Publicly-Announced Negotiated Procurements

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The publicly-advertised negotiated procurement market segment is a new world for companies that have not bid on negotiated procurements using requests for proposal (RFP) procedures.

Responding to RFPs is unique for several reasons.

  • Proposal preparation is a complex, expensive process with high stakes both for the winners and the loser.
  • The award decision is placed in the hands of end-users, with oversight performed by the official procurement organization.
  • The proposal evaluation process is subjective, leaving a tremendous amount of latitude on the part of end-users in making an award decision.
  • The negotiated procurement segment is one of the least commercial- like of the government market segment.

Commercial vs. Government Procurement

When making purchases, companies of course are not subject to public procurement laws and thus have the luxury of making large, complex purchases in a more streamlined (and perhaps rational) manner than governments. Some issue RFPs for large projects but when they do they usually send the RFP to a select set of vendors, and the selection of the vendor does not necessarily have to be quantified and stand up to public and legal scrutiny. They take all factors into account and make a rational judgments on which vendor will be the best for the company.

Governments try to do the same thing as commercial companies in procuring large, complex products or services, except they are subject to procurements laws requiring that:

  • The procurement is open to bids from all qualified companies.
  • The award decision is quantified wherever possible to level the playing field when comparing vendor proposals.
  • The award decision is documented in a manner that will stand public scrutiny and a formal, legal protest from a losing vendor.

The Award Decision

Government award procedures generally are as follows:

An RFP is issued containing the project specifications, requirements for the content of technical and price proposals, formal technical and price proposal evaluation procedures, and numerous clauses and detailed bid submission instructions.

The basis of the evaluation procedure is usually a numeric scoring scheme establishing a maximum number of points assigned to evaluation factors (criteria) such as understanding of the problem, technical approach, project team experience, and company qualifications. End-users and contracting officers jointly decide the factors and the scoring weights. Price usually is not assigned points but it can be. In most RFPs, a statement is made about the importance of price.

An evaluation committee is formed usually comprising end-users (e.g., Chief Information Office or his designate for an IT service procurement) and primary stake holders (e.g., users who are impacted by the project). Like scoring factors, the size of the evaluation committee varies among procurements.

Each evaluation committee member scores vendor proposals according to the evaluation procedure published in the RFP. Price is always an important factor and prices are weighed against technical scores. An award recommendation is then made, documented, and sent to the contracting office.

The Purchasing Office Director (state and local agencies) and the contracting officer (federal government) play an important role in the award process and are legally delegated to make the final award decision. They (or their designates) write the RFP with input from the end-user and oversee the proposal process. Their job is to ensure that the playing field is as level as possible given the inherent subjective nature of the process. Stated simply, their job is to interface with the bidders on all RFP issues and questions, make sure the procurement regulations are followed, and ensure the integrity of the process.

Generally speaking, the evaluation processes conducted by the government are about as fair as they can be, given the public nature of government procurement. In spite of the formality of point scoring and weighing of prices versus point scores, the decision, in the end is, is fraught with subjectivity. There's just no avoiding that.

Reading GAO Bid Protest Decisions often helps one get a sense of the subjective nature of the negotiated procurement process. One example is Matter of SelRico Services, Inc., at http://www.gao.gov/decisions/bidpro/2866644.htm (contract awarded to lower-priced, lower-rated offeror in procurement where price was stated as least important evaluation factor).

Sales Environment

End-users are the keys to selling products and services purchased using RFPs. Often they will be professional managers, scientists, or engineers, who know their industry, communicate with other professionals, read trade journals, and attend trade shows and association meetings. Their jobs, performance ratings, and salaries are often tied to the equality of the contractors they select.

If the RFP is for services, they are intensely interested in your project manager and the quality of personnel you can provide. They'll want to know what work you have done in the past, references, and, in general, something more concrete than just reading a paper proposal.

If the RFP is for complex technical products or a solution (products and services), they'll often have preconceived opinions of what products or services they want. They do not operate in a vacuum and act much like commercial end-users who know their industry and the products and services offered therein.

Because of their size and importance to the end-user, a majority of negotiated procurements have a background that frequently influences the selection of a contractor. Examples are:

  • Firms may have already completed selling efforts with end-users. You can safely assume at least one company has pre-sold end-users before a procurement is publicly announced. This is not illegal if it's done early enough in the procurement process (i.e., the conceptualization phase), and it doesn't mean that the user has already selected a contractor. On the other hand, it does mean that pre-selling has taken place, often aggressively, and this could affect the award decision.
  • With highly specialized services (e.g., research and development) program personnel may have ongoing relationships with firms that go back many years, or program personnel may know the "experts in their field" as part of their day-to-day work.
  • There may be an incumbent contractor performing identical or similar work. Under a subjective system you cannot assume that the only factors involved in the evaluation of your firm is what is on the written page. Large government contractors employ ex-government personnel, retain lobbyists, put former top officials of the government on their Boards of Directors, and socialize with government personnel. These practices are not illegal. Medium and small firms follow similar practices to varying degrees. Just keep in mind that these practices can make a difference in seeking negotiated contracts.

Sales Strategies

What does all this tell us?

  • Get there early and sell your project management, personnel qualifications, proven solutions, product feature and benefits, and company experience and reputation.
  • Find out who has already been there selling the incumbent contractor (if it is a repeat contract), whom they have worked with in the past, and pricing data.
  • Do not write an expensive proposal in response to an RFP unless you have done the two steps outlined above. Aggressively seek out end-users for upcoming negotiated procurements. Don't make it just a sales call; develop personal, professional relationships with end-users and key decision makers. Get there early and make it an ongoing process; that way you will naturally learn about the upcoming projects and know when to stop communicating. End-users do not talk to prospective bidders informally once the procurement is formally announced. After that, communication must be through the contracting office.

As an example, for a service procurement suppose an end-user has to evaluate and assign points to the resume of a project manager. A few more points may creep into the score if the end-user knows and respects the person behind the resume. Remember that the end-user may have to work with the manager every day during the project and the manager's performance may well reflect on the end-user.

Sales Costs

Heavy front-end sales efforts and large, expensive proposals cause sales costs to be high for negotiated procurements. On the other hand, your wins tend to be large dollar and you can nurture a single customer for many years if you provide exceptional contract performance.

The key to keeping sales costs reasonable is a high win percentage. You will win often if you:

  • Know your strengths and capabilities (and weaknesses too) and go after business that fits your strengths. Spend marketing dollars up front to find the opportunities which fit your company perfectly. In other words, narrow as much as possible the number of prospective customers to whom you try to sell.
  • Sell aggressively to the prospective customer well before negotiated procurements are publicly announced.
  • Use the information gathered by "early selling" to make intelligent bid/no bid decisions. Don't write an expensive proposal if your intelligence indicates that your chances of winning are not excellent. Losing efforts are not only costly but emotionally demoralizing and drain scarce technical and scientific staff resources. (Most companies ask their key people to work at night and weekends to write proposals.) Carefully thought-out no bid decisions are critical to keeping your win percentage high.
  • Bail out of potential opportunities early and save sales costs if up-front research indicates that your chances of winning are not good (e.g., if your intelligence says that an incumbent contractor is well liked by the customer). On the surface the negotiated procurement process may seem overly formal and subject to gross manipulation. Under the surface it really isn't that much different than what you do in selecting an accountant, a computer developer, or a complex product. In the end it boils down to a rather subjective decision arrived at after considering a wide range of factors. Think of the sales process as an educational process helping the end-user make the best possible decision.


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