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How the Government Buys
Goods and Services
The government buys goods and services through a process called procurement. This can be defined as the overall process of acquiring goods or services. Procurement involves, but is not limited to, determining needs, determining suppliers, and awarding contracts. And as the government recognizes needs, it must evaluate how much is needed, how soon needs can be met, and how costly those needs will be.
The quickest way the government acquires goods is through Micro-purchasing. Micro-purchases are those that are under $2,500 and do not require competitive bids or quotes to attain. Agencies can pay using a Government Purchase Card without procurement officers. Anything over $2,500, however, is subject to the Sealed bidding process. Sealed bidding is where government program offices (i.e. DoD) solicit contract requirements and send them along to procurement offices. Procurement officers then identify potential bidders and issue an Invitation for Bid (IFB) to these bidders. Procurement officers then evaluate contract solicitations and determine which bidder best fits the government's needs so that contracts can be awarded.
Other government needs aren't so clear. Sometimes program offices solicit a Request for Proposal(RFP) instead of and IFB. This is because in certain circumstances no specific product or service exists to fulfill a government need. The government solicits an RFP to find out which business can come up with the best proposal to satisfy what is needed. Contracts are then awarded to businesses based on the government's evaluation of the "best value" of proposals.
Though the federal government does use other methods of procurement, such as Sole-source Contracts and Multiple Award Contracts, it is important to gain a basic understanding of how the government buys your goods and services. Hopefully, by now you have some idea of how contracts may be awarded to your small business.
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