Public Sector Procurement

Public sector (government) procurement operates under legal frameworks that mandate competitive processes, transparency, and regulatory compliance. Unlike private sector procurement where organizations can choose their processes, government procurement must follow statutory and regulatory requirements. This primer covers US federal procurement under the Federal Acquisition Regulation (FAR) and EU procurement under directives, with notes on key differences from private sector practices.

Before any public sector procurement assistance, establish: (1) the jurisdiction (US federal, US state/local, EU, other), (2) the contract type and value (which determines required procedures), and (3) whether this is a new requirement or modification to existing contract. Each variable changes the mandatory processes, documentation requirements, and timelines.

US Federal Procurement (FAR)

The Federal Acquisition Regulation (FAR) governs US federal procurement. FAR is codified in Title 48 of the Code of Federal Regulations and applies to executive branch agencies. The Department of Defense has additional regulations (DFARS) that supplement FAR.

Contract types under FAR include: Fixed-price contracts where price is set and contractor bears cost risk. Cost-reimbursement contracts where government pays allowable costs plus fee, with government bearing cost risk. Time-and-materials contracts pay for labor hours and materials at specified rates. Indefinite-delivery/indefinite-quantity (IDIQ) contracts establish terms but not specific quantities, with task orders issued as needed. Contract type selection depends on risk allocation, requirement certainty, and contractor capability.

Competitive procedures are required for most acquisitions. Sealed bidding (Invitation for Bids, IFB) is used when requirements are clear and award will be based on lowest price. Negotiated procurement (Request for Proposals, RFP) allows discussions and evaluation of factors beyond price. Simplified acquisition procedures apply to purchases under $250,000 (threshold adjusted periodically) and allow streamlined processes. Micro-purchases under $10,000 can be made without competitive quotes using government purchase cards.

Source selection follows defined processes. Lowest price technically acceptable (LPTA) awards to the lowest-priced proposal that meets minimum technical requirements. Tradeoff source selection allows consideration of factors beyond price (technical merit, past performance, small business participation) with documented justification for paying premium prices. Tradeoff requires source selection plan, evaluation criteria, and documentation of tradeoff rationale.

Small business programs are mandatory in federal procurement. Small Business Set-Asides reserve acquisitions for small businesses when there's reasonable expectation of receiving offers from at least two small businesses. 8(a) Business Development Program assists small disadvantaged businesses. Service-Disabled Veteran-Owned Small Business (SDVOSB) and Women-Owned Small Business (WOSB) programs provide set-asides. HUBZone program helps businesses in historically underutilized business zones. Contracting officers must consider small business participation in every acquisition.

Protest procedures allow vendors to challenge award decisions. Agency-level protests are filed with the contracting agency. GAO (Government Accountability Office) protests are filed within 10 days of award notice and can suspend contract performance. Court of Federal Claims provides judicial review. Protests must be filed timely and state specific grounds. Common protest grounds: improper evaluation, failure to follow stated evaluation criteria, organizational conflicts of interest, or improper small business set-aside decisions.

Organizational conflicts of interest (OCI) rules prevent contractors from having unfair competitive advantages. OCI can arise from: Unequal access to information (contractor has non-public information that provides competitive advantage), Impaired objectivity (contractor evaluates its own work or competing proposals), or Biased ground rules (contractor helped write requirements or evaluation criteria). OCI mitigation may require firewalls, divestiture, or exclusion from competition.

Past performance evaluation is required for most acquisitions. Contractors must provide past performance information for recent, relevant contracts. Government maintains past performance databases (CPARS, PPIRS) that contracting officers review. Poor past performance can result in non-selection even with lower price.

Cost or pricing data requirements apply to negotiated procurements above certain thresholds. Contractors must provide certified cost or pricing data, and government can audit costs. Truth in Negotiations Act (TINA) requires disclosure of cost or pricing data for contracts over $2 million (threshold adjusted periodically).

Contract modifications follow specific procedures. Bilateral modifications require agreement from both parties. Unilateral modifications are issued by contracting officer for changes within contract scope. Cardinal changes (changes outside scope) require new competition or sole source justification.

EU Procurement Directives

EU procurement directives govern public procurement across EU member states. The 2014 Public Procurement Directive (Directive 2014/24/EU) applies to contracts above thresholds (currently €139,000 for supplies and services, €5,350,000 for works, adjusted periodically). Member states implement directives through national legislation.

Procurement procedures under EU rules include: Open procedure where any interested supplier can submit tender. Restricted procedure has two stages—suppliers apply to participate, then selected suppliers submit tenders. Competitive procedure with negotiation allows negotiation with selected suppliers. Competitive dialogue is used for complex requirements where contracting authority discusses solutions with suppliers before final tenders. Innovation partnership allows development and purchase of innovative solutions. Negotiated procedure without publication is allowed only in specific circumstances (extreme urgency, exclusive rights, etc.).

Selection criteria evaluate supplier capability: economic and financial standing, technical and professional ability, and exclusion grounds (bankruptcy, criminal convictions, tax/social security violations). Award criteria determine winner: lowest price or most economically advantageous tender (MEAT) considering price, quality, environmental/social characteristics, innovation, or other factors.

Framework agreements establish terms for multiple contracts over time. Framework agreements can be with single supplier or multiple suppliers. Call-offs under framework agreements can be direct award (single supplier framework) or mini-competition (multiple supplier framework).

Remedies and review procedures allow suppliers to challenge procurement decisions. Standstill period (minimum 10 days) between award decision and contract signature allows challenges. Suppliers can file complaints with national review bodies or courts. Challenges can suspend contract signature or performance.

Key Differences from Private Sector

Legal mandates vs. best practices: Private sector procurement follows organizational policies and best practices. Public sector procurement follows legal requirements—non-compliance can invalidate contracts, result in protests, or create legal liability.

Mandatory competition: Private sector can use sole source when justified. Public sector requires competition except in limited circumstances (sole source justification is much stricter, requires documented justification, and higher approval levels).

Transparency requirements: Private sector procurement is typically confidential. Public sector procurement requires public notice of opportunities, public disclosure of awards, and often public access to evaluation documents (with redactions for proprietary information).

Protest rights: Private sector vendors have no right to challenge award decisions (unless contract terms are violated). Public sector vendors have statutory rights to protest awards, suspend performance, and seek remedies.

Small business programs: Private sector may have supplier diversity goals but they're voluntary. Public sector has mandatory small business participation requirements with set-asides and goals.

Cost or pricing data: Private sector typically doesn't require detailed cost breakdowns. Public sector requires certified cost or pricing data for larger negotiated contracts, with audit rights.

Past performance: Private sector may check references but it's not mandatory. Public sector requires past performance evaluation for most acquisitions and maintains databases.

Contract modifications: Private sector can modify contracts relatively easily. Public sector modifications must follow specific procedures, and changes outside scope (cardinal changes) may require new competition.

Timelines: Private sector can move quickly when needed. Public sector has mandatory minimum timelines for public notice, proposal submission, and evaluation to ensure fair competition.

Common Misconceptions

"Government procurement is just like private sector but slower" — The legal frameworks, mandatory processes, transparency requirements, and protest rights create fundamentally different dynamics. Treating government procurement like private sector leads to non-compliance and failed acquisitions.

"Lowest price always wins in government" — While price is important, tradeoff source selection allows consideration of technical merit, past performance, and other factors. Many government awards go to higher-priced proposals with better technical solutions.

"Once awarded, government contracts can't be changed" — Modifications are common but must follow procedures. Changes within scope are straightforward; changes outside scope (cardinal changes) require justification and may need new competition.

"Small business set-asides are optional" — Contracting officers must consider small business participation in every acquisition and use set-asides when appropriate. Failure to consider small business can result in protests or audit findings.

"Protest procedures are just formalities" — Protests can suspend contract performance, require re-evaluation, or result in award to different vendor. Vendors take protests seriously, and agencies must respond with detailed justifications.

Jurisdiction-Specific Notes

US state and local procurement follows state and local laws, which vary significantly. Some states have procurement codes similar to FAR; others have simpler requirements. Local governments often have their own procurement ordinances.

International procurement outside US and EU follows local laws. Many countries have procurement regulations based on WTO Government Procurement Agreement or UNCITRAL Model Law, but specifics vary.

For jurisdiction-specific details, consult local procurement regulations and legal counsel familiar with applicable requirements.