CONTRACTING BY NEGOTIATION

Negotiation means contracting through the use of competitive or other-than-competitive (i.e., sole source) proposals. Simply put, a negotiated contract is any contract awarded without using sealed bidding. The single element that most distinguishes contracting by negotiation from contracting by sealed bid is the subjective judgment required in a negotiation to weigh quality and other factors against price. Overall, negotiation permits the government greater latitude in selecting contractors (see Figure 1).

The basic elements in a sealed bid procurement—the existence of an established price and a functioning marketplace—are not as well defined in negotiation. The procedures used in negotiating a contract vary depending on the competitive environment; specifically, multiple bidders vs. sole source awards. The government’s focus shifts from price analysis to a combination of price and cost analysis. And the contracts are subject to various complicated federal regulations that mandate how costs should be determined, accumulated, and allocated.

For each government acquisition, the relative importance of cost or price will likely vary. In acquisitions where the requirement is clearly definable and the risk of unsuccessful contract performance is minimal, cost or price may be dominant in source selection. The less definitive the requirement, the more development work required, or the greater the contract performance risk, the more dominant technical or past performance considerations will likely be.

If the acquisition selection is to consider award to other than the lowest priced offeror or other than the highest technically rated offeror, the solicitation will state the relative importance of all evaluation factors and whether all evaluation factors other than cost or price are together significantly more important than, approximately equal to, or significantly less important than cost or price. This permits tradeoffs among cost or price and non-cost factors, and allows the government to accept other than the lowest priced proposal. Any perceived benefits of a higher priced proposal must merit the additional cost.

Figure 1 Contracting by Sealed Bid vs. Negotiation

The lowest priced, technically acceptable source selection basis is appropriate when best value is expected to result from the process. Under this process, the evaluation factors and significant subfactors that establish the requirements of acceptability will be presented 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-cost factors. Past performance need not be an evaluation factor in lowest price, technically acceptable source selections. If the government determines that a small business concern’s past performance is not acceptable, the matter is referred to the Small Business Administration for a Certificate of Competency determination. Proposals are evaluated for acceptability but not ranked using the non-cost/price factors.

Oral presentations by offerors as requested by the government may substitute for, or augment, written information at any time in the acquisition process, and are subject to the same restrictions as written information regarding timing and content. Prerecorded videotaped presentations are generally not considered oral presentations, although they may be included in offeror submissions. The solicitation may require each offeror to submit part of its proposal through oral presentations. However, certifications, representations, and a signed offer sheet (including any exceptions to the government’s terms and conditions) must be submitted in writing. Information pertaining to areas such as an offeror’s capability, past performance, work plans or approaches, staffing resources, transition plans, or sample tasks (or other types of tests) may be suitable for oral presentations. When oral presentations are required, the solicitation must provide offerors with sufficient information to prepare for those presentations.

The government must maintain a record of oral presentations. A copy of the record placed in the file may be provided to the offeror. When an oral presentation includes information that the parties intend to include in the contract as material terms or conditions, the information must be put in writing. Incorporation by reference of oral statements is not permitted.

Exchanges of information among all-interested parties, from the earliest identification of a requirement through receipt of proposals, must be consistent with procurement integrity requirements. The purpose of exchanging information is to improve the understanding of government requirements and industry capabilities. This allows potential offerors to judge whether or how they can satisfy the government’s requirements, enhances the government’s ability to obtain quality supplies and services at reasonable prices, and increases efficiency in proposal preparation, proposal evaluation, negotiation, and contract award.

An early exchange of information among participants in the acquisition process can identify and resolve concerns regarding the acquisition strategy. This includes proposed contract type, terms and conditions, and acquisition planning schedules; the feasibility of the requirement, including performance requirements, statements of work, and data requirements; the suitability of the proposal instructions and evaluation criteria, including the approach for assessing past performance information; the availability of reference documents; and any other industry concerns or questions. Early exchanges of information can be accomplished through industry or small business conferences, public hearings, market research, one-on-one meetings with potential offerors, presolicitation notices, draft Requests For Proposals (RFPs), Requests For Information (RFIs), presolicitation or preproposal conferences, and site visits.

Special notices of procurement matters or electronic notices may be used to publicize the government’s requirement or to solicit information from industry. RFIs may be used when the government does not presently intend to award a contract, but wants to obtain price, delivery, other market information, or capabilities for planning purposes. Responses to these notices are not offers and cannot be accepted by the government to form a binding contract. There is no required format for RFIs.

After release of a solicitation, the contracting officer is the focal point for any exchange with potential offerors. When specific information about a proposed ac-quisition that would be necessary for the preparation of proposals is disclosed to one or more potential offerors, that information is to be made available to the public as soon as practicable, but no later than the next general release of information, in order to avoid creating an unfair competitive advantage. Information provided to a particular offeror in response to that offeror’s request must not be disclosed if doing so would reveal the potential offeror’s confidential business strategy. When a presolicitation or preproposal conference is conducted, materials distributed at the conference are made available to all potential offerors upon request.

This process invites potential offerors to submit information that allows the government to advise the offerors about their potential to be viable competitors. A pre-soli-ci-tation notice identifies the information that must be submitted and the criteria that will be used in making the initial evaluation. Information sought may be limited to a statement of qualifications and other appropriate information (e.g., proposed technical concept, past performance, limited pricing information). At a minimum, the notice contains sufficient information to permit a potential offeror to make an informed decision about whether to participate in the acquisition. This process should not be used for multistep acquisitions where it would result in offerors being required to submit identical information in response to the notice and in response to the initial step of the acquisition.

The government evaluates responses and advises each respondent in writing either that it will be invited to participate in the resultant acquisition or, based on the information submitted, that it is unlikely to be a viable competitor. The agency advises respondents considered not to be viable competitors of the general basis for that opinion. The agency informs all respondents that, notwithstanding the advice provided by the government in response to their submissions, they may participate in the resultant acquisition.

RFPs are used in negotiated acquisitions to communicate government requirements to prospective contractors and to solicit proposals. RFPs for competitive acquisitions describe the government’s requirement, the anticipated terms and conditions that will apply to the contract, information required to be in the offeror’s proposal, and factors and significant subfactors that will be used to evaluate the proposal and their relative importance. The solicitation may authorize offerors to propose alternative terms and conditions, including the contract line item number (CLIN) structure. When alternative CLIN structures are permitted, the evaluation considers the potential impact on other terms and conditions or the contract requirement.

An RFP may be issued for Office of Management and Budget (OMB) Circular A-76 studies, which involve cost comparisons between government and contractor performance. Electronic commerce may be used to issue RFPs and to receive proposals, modifications, and revisions. If facsimile proposals are authorized, contracting officers may request offeror(s) to provide the complete, original signed proposal at a later date. Oral RFPs generally are authorized when processing a written solicitation would delay the acquisition of supplies or services to the detriment of the government. Use of an oral RFP does not relieve the government from complying with other FAR requirements.