It is doctrine and widely believed that competitive bidding (sealed bidding and competitive negotiation) reduces costs and increases quality.

But is it true?

2 hours ago, Vern Edwards said:

But is it true?

Yes. By experience for what I will call the acquisition of my personal needs seeking and applying competition does reduce the costs and does increase the quality of what I buy. Yet by experience when competition is done within the structure of the Federal Acquisition Regulations I believe the answer is it depends. Why? Because of the socio-economic and political interests that are mandated by the processes of the Federal Acquisition Regulations and the policies that are invented to go along with Regulations.

The well suited and informed buyer (contracting officer assisted by technical expertise, if needed) can reach a solid deal without competition. By first evaluating and selecting potential sources on technical merit and then negotiating price with the most favorable, an optimal choice is made. I’m thinking along the lines of the A/E contract process but perhaps not as formal.

2 hours ago, formerfed said:

The well suited and informed buyer (contracting officer assisted by technical expertise, if needed) can reach a solid deal without competition. By first evaluating and selecting potential sources on technical merit and then negotiating price with the most favorable, an optimal choice is made. I’m thinking along the lines of the A/E contract process but perhaps not as formal.

How is that not competition?

47 minutes ago, Don Mansfield said:

How is that not competition?

It doesn’t have to formal competition as in FAR 15. It can involve identifying potential sources, requesting information, and asking questions to arrive at a pool of a few or perhaps one source. Personal knowledge or prior experience can lead to a similar conclusion. Or it may consists of industry submission of information similar to A/E contracting.

1 hour ago, formerfed said:

It doesn’t have to formal competition as in FAR 15. It can involve identifying potential sources, requesting information, and asking questions to arrive at a pool of a few or perhaps one source. Personal knowledge or prior experience can lead to a similar conclusion. Or it may consists of industry submission of information similar to A/E contracting.

Ok, so you're saying you don't need "full and open competition" to get a good deal. I agree. I also think what you described is a competitive procedure, even though it may not meet the definition of "full and open competition."

7 minutes ago, Vern Edwards said:

@Don Mansfield

From FAR Part 2: "Full and open competition, when used with respect to a contract action, means that all responsible sources are permitted to compete."

What part of that definition does what formerfed described fail to meet?

I don't know if what @formerfed described includes permitting all responsible sources to compete--that's why I said it may not meet the definition.

Thanks for clarifying.

I don't think competition guarantees that the government pays lowers prices. Moreover, price competition encourages tactics such as buying-in (low-balling).

I think CICA is based on a category mistake. It assumes that all government contracts are transactions in which the contract price is one and done at the time of contract award, like buying a COSTCO hotdog.

But the biggest and most complex government projects and programs are relations in which specifications are not definitive, requirements and the conditions of performance are subject to change, and prices are subject to adjustment after contract award, sometimes several times. Few such contracts are completed at the award price, and post-award price adjustments are made on a sole source basis. Competitors know that and engage in tactics such as buying-in ("low-balling") in order to get the award and then "get well" through changes.

One of the most competitive government contract markets is construction. Most construction contracts are awarded by sealed bidding. Yet only about 8.5 percent of construction contracts are completed at the award price due to changes, claims, and litigation. Construction contracts the most commonly litigated of all government contracts.

As for quality-- it is well known that contracts awarded after full and open competition for weapon and software system development are frequently plagued with quality issues that take years to resolve after award of a development/production contract. Quality in weapons development is the product of ongoing rivalry, not competitive bidding.

Full and open competition𑁋allowing all prospectively responsible firms to compete𑁋is time-consuming and expensive and, based on the foregoing, wasteful. A thoughtful Congress would reconsider the "full and open competition" standard and get rid of the Part 15 source selection process, in which price is a mandatory contractor selection factor.

The A-E selection process would be far better than the FAR Part 15 process for relational R&D, system development, complex support services, and large scale construction acquisitions. Separate the steps of contractor selection and contract formation.

Price should not be a factor in contractor selection for such projects and programs. It should be negotiated after contractor selection, during contract formation, i.e., offer, and acceptance.

On 2/24/2026 at 5:50 AM, Vern Edwards said:

It is doctrine and widely believed that competitive bidding (sealed bidding and competitive negotiation) reduces costs and increases quality.

But is it true?

Regarding competitive bidding, from my experience in federal construction contracting, prior to implementation of competitive negotiations, it didn’t “increase quality”. There were many dirtbag contractors, who cut corners and/or were very difficult to deal with and/or claims artists. I would often dread even conducting the post award conference with them.

After switching to “best value”, most of them disappeared or quit being awarded contracts. Others improved their quality of performance and/or became much easier to work with. Two previously cantankerous contractor owners actually became fairly pleasant to deal with.

I attribute most of this improvement to implementing the evaluation of past performance as a selection factor. Evaluating proposed key personnel and requiring KO approval of substitutes were also useful… They realized that they had to “cooperate to graduate” and satisfy the customer to win awards…

The willingness to pay more for higher quality and/or performance capability also was significant advantage too.

27 minutes ago, joel hoffman said:

After switching to “best value”, most of them disappeared or quit being awarded contracts.

So the change in the method of contracting (from sealed bidding to competitive negotiation) produced the change in attitude, which you consider an improvement in quality, though at a higher price.

Couldn't sole-souring or competition limited to selected prospective sources have produced a similar outcome without the administrative cost of full and open competition?

1 hour ago, Vern Edwards said:

So the change in the method of contracting (from sealed bidding to competitive negotiation) produced the change in attitude, which you consider an improvement in quality, though at a higher price.

Yes but not necessarily at higher final cost. ReguLarly had lowball, buy-in bids, often followed by claims and requests for equitable adjustments, to deal with.

And timeliness of performance completion increased after changing to competitive negotiations.

1 hour ago, Vern Edwards said:

Couldn't sole-souring or competition limited to selected prospective sources have produced a similar outcome without the administrative cost of full and open competition?

The latter, yes perhaps. The former, sometimes but not often regarding lower pricing.

We were able to sometimes request specific 8(a) firms and were successful at rejecting some firms offered by SBA before or after receiving proposals/negotiating.

My training is in economics and I'm somewhat familiar with the (less mathematical) literature. Economic papers on this topic emphasize that there are differing markets conditions:

• low-complexity vs. high-complexity requirements

• importance of price vs. quality

• Homogenous or heterogenous sellers. (when everyone proposes the same solution to your problem; there is little to be gained by negotiating)

• Irregular/unpredictable or frequent/predictable purchasing

• Many others.

Buyer likewise have a set of procurement methods - the most important of which is using either negotiation or competitive bidding. Note that in this literature buyers using both competitive bidding and negotiation - receiving many competitive offers and then conducting negotiations - is usually waved away as a self-evidently poor choice. Clearly economists have not read and absorbed FAR 15. I'm only half-joking here - I mean FAR 15 as its understood and used by practitioners, not by FAR originalists.

Given all this, the answer to the original question 'Is it true?' is 'It depends.' When the buyer (GVT) uses the right methods for that market's conditions, then Yes costs decrease and quality increases. When the wrong method is used, then the inverse is true.

The government treating all contracts as transactions suggests the government is using competitive bidding when the conditions favor negotiation - that's when the answer is no.

P.S. A department is doing a natural experiment on this right now - many requirements whose conditions suggest (to me) they are negotiations, and previously were (more or less) negotiated, are now being treating like transactions. Maybe I'm wrong and it'll work out.

P.P.S. 'Competition under Incomplete Contracts and the Design of Procurement Policies', Carril et al, 2024, is a recent article about this topic.

1 hour ago, General.Zhukov said:

P.P.S. 'Competition under Incomplete Contracts and the Design of Procurement Policies', Carril et al, 2024, is a recent article about this topic.

Here's the abstract.

We study the effects of intensifying competition for contracts in the context of US Defense procurement. Leveraging a discontinuous regulation that mandates agencies to publicize certain contract opportunities, we document that expanding the set of bidders reduces award prices but deteriorates post-award performance in terms of cost overruns and delays. We develop and estimate an auction model with endogenous entry and stochastic execution performance, in which the buyer endogenously chooses the intensity of competition. Model estimates indicate substantial heterogeneity in performance across contractors and show that simple adjustments to the current regulation could provide significant savings in procurement spending.

Duh.

Typical economics "paper" by "scholars" desperate to publish something. (This one had three authors. Adam Smith wrote his great treatise all by himself.)

Anyone doing government contracting for a couple of decades or so could have told us that. There are at least a dozen Congressional hearings that document that effect. That's why FAR 3.501 has warned against buy-ins for 50 years.

On 2/24/2026 at 5:50 PM, Vern Edwards said:

Price should not be a factor in contractor selection for such projects and programs. It should be negotiated after contractor selection, during contract formation, i.e., offer, and acceptance.

I can reflect on many situations where price was successfully negotiated at fair and reasonable amounts during the contract formation stage. These ranged from Congressionally directed projects for major systems involving single sources, R&D where noncompetitive is sometimes the norm, to urgent and compelling needs. In every instance, the government negotiator was very skilled and experienced and supported by equally competent technical experts.

So I’m concluding this process of negotiation after selection requires well qualified government staff to negotiate and arrive at fair and reasonable pricing. The big question is where do these people come from? Sure, they exist now but in limited numbers but a widespread use of this requires many more well qualified negotiators.

This is can be a great application of a Congressionally directed test.

Another point involving misperceptions is companies often don’t propose their more favorable offers in competitive situation. Pricing depends upon what the company needs to do to win or much much they want to win - how badly do they want this business, how important is it the their overall strategic plan, do they want to commit their best resources including personnel to the project, what other opportunities will they pass up, what is the likely return on the investment, who is their anticipated competition, what are the potential risks, what is the clients reputation (is the agency something they want to deal with), and so on. Sometimes a company proposes with high prices even with identified negatives on the notion it’s worth it for the added profit.

A somewhat similar situation exists with quality.

In today’s times where conducting negotiations is becoming the exception, contract awards may reflect much higher prices than what could be possibly achieved.

I'd go so far to say that the pursuit of full and open competition is actively harmful in a significant number of procurements. It might even be a majority. For example, I'm working on basic and applied R&D right now and there are basically no cases where prices go down and quality goes up because of competition. This is something I would like to think about and think about how to test.

Edited February 26Feb 26 by KeithB18
Hit publish too fast.

1 hour ago, formerfed said:

Another point involving misperceptions is companies often don’t propose their more favorable offers in competitive situation. Pricing depends upon what the company needs to do to win or much much they want to win - how badly do they want this business, how important is it the their overall strategic plan, do they want to commit their best resources including personnel to the project, what other opportunities will they pass up, what is the likely return on the investment, who is their anticipated competition, what are the potential risks, what is the clients reputation (is the agency something they want to deal with), and so on. Sometimes a company proposes with high prices even with identified negatives on the notion it’s worth it for the added profit.

A somewhat similar situation exists with quality.

In today’s times where conducting negotiations is becoming the exception, contract awards may reflect much higher prices than what could be possibly achieved.

I agree that firms may often not initially propose their best price in negotiated acquisitions. That’s why government buyers should negotiate and bargain for better prices.

And I agree that many buyers/KO’s don’t want to negotiate or bargain for better terms/prices.

In construction contracting, I found that many KO’s in my former Army Command don’t know how to analyze pricing , didnt know enough about construction contract pricing to analyze or to negotiate/bargain. Heck many of them across the Districts didn’t even know they COULD bargain!!