Authorize a Two Phase Competitive Source Selection Process

Authorize a Two Phase Competitive Source Selection Process

Background

Federal law requires executive agencies to evaluate sealed bids and
competitive proposals based solely on the factors specified in the
solicitation. In the case of competitive proposals, the law requires
that the government conduct, before award of the contract, written or
oral discussions with all responsible sources submitting proposals
within the competitive range, considering only price and other factors
included in the solicitation.

In certain negotiated procurements, the requirement to consider price in
establishing the competitive range and include all proposals with a
reasonable chance of being selected for award creates problems for both
prospective offerors and the government. This is especially problematic
for contracts that require an offeror to perform a substantial amount of
design work in order to prepare its proposal. For example, in
designbuild construction procurement, it is very costly for prospective
offerors to compete because they must do a considerable amount of the
design work before they can price their proposal. Under a designbuild
construction contract, the contractor is responsible for designing and
constructing the building or other public work.  This differs from the
traditional approach, where a contract is awarded to an
architectengineer firm that designs the project, and after the design is
complete, separate bids for construction are solicited and a contract is
awarded.

When the government uses a designbuild approach, contractors often
complain of the high cost to compete for such projects and urge the
government to use a twophase process that would focus on qualifications
and concepts in the first phase and limit competition in the second
phase to a specified number of contractors. This would control a
contractor's expenses in the first stage and assure those contractors
that do incur the expense in the second phase that they have a realistic
chance of being selected for the award.

Need for Change

Executive agencies and departments involved in contracting for
designbuild construction projects, lease construction projects,
prototype production, or other similarly complex projects where the cost
of preparing and submitting a proposal is significant would benefit by
using a twophase process. It is similar to the commercial practice of
"shortlisting," where the best quality firms are chosen upfront, and
only then asked to engage in a more detailed technical and price
competition.

The twophase process would also permit more efficient use of government
personnel by allowing them to focus on the detailed proposals of the
most qualified offerors and expedite the selection, evaluation, and
award process. Such limited competition should ensure reasonable prices
while offering the government a range of designs or approaches to
satisfying the government's requirement. This would benefit both
prospective contractors and the government. This process would shorten
the lead time for such procurements, reduce costs, and provide for more
timely fulfillment of the customers' needs.

The regulations and case law related to the establishment of the
competitive range currently preclude the government from predetermining
the number of offerors considered to be within the competitive range.
The government is required to see what the market produces and then
determine which offerors, when evaluated against the factors specified
in the solicitation, have a reasonable chance of being selected for
award. In a tight economic market with limited commercial activity,
there can be intense competition for government contracts. For example,
it is not uncommon for the government to receive more than 25 offers on
major designbuild construction projects. Often the offers are from
wellqualified local firms and national real estate developers, and the
final competitive range includes several offerors that have submitted
outstanding proposals. Negotiating with all offerors in the competitive
range requires a substantial amount of time, resources, and costs for
the government and the offerors.

If the government continues to use the current process, it will
discourage some of the best offerors from competing because they are
becoming more and more reluctant to expend the physical resources and
costs when faced with unlimited competition for the award. If
competition is limited in the second stage, the offerors would be more
likely and willing to expend the resources because they would feel that
they have a realistic chance of getting the award.


Endnotes

1. The Federal Property and Administrative Services Act of 1949 (41
U.S.C 303b), and the Armed Services Act (10 U.S.C. 2305(b)).