Sealed Bids

Federal Procurement Essentials

Also known as: bid contracting, sealed bidding, sealed bid procurement, invitation to bid (ITB), bid-based procurement process, government bid process, federal government bid, government bid, government bidding, federal invitation to bid, federal government bids, government contract bid, government invitation to bid, government bidding process, federal procurement bid proposal, government bid solicitations, federal government ITB, federal government bidding, government contract bid.

1. Competitive Procurement and Sealed Bids

The Federal Acquisition Regulation (FAR) is the law that defines methods and processes for contractual acquisition to be performed by any federal entity of any asset, whether material (good, product, or construction) or immaterial (services). Although these policies and procedures differ by essence, they share their willingness to promote competition to the maximum extent as their procurement standard, so-called full and open competition (FOC).

Procurement is a two-fold perspective: it identifies, first, the method to be used by qualifying the level of competition required by both the acquisition nature and context; and, consequently, defines the process or procedures to be implemented in order to support the method chosen.

Competitive procurement, i.e. full and open competition, provides different contracting methods with different level of competition, as follows:

The 3 Competitive Contracting Methods:

  1. Sealed bidding, relying on competitive bids, also called sealed bids, submitted in response to an invitation for bids (IFB);
  2. Contracting by negotiation, relying on competitive proposals in response to a request for proposals (RFP); and
  3. Simplified acquisitions, relying on quotations in response to a request for quotation (RFQ).

While simplified acquisitions is reserved for "small" acquisitions (less than $100,000 [FAR 2.101]), and contracting by negotiation for acquisitions which evaluation factors are not primarily related to price but the overall value, sealed bidding is aiming at merely selecting the offer with the lowest evaluated priced.

2. Sealed Bidding

To solicit offers from providers, the best-price purchase process relies on an Invitation to Bid (ITB), also known as Invitation to tender (ITT), Invitation for Bids (IFB), or Sealed Bids.

Definition of sealed bidding

Sealed bidding (defined in FAR Part 14) is a procurement method used when the best value is expected to result from the selection of the lowest evaluated priced offer. This contracting method solicits, in a document called invitation for bids (IFB), prospective providers for submitting offers, called sealed bids.

Precedence of sealed bidding

Federal regulations give preference to sealed bidding over contracting by negotiation, that is sealed bids over competitive proposals, if:

  1. Time permits the solicitation, submission, and evaluation of sealed bids;
  2. The award will be made on the basis of price and other price-related factors;
  3. It is not necessary to conduct discussions with the responding providers about their sealed bid because of both the clearness and completeness of requirements; and
  4. There is a reasonable expectation of receiving more than one sealed bid.

If any one of the aforementioned conditions is lacking, contracting by negotiation is thus the procurement method selected instead of sealed bidding.

Comparative efficiency of sealed bidding

Most prospective providers consider sealed bidding as the less costly, fastest competitive procurement method because no time is wasted in discussions, except in very well-defined cases, between the requester and prospective suppliers. Therefore, sealed bidding is deemed the fairest since no opportunity is offered to a provider to appear smarter, and more efficient than others, thus introducing a bias into the requester’s mind by leveraging their special, newly created or long lasting relationship. Sealed bidding provides a clear, and definitive commitment, with no space for trade-off, particularly about non-price-related factors used to evaluate responsiveness of bids.

Sealed bidding contract types

Only a firm-fixed-price (FFP) contract can be used when sealed bidding is selected as the contracting method. Nonetheless, a fixed-price (FP) contract with economic price adjustment may be used when the sealed-bidding process needs some flexibility, and it is feasible, and authorized (FAR 16.203).

3. Sealed Bidding Procedures

The table below delineates the different steps that are involved in the process implementing sealed bidding, and that are detailed in the next sections.

The Sealed-Bidding Process:

  1. Preparation of the invitation for bids
  2. Publicizing of the invitation for bids
  3. Receipt of bids
  4. Public opening of bids
  5. Evaluation, and comparison of bids
  6. Selection of the lowest-priced responsive bid
  7. Award of contract

Sealed Bidding Step 1: Preparation of the invitation for bids

Sealed bidding relies on a solicitation document, also called invitation to bid (ITB) or invitation to tender (ITT), that should describe in a clear, accurate, and complete manner the needs, requirements, and constraints related to the good, product, construction, or service to be acquired.

Sealed bidding specifications or requirements cannot restrict, or limit unnecessarily and unduly the number of organizations submitting a bid. The invitation should include, or reference any document needed by the bidder for bidding.

By default, when sealed bidding is retained as the procurement method, the uniform contract format outlined in the table below should be used to the maximum practicable extent for the preparation of the invitations for bids and contracts. The use of the format facilitates preparation of the solicitation and contract as well as reference to, and use of, those documents by bidders and contractors.

Uniform Contract Format:

Part I - The Schedule

  1. Solicitation/contract form (SF-33)
  2. Supplies or services and prices
  3. Description/specifications.
  4. Packaging and marking requirements.
  5. Inspection and acceptance.
  6. Delivery and performance.
  7. Contract administration data
  8. Special contract requirements
Part II - Contract Clauses
  1. Contract clauses
Part III - List of Documents, Exhibits, and Other Attachments
  1. List of documents, exhibits, and other attachments
Part IV -Representations and Instructions
  1. Representations and certifications
  2. Instructions, conditions, and notices to bidders
  3. Evaluation factors for award

Nevertheless, when some flexibility is necessary, feasible, and authorized (FAR 16.203), the simplified contract format outlined below may be used in lieu of the uniform contract format.

Simplified Contract Format:

Part I - The Schedule

  1. Solicitation/contract form (SF-1447)
  2. Contract line item number.
  3. Description/specifications.
  4. Quantity and unit of issue.
  5. Unit price and amount.
  6. Packaging and marking requirements.
  7. Inspection and acceptance.
  8. Delivery and performance.
  9. Special contract requirements
Part II - Contract Clauses
  1. Contract clauses
Part III - List of Documents, Exhibits, and Other Attachments
  1. List of documents, exhibits, and other attachments
Part IV -Representations and Instructions
  1. Representations and certifications
  2. Instructions, conditions, and notices to bidders
  3. Evaluation factors for award

Notice that, depending on the type of contract retained, section A of the Schedule varies. Indeed, the Standard Form (SF) 33 (Solicitation, Offer, and Award) is used when a uniform contract format is needed, which is the case by default. The Standard Form (SF) 1447 (Solicitation and Contract) is used in lieu of SF 33 when a simplified contract format is instead needed.

Whatever type of contract selected, bidders fill out and sign the related form, and submit it. Then, upon acceptance of the lowest responsive bid, the soliciting organization signing the form establishes a binding contract between both parties.

Sealed Bidding Step 2: Publicizing of the invitation for bids

The sealed-bidding process then requires invitations to be publicized by all appropriate means a sufficient time before public opening to enable prospective bidders to prepare and submit bids.

Means of publication for sealed bidding can be direct transmittal to prospective bidders, and dissemination in public places, in particular the Governmentwide point of entry (GPE). The GPE is the single point where the public can access electronically federal business opportunities greater than $25,000.

A sealed-bidding pre-bid conference may be used, generally in a complex acquisition, as a means of briefing prospective bidders and explaining complicated specifications and requirements to them as early as possible after the invitation has been issued and before the bids are opened. The conference shall be conducted in accordance with the procedure prescribed in FAR 15.201.

Sealed Bidding Step 3: Receipt of bids

Bidders must submit sealed bids to be received before their opening at the place and no later than the time stated in the solicitation document, otherwise bids will be deemed late bids and thus not be considered for evaluation.

Sealed bidding specifies that all bids received before the time set for the opening of bids should be kept secure.

Sealed Bidding Step 4: Public opening of bids

The bids are publicly opened at a predetermined time and place, which are specified in the sealed-bidding solicitation document.

If practical, the bid is read aloud to the persons present, and their amount publicly announced. The original of each bid is then recorded, and carefully safeguarded.

Sealed Bidding Step 5: Evaluation, and comparison of bids

Bids are evaluated with no discussion held with the bidders. Because bid evaluation and comparison are limited to price and other price-related factors only, the decision cycle is shorter than other competitive procurement methods that have to deal with more complex, non-price-related evaluation factors.

Evaluation of bids is two-fold. First, the bid must be determined responsive, then the bidder must be deemed responsible, as detailed below.

Bid Responsiveness Determination:

To be determined responsive, a bid must be:

  1. Received, opened, and not rejected at the time and place set forth in the invitation for bids;
  2. Conform to the specifications, terms, and conditions set forth in the invitation for bids; and
  3. The most advantageous bid considering only price and other price-related factors set forth in the invitation for bids (fair, and reasonable price).

Bidder Responsibility Determination:

To be determined responsible, a bidder must:

  • Have adequate financial resources to perform the contract, or the ability to obtain them.
  • Be able to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and governmental business commitments.
  • Have a satisfactory performances record. A prospective contractor shall not be determined responsible or non-responsible solely because of a lack of relevant performance history, except when specified in a standard for special acquisitions.
  • Have a satisfactory record of integrity and business ethics including satisfactory compliance with laws related to taxes, labor and employment, environment, antitrust, and consumer protection.
  • Have the necessary organization, experience, accounting and operational controls, and technical skills, or the ability to obtain them.
  • Have the necessary production, construction, and technical equipment and facilities, or ability to obtain them; and
  • Be otherwise qualified and eligible to receive an award under applicable laws and regulations.

Sealed Bidding Step 6: Selection of the lowest-priced responsive bid

In the sealed-bidding process, selected is the responsible bidder whose bid is deemed responsive, i.e. conforming to the invitation for bids, and is most advantageous considering only price and other price related factors set forth in the solicitation document.

Sealed Bidding Step 7: Award of contract

With reasonable promptness, an award is made to the selected responsible bidder, while a notice of award is sent to unsuccessful bidders whose bid was not retained because either they were declared non-responsible, their bid was deemed non-responsive, or its price was not the lowest.

4. Conclusion on Sealed Bidding Method and Procedures

Selling to the government can bring fresh air to contract winners, particularly small and medium businesses (SMB), mastering federal contracting rules. In fact, organizations that understand and leverage federal acquisition methods and processes can grow from scratch to a profitable bottom line, whatever their size.

The solution is not trying to dodge procurement rules that would seem too heavy to would-be contractors. As Buddha said, your greatest weapon is in your enemy’s mind. Indeed, your best asset relies on knowing the rules by which your enemy, namely your future customer, is playing. Thus, by doing exactly whatever you are asked, or more exactly, expected to do, you are taking the path with the least resistance, the one toward success, that is. This situation would be even better should you pay attention to the myriads of special programs giving privileged access to the gold contracting pot to businesses owned by women, minorities, and veterans.

Again, all this is written on the federal Rosetta stone, the Federal Acquisition Regulation. Get to read it and you are in business, it is as simple as that.

Sealed-Biding Related Web Resources:

Sealed Bidding
Federal Acquisition Regulation (FAR) Part 14.

This part, Sealed Bidding, prescribes:

  • The basic requirements of contracting for supplies and services (including construction) by sealed bidding;
  • The information to be included in the sealed-bidding solicitation (invitation for bids);
  • Procedures concerning the submission of sealed bids;
  • Requirements for opening and evaluating sealed bids and awarding contracts; and
  • Procedures for two-step sealed bidding.

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