Conducting Negotiations After Rejecting Bids

Q.  Can we reserve the right to not accept the lowest responsible/responsive bid and instead negotiate a lower price with that entity? I have found no express prohibition in Circular 4220.1F; however, the "experts" here are of two minds on the issue: One side argues that to do so would make a mockery of the sealed bid procurement process, while the other side argues that the lowest responsible/responsive bidder has "earned" the right to negotiate.

A. We strongly recommend you not adopt the approach of conducting negotiations with the low bidder. The sealed bidding process is designed to maximize the competitive incentive to offer the best price initially. Any system that changes the finality of the bids compromises this bidding incentive and becomes counterproductive.

When a Federal Government contracting officer finds it necessary to reject all bids after first determining that the prices are unreasonably high, FAR 14.404-1(c)(6), (e)(1) and (f)(1) allows the contracting officer to conduct negotiations with all bidders (not just the low bidder) in lieu of re-soliciting. If all bids received were too high, it would indicate there was a problem with the specifications or other terms and conditions that was responsible for the pricing problem, and that discussions/negotiations might clarify the situation. While grantees are not required to follow the FAR this is offered for information only. (Revised: September 4, 2009)

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