Learn more about government contracting, bidding and opportunities.
If you hope to compete for a long-term contract, there are a number of features that are unique to these kinds of arrangements. Be sure you understand these various elements before committing yourself to a project.
Guaranteed Minimum. This is the minimum quantity the government agrees to buy during the contract period. The government is not obligated to buy any quantity beyond the guaranteed minimum quantity and may, if justified, buy elsewhere after that quantity has been procured (though that is not the intent and is not a common occurrence). The guaranteed minimum provides a vendor assurance of some sales and delineates where vendor risk in pricing begins.
Estimated Annual Demand/Quantity. This spells out the actual quantity the government estimates that it will order during the contract period. Estimates are based on prior demand history but not assured. A check with contract history will reflect the consistency pattern of prior demand history.
Contract Maximum Quantity. This is the maximum cumulative quantity the government can procure during the period of contract performance. If a contract period runs from January to December and in September the full quantity is reached, no further orders will be issued until the new contract period (option) is exercised.
Minimum Order Quantity. This shows the minimum quantity that will be ordered at one time in a delivery order. It is usually based on average demand quantity ordered by requisitions. Consideration of this quantity is critical in pricing and considering the size of a production run.
Maximum Order Quantity. This sets the maximum quantity that will be ordered at one time in a delivery order. The Government may order a larger quantity but vendors have the right to decline the order or request a modification to the delivery schedule to meet the increased demand. At no time can the order quantity exceed the (accumulated) maximum contract quantity.
Flexible Option. This clause allows the government to exercise an option earlier than the expiration of the contract term. If a contract covers a period from January to December, and the full contract quantity is utilized in September, the contracting officer will not have to wait until December to exercise the option. With the flexible option, the option can be exercised in September and the new contract period would then run from September to August of the next year. While this process may shorten the ultimate contract period, the quantities are not altered and both vendor and government are unharmed by the action.
Paperless Order Processing System (POPS). This requires the use of special software and a Value Added Network (VAN) when electronically sending delivery orders via Electronic Data Interchange (EDI). Failure to comply with POPS during award performance may result in a termination for default. While a vendor does not need to have the system in place at the time of solicitation, it must be in place within 30 days after award. Your local PTAC can help you identify potential VANs.
What is the next step if you find a bid that you are interested in? You will have to get the bid package (it is also sometimes referred to as a solicitation package). To get the package, you can do one of the following:
Once you get the package, review it carefully to determine exactly what the purchasing office wants to buy, and compare that with what your business is capable of delivering.
In addition, look at what type of contract is being sought. The three major contract varieties are fixed-price, cost-reimbursement, and special situation. This important because while you merely place a traditional bid for many contracts, there are other bidding techniques that come into use. Finally, make absolutely sure you understand the contract terminology. Unfortunately, the terminology used differs from one buying office to the next.
These are the types of contracts that small businesses will, for the most part, be dealing with. Under the fixed-price arrangement, the final price is basically determined before the work is performed. There are various types of fixed-price contracts:
Cost-reimbursement contracts provide for the final price to be determined either when the work is finished or at some interim point during contract performance. If a contract is cost-reimbursable, the contractor can legally stop work when all contract funds are spent. Thus, the cost risk is essentially shifted to the government. There are various types of cost-reimbursement contracts:
There are also special types of contracts, including:
There are two new bidding techniques that the government is using that the small business needs to be aware of:
Both can present potential problems for small businesses.
If you decide to compete for a bid using the auction method, you need to spend time and effort researching and preparing so that you are sure that you can do what is required at the price you offer. You also need to protect yourself from the auction mentality that can take over. This is a fast-pace environment, and it is easy to get caught up in the moment. In an effort to win, you could end up bidding too low, receiving the contract, and not being able to cover your costs.
In bundling, there may be requirements included in the solicitation that cover areas that a small business cannot perform or manage. If you are considering making a bid, make sure you carefully read every provision of the bid to make sure you have the capability to perform all that is required, including project management.
A word to the wise: Be very cautious if you choose to participate in these bidding techniques.
The following information is from the Defense Supply Center Richmond (DSCR), illustrating procurement processes at a DoD buying office. DSCR is part of the larger DoD buying organization, and if you understand better what DSCR is doing, you will be better prepared to work with the other Supply Centers and federal buying offices.
DSCR, like many other buying offices, issues many long-term contracts. These contracts are more than just fixed-price, fixed-quantity awards. Generally, they contain a range of annual estimated quantities, a separate ordering quantity and a small guaranteed quantity. These quantities will be utilized over a period of a year or years with option terms. For long-term contracts over $100,000, the most common type is referred to as an Indefinite Quantity Contract (IQC). Long-term contracts under $100,000 are identified as Indefinite Delivery Purchase Orders (IDPOs).
There also are other factors to consider such as purchase agreements, surge requirements, and marketbaskets.
Some buying offices refer to "purchase agreements," which are pre-arranged agreements signed prior to doing business with the agency. The Defense Supply Center Richmond requires no such agreements, only that you are registered on the CCR. These purchase agreements are often confused with Blanket Purchase Agreements.
DSCR does have a Blanket Purchase Agreement (BPA) program, which is utilized to make awards below $25,000 (See FAR 13.303 and FAR 16.7). A Blanket Purchase Agreement is a negotiated set of terms under which awards can be made. Once in the BPA program, vendors compete for solicitations, with delivery orders issued against the terms of the BPA. These agreements have a number of features:
If you want to be considered as a supplier under the BPA program, you are evaluated on these criteria:
Solicitations issued under the BPA system will have a "Z" in the ninth position of the solicitation number. Award numbers will contain an AA or AB in the ninth position of the basic agreement. Once the BPA number is issued, it will remain in effect until the vendor requests removal of the BPA. The BPA award number is automatically updated every year with a new fiscal year in the seventh and eighth position. No formal notice is sent to confirm this.
In order to cover emergency situations, many DoD long-term contracts now specify surge quantities. Surge requirements are excess requirements (above the basic quantity) that must be available with an accelerated delivery. These would typically be utilized during times of war or unforeseen surges in demand. Vendors must be capable of supplying any normal contract quantities at the same time as any surge requirement.
Surge items are listed as a separate line item, allowing vendors to reflect a premium price (if justified) to compensate for any overtime shifts, stock rotations/storage, equipment, shipping costs required to supply the surge quantity. The government determines the quantity and delivery desired for the surge requirements. The vendor provides the price necessary to meet the demand.
Due to the critical nature of availability, vendors are generally asked to provide the government with a surge and sustainability plan that details how the vendor will meet the requirements (See DFARS 217.208-70 and DFARS 252.217-7001). Look for the surge clause in section I of the solicitation.
Marketbaskets are long-term contracts for large groupings of multiple items with National Stock Numbers (NSN) that are lumped together based on manufacturing processes. Due to the variety and size of these buys, they are evaluated on a line-item basis, enabling a vendor to respond to one, few or all of the items needed. Most of these buys contain competitive item descriptions and are solicited as some type of set-aside (SB, HUBZone or 8(a)).
Vendors interested in these buys must be careful to consider the volume of items they quote, the impact on their production lines, the ability to meet delivery of multiple items at the same time, the impact of surge requirements as well as the normal impact of packaging and delivery order requirements. Careful attention must be paid to detail in the solicitation. Marketbaskets are highlighted on the DSCR Business Opportunities page, under Corporate Contracting/Special Acquisitions and Small Business Acquisitions.
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