. B-245007, 91-2 CPD 491 stated:
Whereas bid responsiveness concerns whether the bid itself as of the time of bid opening unequivocally offers to perform in accordance with all material terms and conditions of the solicitation, responsibility refers to a bidder's ability to perform the contract requirements and is determined not at bid opening but at any time prior to award based on information received by the agency up to that time.

91 - EDT Construction, Inc., et al., Comp. Gen. B-240343, 91-1 CPD 374.

92 - Although unusual, it is possible that before the time and date set for receipt of bids, a bidder may discover a mistake in a bid it has already submitted to you. If you have included a clause in the solicitation (or adopted a policy) as suggested in our earlier discussion on "Receipt of Offers" (See Section 4.3.3.1) and the problems with late submissions, modifications and withdrawals of offers, they should be followed. Essentially, the bidder is advised that modification of its bid would be treated the same as the original bid -- must be received timely and should clearly identify the bid it is modifying.

93 - See FAR Section 14.406.

94 - See Section R3-202.13 (Mistakes in Bid), Recommended Regulations approved August 2, 1980, implementing The Model Procurement Code for State and Local Governments, approved by the American Bar Association on February 13, 1979 (hereinafter referred to as the Recommended Regulations).

95 - For instance, Amendment Number 1 to the solicitation changed the quantities for line item 4 on the Schedule from 5 to 12. The bid included a Schedule that showed the quantity for line item 4 to be 12. No other amendments were issued and the bidder did not formally acknowledge Amendment No. 1. There was no way it could have used the correct Schedule page unless it had received the Amendment -- clear from the bid that it received Amendment No. 1.

96 - See discussion at Section 4.3.3.2, "Federally Required Submissions with Offers."

97 - The Recommended Regulations to the Model Procurement Code [at Section R3-202.13.4(b)] refers to this type of mistake as "mistakes where intended correct bid is evident." The mistake and the intended bid are clearly evident on the face of the bid document.

98 - The Recommended Regulations to the Model Procurement Code [at Section R3-202.13.4(c)] refers to this type of mistake as "mistakes where intended correct bid is not evident."

99 - You should consider all the long run cost of forcing the bidder to perform unwillingly.

100 - For an extended treatment of this topic (and also as the source for most policies of transit properties on the matter), it is recommended that you review FAR Section 14.406-4 and the Recommended Regulations at Section R3-202.13.5.

101 - See FAR 14.406-4(e) for recommended procedures to follow in the event this type of mistake has been alleged or disclosed.

102 - This is the position taken in the Recommended Regulations at Section R3-202.13.5.

103 - See FAR Section 14.604-4(a) and (b).

104 - FAR Section 52.214-15.

105 - W. A. Scott v. United States, 44 C.Cl. 524, 527 (1909).

106 - See, e.g., Section 2.205 of the Texas Business and Commerce Code which provides:

Section 2.205. Firm Offers.

An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

107 - Nation-Wide Reporting and Convention Coverage, GSBCA No. 8309, 88-2 BCA 20,521 at 103,741.

108 - FTA Circular 4220.1E Section 9.d.(1).

109 - FTA Circular 4220.1E Section 9.d.(1).

110 - FTA Circular 4220.1E Section 9.d.(2).

111 - FTA Circular 4220.1E Section 7.h.

112 - FTA Circular 4220.1E Section 9.d.(4).

113 - FTA Circular 4220.1E Section 9.e.

114 - Sub-paragraph (5), like paragraph 6.g., recognizes the concept of best value. Once again, FTA does not wish to dictate any particular factors or analytic process. Solicitations must, of course, tell potential competitors for the contract what the basis for award will be.

115 - FTA Circular 4220.1E Section 9.e.

116 - This new definition was intended to recognize the concept of best value. The language is intended neither to limit nor dictate qualitative measures grantees may employ.

117 - Federal Register Vol. 62, No. 189, Sept. 30, 1997.

118 - FAR Part 15 was reissued by Federal Acquisition Circular (FAC) 97-02 dated October 10, 1997.

119 - The FAR now sees lowest price technically acceptable proposal selection as one end of the best value spectrum but we hvae distinguished it from best value for clarity of discussion purposes.

120 - Far Subpart 15.101 - Best Value Continuum.

121 - See Section 6.5 - Architect-Engineering Services.

122 - New York City Transit - for more information, call Mr. William DeSantis at (718) 694-4339.

123 - FTA Circular 4220.1E Section 9.d(3).

124 - See discussion in Section 4.5.4, "Discussions and Clarifications."

125 - See discussion in Section 4.5.3, "Competitive Range."

126 - Multiple rounds of best and finals tend to create suspicion in the minds of offerors about what the motive is for the subsequent requests, particularly if does not appear that negotiations are being reopened for a discussion of substantive matters. The preparation of proposals can be a very time-consuming and expensive process and it is possible that, for one of these or some other reason, an offeror may decide not to submit a response to a 3rd or 4th request for a best and final offer. Also, if you make a practice of multiple BAFOs, you may not receive "best" offers in the first round during future procurements.

127 - FTA Circular 4220.1E Section 7.h.

128 - FTA Circular 4220.1E Section 9.d.(4).

129 - A very significant caveat must be issued at this time. If your governing body (city council, county commissioners, board of directors, etc.) has reserved unto itself the sole authority to reject bids for whatever reason, you, as the procurement official, have no authority to make that final determination and notify the bidder until your governing body has concurred with your recommendation.

130 - See Section 4.5.2, "Evaluation of Proposals."

131 - See, e.g., FTA Circular 4220.1E Section 8.a.: "All procurement transactions will be conducted in a manner providing full and open competition."

132 - See discussion of small purchase procedures in Section 4.2, "Small Purchases."

133 - See discussion of sealed bidding procedures in Sections 4.3, Competitive Procurement Methods and 4.4, Sealed Bids (Invitation for Bids)

134 - See discussion of competitive proposals in Sections 4.3, Competitive Procurement Methods and 4.5, Competitive Proposals (Request for Proposals)

135 - See discussion of the submission of cost and pricing data in Section 5.2, "Cost and Price Analysis."

136 - See discussion of negotiations under competitive proposal method at Section 4.5.2, "Evaluation of Proposals."

137 - FTA Circular 4220.1E Section 9.h.(1)(e).

138 - 49 U.S.C. Section 5307(a)(1).

139 - This is also the position taken in FAR Section 14.502.

140 - See discussion at Section 4.4.1, "Solicitation."

141 - One variation that could be used if time is particularly tight, would be to ask, as part of Phase One, that the bidders include a sealed bid in a separate envelope that would only be opened in the event the technical offer was considered acceptable. This creates some additional security on the part of the procurement staff because you would want to ensure that the technical acceptability determination was made without knowledge of the prices for the different offers.

142 - See Section 4.3.2.5, "Amendment of Solicitation."

143 - If, in the opinion of the Contracting Officer, a contemplated amendment would significantly change the nature of the procurement to the extent that other entities (who did not submit unpriced technical offers) would likely become a proposed offeror as a result of the amendment, consideration should be given to canceling the solicitation and issue a new solicitation.

144 - Documentation of an unacceptable finding cannot be over stressed. Disputes over this determination are the most common area of bid protest in the multi-step process.

145 - Codified at 40 U.S.C. Section 481(b).

146 - Public Law 104-106, § 4309, 110 Stat. 186, 670 (1996).

147 - See, e.g., Chapter 741, Texas Government Code, V.T.C.A.

148 - See, e.g., Chapter 791, Texas Government Code, V.T.C.A.

149 - FTA Circular 4220.1E Section 7.e.

150 - FTA Circular 4220.1E Section 4.

151 - Navy web site info for reverse auctions is: http://www.abm.rda.hq.navy.mil/navyaos/acquisition_topics/contracting_/reverse_auctioning/reverse_auctioning. You can also go to the web page address above ending with .mil/ and enter "reverse auctions" in the "search" box and it will take you to the materials on reverse auctions. Navy can be contacted by phone: (215) 697-2850.

152 - Army Source Selection Guide, June 2001, may be found at: http://www.amc.army.mil/amc/rda/rda-ap/docs/assg-2001.pdf. Click on Appendix I for information on On-Line Reverse Auctions.

153 - Contact Mr. Geoff Gauger at Treasury for additional information: (202) 622-0203.

154 - Electronic Bazaar - Reverse Auctions Save Buyers Time, Money by Geoff Gauger. Federal Times, November 4, 2002. This article may be accessed at: http://federaltimes.com/index.php?S=1264522.

155 - http://www.gsa.gov/Portal/gsa/ep/contentView.do?contentType=GSA_OVERVIEW&contentId=10655

156 - Grantees are not required to follow the FAR. However, they are required to follow FTA Circular 4220.1E which would apply to procurements using reverse auctions.

157 - www.firstgov.gov/index.shtml.

158 - The Strategic Need for Real -Time Competitive Bidding in the Public Sector Procurement Process, by David C. Wyld and Randall P. Settoon, September 2002, p.18. This paper may be accessed at: learningcenter.ariba.com/wp_resource.cfm

159 - Reverse Auctions - Strategies and Lessons Learned from a Successful Implementation by Gillian Verga, Jan 2002. This article may be accessed at: http://www.apics.org

160 - When to Use an Auction by Ed Goetting, September 4, 2002. This article may be accessed at: www.line56.com/print/default.asp?ArticleID=3983

161 - For information re LAMTA call the Director of Purchasing at 213-922-7210.

162 - For information about SEPTA’s pilot program call 215-580-8251.

163 - For information about Houston MTA call Paul Como at: 713-739-4803.

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