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The federal government has standardized procedures for buying products and services from the public. Purchasing methods vary based on the quantity, technical needs, or purpose of the acquisition. Knowing the difference between a micro-purchase, simplified acquisition procedure and contract negotiation is the first step to securing success in government contracting.

Government Buying Methods

If you want to get into the business of government contracting, you should know how the government buys products and services. The federal government has standardized purchasing methods that most business owners are unfamiliar with. While business owners know that federal procurement processes are highly regulated, the average business owner is uninformed about the buying methods the government uses. Let’s take a closer look at the key government buying methods.

Micro-Purchases

70% of contracts are for micro-purchases

Generally speaking, any government purchases under $3,000 are considered micro-purchases. They are perhaps the easiest type of purchasing method for contractors, and do not require assumption of risk by either party. Contractors are not required to submit competitive bids or quotes, and agencies can pay using a government purchase card (aka a credit card), which ensures fast and easy payments. Micro-purchases are not binding like a contract or agreement might be; they include details like price quotes, delivery information, etc.

The consideration of a micro-purchase may vary depending on whether certain government regulations are applicable to the purchase. For example, the definition and purchase requirements of a micro-purchase varies when the Davis Bacon or Contract Service Act is applicable.

Simplified Acquisition Procedures

Simplified Acquisition Procedures, also called government quotes, are reserved for small businesses. More specifically, this type of government acquisition provides purchasing rights to small companies for purchases above $3,000 and below $150,000. These streamlined processes are advertised in Federal Business Opportunities (FBO), the government’s online database of open procurement opportunities. All planned purchases of over $25,000 must be advertised on FBO. Business owners must provide contracting officials with a quote to win the acquisition.

Sealed Bidding

Sealed bidding is a more competitive buying method than either micro-purchases or simplified acquisition procedures. Sealed bidding is used whenever the government has very specific, clear and complete requirements. The government issues an “Invitation for Bid” (IFB) which includes a description of the product or service to be acquired, instructions for preparing a bid, the conditions for purchase, delivery, payment, and other requirements associated with the bid, including a deadline for bid submissions.

Companies prepare and submit bids, and afterwards government contracting officials read aloud all of the bids in a public forum. Typically, the lowest bidder wins the acquisition, so long as other ethical and performance standards demonstrate they have the ability to fulfill the contract requirements.

Contracting By Negotiation

When the government needs to make larger purchases of over $150,000, or requires a highly specialized or technical product or service, it may issue a Request for Proposal (RFP). Prospective contractors submit proposals detailing how they intend to carry out the government’s request and at what price. Contracting officials and business owners can bargain over the terms and conditions, such as the price, schedule, or technical requirements, before the contract is officially awarded. This method is more complicated than the others mentioned, and requires greater oversight and administration by government contracting specialists.

Consolidated Purchasing Vehicles

When various government agencies have common purchasing needs like office supplies or furniture, they can use consolidated purchasing vehicles to save costs because they increase the quantity ordered (economies of scale). This type of buying method encourages long-term vendor agreements with fewer vendors. Consolidated purchasing vehicles avoid the competition and time-consuming nature of the other buying methods because buyers can fill needs through existing contracts instead of starting the procurement process from the beginning each time.