Encourage Best Value Procurement

Encourage Best Value Procurement

Background

Determining the successful competitor for a government contract requires
a full assessment of available information. The award of a contract to a
supplier based on lowest price alone can be a false economy if there is
subsequent default, late delivery, or other unsatisfactory performance
resulting in additional contractual or administrative costs. It is
essential that all vendors are treated fairly in the competitive
process. However, the needs of a vendor should not supersede those of
the taxpayers and federal agencies. Competent, costefficient suppliers
provide the best value to the government. While it is important that
government purchases be made at a reasonable price, this should not
require that an award be made to a supplier solely because the supplier
submits the lowest offer.1

There are two basic methods of procurementsealed bid and negotiation.
When sealed bid procedures are used, there is a public bid opening and
the award must be made to the responsible offeror submitting the lowest
offer based on price and pricerelated factors (e.g., transportation
charges). When the negotiated method of procurement is used, however,
the government has considerable latitude in structuring the procurement
and can consider both price and other factors (e.g., technical
capabilities, qualifications of key personnel, etc.) in selecting the
contractor. Agencies have broad discretion in selecting factors to be
considered, but must always consider price or cost to the government.

Allowing for the possibility of selecting other than the lowest offeror
does not mean buying a Cadillac or buying supplies or services beyond
the government's minimum needs. It simply means considering value
differences between offers such as past performance records, quality of
proposed solutions, and cost differences, and then choosing the best
overall value. It means permitting the consideration of all factors when
buying goods and servicesthe way smart buyers in business make tradeoff
decisions to determine best value. The benefits of making best overall
value source selection decisions can result in improved mission
performance and lower lifecycle costs. It can also help to encourage
vendors to provide their best products and services to the government.

When a procurement is structured to consider both price and other
factors in making the selection to provide the greatest value to the
government, it is often referred to as a "best value" procurement. The
average person makes purchases on the basis of best value or greatest
value every day. For example, if brand A batteries cost $1.00 and last
10 hours, and brand B batteries cost $1.50 but last 20 hours, the
average person would consider brand B to be the best value.

Federal regulations provide for awards based on the greatest value and
cite examples where the approach can be used.2 Examples cited are in the
acquisition of research and development, professional services, or
costreimbursement contracts. However, the process outlined in the
Federal Acquisition Regulation for greatest value or best value
procurements is complex and requires far more time and resources than
other types of procurements. As a result, many procurement officials
feel more comfortable awarding contracts based on lowest cost rather
than best value.

Need for Change

Many federal agencies rely heavily on support from contractors to
accomplish agency missions. Unless the contractors share an agency's
commitment to quality, the agency cannot improve the quality of service
provided to taxpayers. The government must find ways to reward
contractors who perform and remove from the federal acquisition system
those who do not. Acquisition strategies designed to support and foster
the quality revolution need to be promoted and used to the fullest
extent.

The federal government faces many problems implementing this quality
revolution in the procurement process. Even though the federal
regulations clearly state that a prospective contractor must demonstrate
that it is responsible, many contracting officers feel that the burden
of proof is instead theirs.  Contracting officers are often reluctant to
reject offers from contractors who have a poor past performance record
or who otherwise do not appear to be capable of performing. The
reluctance is, in part, due to the fear of being secondguessed by
reviewers, protests, or other legal action.3

Agencies do not always consider innovative ways to include quality
considerations, such as past performance, when developing acquisition
strategies. There needs to be a total rethinking and redefining of what
best value means and how it can be used in all types of procurement
strategies. This includes not only negotiated procurements that use
price and other factors, but also other negotiated and sealed bid
procurements.

In the area of "greatest value" or socalled "best value" procurement,
many protests before the General Accounting Office (GAO) or the General
Services Board of Contract Appeals (GSBCA) have identified the need to
train the procurement workforce on when and how to effectively use the
technique in source selection. In addition, a survey of Federal
Acquisition Regulation (FAR) users conducted by the General Services
Administration (GSA) indicates that the FAR coverage on source selection
or use of the greatest value needs to provide better guidance, but not
detailed or prescriptive regulations.4

Several agencies (e.g., the Defense Logistics Agency, GSA, and the
National Aeronautics and Space Administration) have undertaken efforts
to streamline the source selection process, share information on best
practices, and educate contracting personnel on when and how to use the
process effectively. Despite these efforts, the federal procurement
workforce, as a whole, needs further training on the use of source
selection techniques.

Endnotes

1. 48 CFR 9.103(c).

2. Subpart 15.6 of the Federal Acquisition Regulation, 48 CFR 15.6.

3. See "PROC16: Promote Excellence in Vendor Performance" in this
report.

4. FAR Improvement Executive Committee, FAR Improvement Project Report
(October 1992), p. 16.