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Should Sealed Bidding be terminated for the convenience of the government?

By Melissa Rider on Monday, May 15, 2000 - 03:27 pm:

Bob--

The "shalls" for sealed bids are right out of CICA, as codified at 41 USC 253(a)(2)(A). We had a recent case to eliminate some of the burden associated with negotiated acquisitions. FAR Case 99-001, published in FAC 97-14, eliminated the requirement for the CO to justify in writing why negotiation was better than sealed bidding for the instant acquisition. See the new lead-in to 6.401.


By Kennedy How on Monday, May 15, 2000 - 10:56 am:

It's interesting that some of us who started in the Contracting arena just before CICA, but after the Reagan build-up, liked the idea of being able to negotiate. We spent a fair bit of time looking for ways to go with Competetive Negotiations, rather than Formal Advertising. Eventually, some of us decided that Formal Advertising was a much better way to go; you actually had less work to do, everything was set forth in regulation, you go from step to step, and award. Where you really got tripped up was those instances where things don't go right. Where there was some odd detail that would crop up which gummed up the works.

It's true that lots of times, you don't need to negotiate a procurement, but sometimes having the option to do so is nice to have. When you determine if discussions are needed or not, it's done at the time after all the proposals are in. Previous history might indicate those times where discussions weren't required, but that might not be the case this time around.

Kennedy


By Vern Edwards on Monday, May 15, 2000 - 10:47 am:

Bob:

I don't know if this is the kind of statistic that you're looking for, but according to data for FY98, DOD obligated $58.2 billion on prime contract award actions that were in excess of $25,000 for which it sought full and open competition under CICA. The partial distribution of those dollars by solicitation procedure was as follows:

$40.1 billion by competitive negotiations
$ 6.0 billion by sealed bidding
$ 0.8 billion by a combination (two-step?)
$ 1.2 billion by A-E selection
$ 1.0 billion by broad agency announcement
$ 0.4 billion by multiple award schedule

Although there is no information about how the remaining part of the $58.2 billion were awarded, the numbers give you an idea about the relative significance of sealed bidding. $6 billion is not a small amount.


By Joel Hoffman on Monday, May 15, 2000 - 09:23 am:

Bob, I'll check for some statistics with several of my colleagues... Happy Sails! Joel


By Vern Edwards on Monday, May 15, 2000 - 01:36 am:

Bob:

The first protest that I ever lost was in about 1975 or 1976 when I was a contract specialist at the old Air Force Space and Missile Systems Organization (SAMSO). I tried to use competitive negotiation to buy security police (guard) services for Los Angeles Air Force Station, citing the old statutory exception 10. A guy named Joe Bell protested to the GAO that we should use sealed bidding (then formal advertising). He did not hire a lawyer and his entire protest was one page long.

We prepared a protest file and forwarded it to the GAO through HQ Air Force Systems Command. The HQ AFSC procurement staff said that Joe was right and directed us to use sealed bidding. The protest never made it to GAO.

We never heard from Joe Bell again. He disappeared and did not submit a bid.

The good old days.


By bob antonio on Sunday, May 14, 2000 - 12:44 pm:

Joel and Vern:

Joel, I know certain industries like sealed bidding and it is used everywhere. The last time I checked it was used 10 percent of the time in the federal government. However, I checked a long time ago. Do you have the U. S. ACE breakout for the use of sealed bidding vs. competitive negotiations? Is your use of sealed bidding concentrated in construction?

Perhaps, I was trying to give condition (1) for sealed bidding my own meaning.

Vern, I did not consider the added evaluation requirements for competitive negotiations when I wrote the note. Over the years, I have seen quite a few instances where competitive negotiation and award on initial proposals was used instead of formal advertising or sealed bidding. I never made an issue of it. However, I vaguely remember seeing an audit report from the 1960s where an agency was criticized for buying tires under competitive negotiations instead of sealed bidding.


By Joel Hoffman on Saturday, May 13, 2000 - 01:46 pm:

Bob, Public bid openings are very popular with contractors and popularly used through out the U.S. Contractors have more confidence in the integrity of the public bid process. Less possibility of shennaigans. It's faster and cheaper than the negotiated procurement process. When price is the only factor, it is entirely appropriate to use the sealed bid method. Happy Sails! Joel


By Vern Edwards on Friday, May 12, 2000 - 03:55 pm:

Bob:

With regard to FAR 6.401 and the statement that COs may request competitive proposals if sealed bids are not appropriate:

In 1987 the GAO sustained a protest that challenged DLA's decision to use competitive negotiations instead of sealed bidding. See ARO Corporation, B-227055, August 17, 1987. The protest was based on the language in CICA (10 U.S.C. 2304(a)(2)) and FAR 6.401.

The DLA had issued an RFP for hand operated grease lubricating bucket pumps, a national stock number item described in a commercial item description. The RFP identified price as the only evaluation factor and did not require the submission of technical proposals.

DLA justified its use of competitive negotiations on the ground that it wanted to be able to conduct price discussions in order to guarantee that prices were fair and reasonable. Two years previously DLA had used competitive negotiations to buy the item and had awarded without discussions. The GAO held that the prior award without discussions proved that discussions were not necessary in order to determine price reasonableness and sustained the protest because the use of competitive negotiations did not satisfy any of the four criteria in CICA. GAO recommended that DLA cancel the RFP and issue an IFB instead; it also gave the protester its protest costs.

DLA asked for reconsideration. See Defense Logistics Agency--Request for Reconsideration, B-227055.2, October 16, 1987. GAO affirmed its prior decision, saying:

"It is true, as DLA points out, that CICA eliminated the specific preference for formally advertised procurements ('sealed bids') and directs an agency to use the competitive procedures, or combination of procedures, that is best suited under the circumstances of the procurement. However, CICA, 10 U.S.C. 2304(a)(2) (Supp. III 1985), does provide, in determining which competitive procedure is appropriate under the circumstances, that an agency 'shall solicit sealed bids if': (1) time permits, (2) award will be based on price, (3) discussions are not necessary, and (4) more than one bid is expected to be submitted. As is evident, the plain language of the CICA provisions is mandatory in nature. When the enumerated statutory conditions are present, the solicitation of sealed bids is, therefore, required leaving no room for the exercise of discretion by the contracting officer in determining which competitive procedure to use."

The language in 10 U.S.C. 2304(a)(2) is the same as it was at the time of these two decisions. As far as I know, the GAO has never reversed itself.

However, note that in 1987 you could evaluate competitive proposals on the basis of price alone; that is not true today, which is why the ARO decision could not happen again. FAR now says that in addition to price agencies must consider quality and past performance in competitive negotiated procurements, and in the last two years the Government has added two more mandatory evaluation factors for use in competitive negotiations. See FAR 15.304(c). Thus, one of the CICA conditions for using sealed bidding is not present: evaluation based solely on price and price-related factors. Which is why I think that the Government should keep sealed bidding.

COs can buy many things -- commodities, construction, and even simple services -- without making tradeoffs on the basis of quality, past performance, small disadvantaged business participation, and small business counter-bundling participation. Contractor capability can often be assessed effectively by means of a pre-award survey (although one of the reasons to the shift toward best value procurement in the second half of the 1980s was to escape the SBA certificate of competency procedure). Finally, it appears that award without discussions are becoming more frequent.

I don't want to debate whether or not "quality" or "best value" demands a tradeoff approach to contractor selection. I simply want to point out that sealed bidding still has its uses, and maybe even some advantages. If the Government keeps encumbering competitive negotiation with mandatory evaluation factors, maybe sealed bidding will become a streamlining technique.


By bob antonio on Friday, May 12, 2000 - 02:42 pm:

In 1842, Congress laid out the basics for sealed bidding. For years, it was the clear preference in law. Even today, a preference remains although somewhat muted. See FAR 6.401 (a) and FAR 6.401 (b) (1) below. Sealed bidding adds training and other costs to the acquisition process because it exists. Should sealed bidding be terminated and replaced with competitive negotiation and award on initial proposals? This is not a novel idea. Sealed bidding has been hard to kill.

Another question. "Contracting officers may request competitive proposals if sealed bids are not appropriate under" FAR 6.401. The first of four conditions for sealed bidding is "Time permits the solicitation, submission, and evaluation of sealed bids." Does anyone know what that really means? Does anyone know of a study that shows sealed bidding taking longer to acquire the same item than competititve negotiation? Or is this a remnant of an earlier century? I have a sneaky feeling that this #1 has its basis in the pre-CICA world when there were exceptions to formal advertising--the previous name for sealed bidding.

Finally, has anyone been told by business that they will not participate in the sealed bidding process because of the public reading of prices?

"Subpart 6.4--Sealed Bidding and Competitive Proposals

6.401 Sealed bidding and competitive proposals.

Sealed bidding and competitive proposals, as described in Parts 14 and 15, are both acceptable procedures for use under Subparts 6.1, 6.2; and, when appropriate, under Subpart 6.3.

(a) Sealed bids. (See Part 14 for procedures.) Contracting officers shall solicit sealed bids 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 offerors about their bids; and
(4) There is a reasonable expectation of receiving more than one sealed bid.

(b) Competitive proposals. (See Part 15 for procedures.)

(1) Contracting officers may request competitive proposals if sealed bids are not appropriate under paragraph (a) above."  

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