Terms and conditions to winning a contract with government projects

PMI Government SIG

Overview

The success of winning government contracts is complex despite the obvious budget constraints, and challenges facing organizations dealing with technological advancements. For that reason alone the complexities of work to be done in government dealing with multiple contractors and mandates regarding acquisition had been a challenge to federal, state, and local government particularly in the U.S. and also other countries. Whatever it may be, we still need consensus, the right solutions, and the negotiation process that everyone can sign off.

Winning government project contracts is a complex process because agencies involved in doing business with private organizations can involve contractors, subcontactors, suppliers, and consultants as providers of technical, administrative, or physical services. There are a variety of skills needed in areas of acquiring services, goods, and supplies in transportation; homeland security administration; public works; energy; agriculture, including farm produce; medical devices; medical networks; child care; environmental; janitorial services; parks and recreations; front-line disaster personnel; health care providers; drug administration; staple foods, such as bread, milk, water; food processing supplies and equipment; oil; gas; telecommunication systems; steel; minerals; war fare equipment; materials; uniforms; drilling; consultants; and so forth.

Supplies, goods, and services for disaster relief programs formed in the wake of such events as the South Asian tsunami, Hurricane Katrina, or the war in the Middle East are contracted.

Opportunities exist to contract with government in the project cycle such as feasibility studies, project planning, development, and evaluation that can use the expertise of project managers. Many countries are familiar with provisions and guidelines for procuring good and services financed in whole or in part by a loan from the International Bank for Reconstruction and Development (IBRD) or a credit/grant from the International Development Association (IDA) that follows procurement guidelines.

Purpose

Major topic of discussion for this paper will focus on contracting practices citing country, state, and local government in order to understand some basic rules, policies for contractual work, and winning bids for government project(s).

  1. Understand the procurement strategies.
  2. Understand laws, rules, regulations, and policies.
  3. Understand legislative reporting and requirements.
  4. Understand procurement management procedures identified in project scope following government guidelines.

Participants will share past experiences contracting with government project(s), from other countries.

Government Procurement Mission

“Promote efficiency between vendors and agencies in order to fulfill the procurement needs of the country, in a cost effective, responsive, and timely manner in accordance with the national law of state and country.”

Contracting Overview: Wheel of Operation in Government

There are international standards and performance policies that need to be observed, as well as expectations for soliciting contracts in regards to what, when, and where services and goods were procured. Public procurement directives vary in many countries that follow governmental order. An open procurement procedures are published. Notices are posted in major newspapers as well as websites from particular agencies or ministry. Particularly important is the consideration regarding environmental issues where environmental policies of the country that is involved affect the health of the nation and the welfare of the people. Government agencies need to be transparent and accountable on results.

Ethics and Value

Legislative, executive, and judicial branches of government maintain a high degree of ethical, legal, and moral procedures in procuring goods and services. However, some practices of collusion, fraud, and corruptions are challenges to some countries. It is however necessary that contractors and agencies/ministry associated with procurement are expected to observe and recognize the following ethical standards unique to government contracting:

  • Conduct business with each other fairly and reasonably without compromising the integrity of the government agency as well as the corporation dealing with government
  • Assist in the elimination of fraud, corruption, or collusion
  • Deal with one another on the basis of mutual trust and respect
  • Acceptance of gifts and hospitality must not be compromised by the State involved in the procurement process
  • All involve in the procurement are accountable to heads of procurement and high level management
  • No vendor shall pay, offer to pay, directly or indirectly any fee, commission, compensation, gift, gratuity, or other things of value to any government officer, legislator or employee.

Public procurement in Denmark as well as Finland, for example, follows the principles of equal treatment, non-discrimination, transparency, proportionality, and mutual recognition when concluding public contracts. This also holds true in other countries.

All individuals involved in acquisition in both government and industry are expected to be accountable for their plans, actions, and outcomes in terms of procurement. It is important that the element of openness, transparency, and open competition is in accordance with the national legislation and international standards. The quality of procurement within the Ministry is monitored.

Familiarity with Sunset Law as it Pertains to Procurement

Sunset law applies to States in U.S. that automatically terminates funding for agencies program and project(s) unless it is renewed. Bidders must be aware where projects contain Sunset law provision. There are instances where “Sunset laws'” are limited to certain period of time (2-3years) to buy equipments for a technological project approved by the legislature. In Texas, unless legislation passes, an agency is scrutinized and reviewed to assess an agency program. About 20-30 agencies in Texas go through the Sunset process each legislative session. Alabama has a similar review process and a review cycle every four years. In Germany, there is a general provision for emergency legislation and some federal states such as the Hesse and North Rhine – Westphalia add Sunset provisions to bills. Canada has an implied Sunset clause of five years. Australia decided to legislate a new anti-terrorism law that has a Sunset clause of five years. Unless legislative actions for the “Sunset law” in a statute or regulation are extended, that terminates or repeals all or portions of the law at a specific date.

Rights and Responsibilities: Procurement and Contracts

Start with the “end” in mind makes good business sense for the agency and the contractors representing their organization. For those that are new in the acquisition and procurement management, the government expects agencies to be fair and yet demanding buyers for supplies, goods and services that offers the best value for their money. Domestic preferences are stated and set forth in the bidding documents. For example, in New Zealand, domestic suppliers are better priced, better through life support such as availability of spare parts and after sales service, shorter delivery lead times, and easier and cheaper communications. Goods and services are adapted to local conditions and have better knowledge of the producer's reputation and reliability of performance. Having given the domestic suppliers full and fair opportunity does not preclude the government to seek and buy from the best source available based on their own assessment of all cost and benefits associated with the product, goods, or services. Goods are considered as all types of personal property that includes commodities, materials, supplies, and equipments. In most cases, procurement is either leased or purchased. For contractors, it is imperative to develop an Acquisition Strategy, which generally applies to rules under which all bids must adhere.

  • Contractors/vendors must have an understanding of the Agency's requirements such as time of delivery and completion of project, terms of payment, warranty and guarantee terms, technical features and efficiency of proposed solution to the agency project.
  • Applicable law, funding limitations, and Sunset Law. Contractors must also understand the fiscal year of various states and countries. For example, in the U.S., the fiscal year for the U.S. government is October 1 to September 30. Whereas, each U.S. state's fiscal year is July 1 to June 30.
  • Taxes and duties required, patent and indemnity.
  • Bid security or performance bond.
  • Cost of goods and services is quantified in monetary terms.
  • Environmental considerations that threatens health and welfare or safety of the people. Be cognizant of minimizing waste, recycling as well as conserving energy, water or some amount disposed or consumed.
  • Correction of errors especially in figures, words used, misplacement of decimal points, unit rates, and total price of the project is crucial to winning a bid.
  • Selected bidder is not allowed to modify the bid once it is submitted to procurement agency.
  • Site visits are allowed in many agencies. Clarification of proposed project by agency must always be in writing. Potential vendors may meet with key agency people during site visits announced by the agency.

Conditions and Terms: BID Opportunities

Terms and conditions generally apply to the rules under which all bids must be submitted with the resulting outcome producing contract. Documents on the contract clearly defines scope of work to be done, goods to be supplied, rights and obligations of the contracting agency, as well as the supplier of goods to be procured. It is in the best interest of vendors to diligently follow rules, requirements, standards, and familiarity with measures used during evaluation. In the U.S. there is an opportunity for prospective vendors to establish a more thorough understanding of the government's requirement set forth in the Request for Quotation (RFQ) with the goal of better proposal submission and project execution. In most projects, Due Diligence Ground Rules session occurs whereby an informal meeting with prospective bidders with agency representative answers to questions asked by contractors regarding specific contracting opportunities. Agency representative is not bound by the answers provided during Due Diligence sessions.

When the government provides standard conditions and terms, review the following procedures to enhance winning the bid.

  • *Vendors are encourage to attend the pre-bid meeting although not mandatory
  • *Vendors are encourage to arrange for a site visit before a proposal is submitted
  • Where large and complex projects are concerned, decompose the objectives set forth on the scope of work into a set of required outcomes
  • Describe effect of bidders proposal affecting “outcome” from proposed solution
  • Quantify efficiency that will benefit the agency, other stakeholders
  • Describe enhancement if any to existing government project
  • Identify measures that will produce results of the work proposed based on past performances
    • Identify what gets measured and by whom, and when measurements will take place
    • Demonstration, analysis, or testing identified by schedule
  • Ensure the proposed work aligns with the agencies needs
  • Define and respond to complexity of project
  • Respond to functionality of project
  • Explicitly respond to timeliness and deliverables
  • Conduct risk analysis including politics and other stakeholders
  • Establish cost baselines including cost associated with travel, shipping, handling of supplies, goods, and services
  • Include in proposal human resources from government and organization involved in the project
    • Customer satisfaction
    • Business relations, governance, and shared responsibility
  • Respond to criteria as specified on proposal analysis and function of the system proposed, products, and procedures for the purpose of satisfying the required functions at the lowest total cost consistent with the following functionality requirements with consideration given to past performances such as:
    • Cost
    • Maintainability
    • Usability
    • System reliability
    • Quality of product
    • Quality of training
    • Availability of product
    • Adaptability and compatibility of supplies and materials, equipment to existing system
    • Support services o Response time
    • Subcontracting.

Types of Solicitation in Government

In many countries the general rule for solicitation and acquisition of goods and services is through tendering procedures. There is private bidding whereby a government agency calls for bids by sending an invitation to bid specifying required goods or services. Suppliers submit a technical response that is of quality and the economic impact of the service provided. Public bidding or tendering is a call for bids through a major publication and notice in the press. Procurement requirements must be met and the procedure is used with specified amount of money budgeted for the project. Procurement through direct contracting is used on emergency and unexpected events or the sole provider or the only standard brand that is compatible with the existing assets from the particular government agency. In Peru, for example, selection procedures or processes used in government procurement are price-based open tendering, merit-based tendering, selective or limited tendering, and small contracts.

Open tendering are used to procure goods and supplies, as well as contract for works in accordance with the Annual Budget Law whereby local price-based open tendering are manufactured by companies with factories in Peru, as well as works executed by companies with offices in Peru. International price-based tendering for goods and supplies that are not manufactured in Peru warrants international participation. International bidding procedures are observed in many countries. Sole source contracts are conducted to determine when there are no other vendors who can satisfy the technical requirements because of unique technical competence or expertise. Sole source is published with sufficient details to provide the service. If there are no other vendors interested on the published document, then a sole source contract maybe issued.

In the U.S., the general rule is full and open competition. Simple acquisitions are guided by the rules of the State where funds are specified by the legislator. The General Services Administration (GSA) for example is a federal government's business manager, buyer, telecommunication manager, IT solutions provider, and real estate developer. Most GSA contracts are general-purpose supplies, equipment, and services; information technology; and network services as well as building construction, repairs, and maintenance. The GSA also buys and leases for vehicles for all federal agencies. The GSA also advocates small disadvantage, women-owned businesses, veteran, and service-disabled veteran-owned businesses.

Conditions and Terms: BID Opportunities

Services and goods required for the project are documented covering both the technical and non-technical requirements.

Understanding Solicitation Procedures in the U.S.

  • Request for Proposal (RFP) is a formal solicitation method that solicits sealed price proposal from prospective vendors that seeks the best value for the state.
    • Cost is a determining factor but also uses the combination of lowest cost = best proposed solution to determine the award
    • Clear and concise methodology and possible best solutions to agencies problem is expected from the organization that submitted the proposal
  • Request for Quotation (RFQ) is a formal solicitation method that includes a well-defined specification or Scope of Work. The responsible vendor is required to provide specification at the lowest cost possible.
  • Request for Information (RFI) is a formal process for soliciting information from vendors who have knowledge, experience, or information about the products or services required for a project. This method is used to determine whether an RFP or an RFQ is appropriate for the next step.
  • Request for Qualified Contractor (RFQC) is used in cases where the agency is attempting to find vendors with qualifications to surpass the required qualifications of contractors. This form of solicitation does “not” culminate in a contract award.
  • Sole Source is a formal process where only one supplier can satisfy the technical requirements because of unique technical competence and expertise and there is only one source verified that that possesses patents or exclusive rights to manufacture and furnish the item or service. The sole source procurement is not an attempt to contract with a favored provider. It is only used when there is no other option available to the government agency.

In order for profit organizations to conduct business with government it is in the best interest of both parties to understand the many aspects of the agency requesting for proposal and service resulting in contract awards.

The standard conditions and terms used in the bid solicitation and acceptance involves subsequent award of contract. For example, pricing and cost quoted as well as other stipulations in the proposal shall be:

  • Net that includes transportation, shipping and handling fully paid by bidders, allowance quoted includes packages or partial delivery cost of goods. When an error in costing has been made by the supplier of goods and services, the unit price will govern. In terms of discounts, prices shall be inclusive of all trade discounts.
  • Execution of the proposal must be signed. Erasures and alterations must be initiated by the bidder in ink. Failure to comply results in the rejection of bid.
  • Bidders guarantees the prices quoted have been arrived at without “collusion” with other eligible bidders.
  • The governing agency reserves the right to require “performance bond” from the successful bidder as provided by law without expense to the government agency.
  • In the U.S., purchases made by the government agency are exempted from the Federal Excise Taxes, as well as state and local taxes under state statute. This item must not be included in the bid prices.
  • All bids are time and date stamped. Bids received after the time of public opening are considered late bids and will be returned to bidders unopened.
  • Telephone bids are not acceptable and a bid may not be altered after opening of the bids.
  • Subcontracting on any or part of the contract work must comply with provisions of the state rules and regulations relating to developing and submitting plan prior to any modifications or performance in the awarded contract.
  • Compensation for all royalties, cost arising from patents, trademarks, and copyrights that are in any way involved in the contract is the sole responsibility of the vendor to pay and the state must be held harmless from any claims.

Bidders should exercise caution when responding to the proposal using the word “may” as opposed to the word “will.” The State Procurement Agency has the option to prohibit the granting of award on an otherwise best value bid. There are circumstances whereby an award is made to the next lowest bidder meeting the specifications if the original bidder cannot meet the conditions specified on the contract.

There are exceptions when the State solicits as a result of emergency purchases. Emergency purchases requires a letter of justification, signed by the authorizing representative or purchasing director due in large to the impact or damage either financial loss to the state or other causes hazardous to life, health and safety, welfare, and property that caused the emergency situation.

Factors for Evaluation of BID: Contractor and Government Agency

Specifications are the primary conduit between the agency and vendor. Bidders may submit bids by mail or hand carried. Once a bid is opened, the bidder shall not be permitted to correct or withdraw from further selection for award.

Specification must be clear and understandable to the bidders and to the agency. Proposals must be simple but complete enough to ensure that requirements will satisfy their intended purpose. Bidders must be accurate in the use of units of measure that are compatible with industry standards. All quantities and packing requirements are clearly identified. The agency must permit competition between “products of equal quality.”

After the opening of bids, confidentiality is maintained. It is not disclosed to any organization until the contract award is published. The agency rejects bids when not signed. Vendors are notified in writing once an award decision has been determined. The contract is governed by the laws and statutes of the state or country. In the event the legislature curtails or fail to appropriate funds to cover the term of the agreement it must be understood by the bidders that is specified on the proposal by the procuring agency.

Technical Evaluation: Financial Evaluation

Range and skills of project managers is broad in the area of project management that is applied over the entire project life cycle. At the planning phase the involvement of government officials from various agencies, representatives from other organizations, as well as other stakeholders can be complex. Analyzing and evaluating the project context involves subject matter experts such as a budget analyst, business analyst, legal advisors, and technical and contract experts. Financial proposals are expected to be within the specified budget and technical evaluation is weighted first on the quality describe by the bidder. Evaluation is based on weighted formula.

The executive summary, corporate overview, project work plan and schedule, project organization and staffing, project functional requirements, project management plan, project cost and oral interviews, presentations and demonstrations if requested fulfill the mandatory requirements in terms of technical evaluation.

Performance and Presentation: PAPA

As prospective bidders, be Prepared to meet the obligations, Aware of the circumstances binding the bidder and the agency to the contract. The government agency will be Persistent on their quest for quality goods and services. Accountability and transparency in government is expected from both bidders and contracting agency. Bidders must be aware and informed of the different types of projects and contract types whether they are fixed price contract, time, and materials or labor – hour contracts, not priced contracts on various projects such as:

  • Industrial projects
  • Complex equipment.
  • Computer and communications system—International Standards Organization (ISO) or equivalent.

Upon opening of sealed bids mandatory requirements listed by the procuring agency must be addressed to warrant further evaluation. The procurement agency checks and verifies the following items:

  • Signed request for project for contractual services form
  • Executive summary
  • Corporate overview
  • Technical approach
  • Cost proposal.

Oral Interviews

In many states only representatives of the State and the authorized representative from the agency and the presenting vendor is permitted to attend an oral interview, presentation, or demonstration. Once an oral interview, presentation, or demonstration has been completed the state reserves the right to make a contract award without any further discussion with the potential vendors regarding the proposals that were received. Vendors are not allowed to amend or alter the proposal. Oral presentations are not binding.

Communicating with Ease: Peak Performance Value

Skill sets required

  • Communication skills
  • Functional abilities
  • Technical abilities
  • Financial skills.

Requirements Management

Open for discussion with participants on global perspective, experiences during informal presentation by vendors and mandatory presentations.

Change Management: Government Award Fees on Contracts

Open for discussion—sharing global perspective and experiences in contracting negotiation, and legal responsibilities. Midsize organizations market share weakened by competitive forces.

Challenges to Managers

  • Education
  • Training opportunities.

Challenges to PMI

  • Suggestions and discussion with participants to improve our knowledge in procurement management, contract negotiation
  • REP Providers in Acquisition Management

References

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Government of Australia. (2005, January) Commonwealth Procurement Guidelines. Retrieved from http://www.finance.gov.au.procurement/australian_government_guidelines.html.

Government of Denmark. (2004) Procurement Rules in Denmark – Legislative FrameworkRetrieved from http://www.ks.dk/english/public-procurement/legislation/procurement-rules-in-denmark-legislative-framework

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Government of Peoples Republic of China. (2005) The Government Procurement Law of the People's Republic of China (Order of President No.68) Retrieved from http://english.gov.cn/laws/2005-10/08/content_75023.htm.

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This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2007, Linda Salac
Originally published as a part of 2008 PMI Global Congress Proceedings – Sydney, Australia

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