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    Government Contracting Database

    Contracting By Negotiation

    The second major acquisition method employed by the federal government, in addition to sealed bidding (FAR Part 14), is contracting by negotiation (FAR Part 15). Through the use of the competitive proposal solicitation form, the government solicits offers from prospective contractors. After the receipt of such offers, the procedure permits bargaining, and usually affords an opportunity for offerors to revise their offers before award of the contract. The “bargaining” which takes place involves discussion, persuasion, alteration of initial assumptions and positions, and give and take which may apply to price, schedule, technical requirements, type of contract, or other terms of the proposed contract.  

    Although sealed bidding was once the most common acquisition method used by the federal government to procure construction services, the use of competitive proposals has grown dramatically and now is used more frequently than sealed bidding. Unlike sealed bidding, where price is determined at the time of bid opening, competitive negotiated procurements may provide an opportunity for a bidder to shift his position regarding price prior to award. This assumes, of course, that the government opens up negotiations and does not exercise its right to award on the basis of initial offers. 

    When negotiations are opened, the government makes an evaluation of which offers are within the competitive range. This competitive range is established after an evaluation of which offers are most likely to result in ultimate award of the contract. Frequently, those offerors who are closest to the government’s estimate, or most consistent with the evaluation criteria applied by the government, will be classified as being within the competitive range, and negotiations will be limited to those offerors. Each offeror, in turn, is then invited to discuss his proposal with the government negotiator and is given the opportunity to ask questions and, ultimately, to make changes in his offer. FAR § 15.306. It is not legal, however, for the government negotiator to conduct an auction, or to advise offerors of the position of other offerors which they would be expected to better. Once negotiations have been completed, the government gives each offeror an opportunity to submit a best and final offer. FAR § 15.307. Award will then be made to the offeror who meets the evaluation criteria listed in the solicitation. Unlike sealed bidding, which limits competition to price, the evaluation criteria may include matters other than price, such as technical capacity, management staff, experience, quality control organization, proposed performance schedule, proposed staffing of the project (superintendents, quality control, project manager) and design, such as design and building projects for family housing. FAR § 15.304. Also, unlike sealed bids which must be awarded on a firm-fixed-price basis, a negotiated procurement may be awarded on either a firm-fixed-price or cost reimbursable contract type.

    Updated: September 19, 2017

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