UPDATE – The simplified acquisition threshold has been amended since this blog was written. See the blog post titled for more details.
Sealed bids are commonly used by state and local governments to procure high-cost items with easily definable characteristics.
While their adoption isn’t as widespread in other sectors, they have been identified as one of the five approved methods of procurement under the Uniform Guidance.
Here is an overview of the sealed bid method of procurement, and the requirements you’ll need to follow should you choose to use this method for your own procurement activities.
Definition of Sealed Bids
Sealed bids are one of the two, approved methods of competitive procurement under the Uniform Guidance when the dollar amount exceeds the Simplified Acquisition Threshold (which is currently $150,000 in most cases). The other approved procurement method is the Competitive Proposal.
U.S. Federal Acquisition Regulations (FAR) define sealed bidding as “… a procurement method used when the best value is expected to result from the selection of the lowest evaluated priced offer.” Federal regulations give preference to sealed bidding over competitive proposals if:
- Time permits the solicitation, submission, and evaluation of sealed bids
- The award will be made on the basis of price and other price-related factors
- It is not necessary to conduct discussions with the responding providers about their sealed bid because of both the clearness and completeness of requirements
The Uniform Guidance goes on to note that in order for sealed bidding to be feasible, the following conditions should be present:
- A complete, adequate and realistic specification or purchase description is available
- Two or more responsible bidders are willing and able to compete effectively for the business
- The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price
If any of the aforementioned conditions is lacking, it may be more appropriate to use a competitive proposal. Since the UG is not prescriptive, it is up to you to determine the best procurement methodology based on the unique facts and circumstances of each procurement.
Specific Requirements for Sealed Bids
The following requirements apply if the sealed bid method is used:
- Bids must be solicited from an adequate number of known suppliers, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised;
- The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond;
- All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly;
- A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and
- Any or all bids may be rejected if there is a sound documented reason.
Other Procurement-Related Considerations
Some other key considerations include the following:
- There can be no conflicts of interest by employees, officers or agents who are engaged in the selection, award and administration of the contract with the winning bidder.
- A contract can only be awarded to a responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed procurement.
- It’s important that you perform the appropriate level of due diligence to consider such matters as contractor integrity, compliance with public policy, record of past performance, and financial and technical resources.
- The contractor cannot be on the System for Award Management (SAM) exclusion list.
- You must maintain a history of the procurement process that should include, at a minimum, the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.
- The process must be conducted in a manner providing full and open competition consistent with the standards of §200.319 – Competition.
- You must take all necessary affirmative steps to assure that minority businesses, women’s business enterprises, and labor surplus area firms are used when possible.
- You must perform a cost or price analysis if the procurement in excess of the Simplified Acquisition Threshold (currently $150,000), including contract modifications.
- The contract that is ultimately awarded to the winning bidder must contain the applicable provisions described in Appendix II to Part 200—Contract Provisions.
If you are not a public sector organization, sealed bidding may be relatively new to you. Don’t avoid it just because you haven’t used it before. You may actually find you have procurements that align well with a sealed bid process, and that you can save time and money by using it.
Author: Tom Rogers
Tom is the founder and CEO of Vendor Centric, he has been a trusted advisor to nonprofit organizations for 30 years, with a focus on helping them align the right people, processes and systems to mitigate third-party risk and drive more value from third-party contracts and relationships.