The U.S. Federal Government’s Procurement Process- Computer

Question

Develop a 15 page APA term paper, original text, which contains an introduction, body, and conclusion/recommendation sections/paragraph.

Use MEAL plan format to construct paragraphs (see attachment)
Use JIT_Purchasing Doc as a reference to organize content.

Author may present other concepts related to the acquisition of computers for the US Federal Government.

Provide a chart that compares sole source and competitive and 2 other charts related to content.

Include:
Introduction. Present a brief overview of the concepts or theories which will be incorporated in the paper. A description of the procurement mythology that will be examined in the paper. An in depth application of the relevant, identified concepts and theories. The Federal Government Procurement Process.

Body:
– Analyzes Competitive versus Sole-Source Procurement. Define/explain what is a Sole-Source Procurement. Define/explain what is a Competitive Procurement. Discuss where in the Federal Acquisition Regulation (FAR) are they referenced? Provide an example of each of the types of procurement. Analyze FAR PART 6 and FAR PART 15
– Discuss which procurement would be used for a major acquisition procurement of Computers for the Federal Government.
– Discuss when and how to use various cost/price analysis techniques. Analyze cash flow from both the supplier and the customer perspective. Discuss how to use contracts as a way to provide incentives to contractors to improve performance and/ or schedule. Discuss if providing incentives would be beneficial in this scenario.
– Discuss if it would be more cost effective or beneficial to the Federal Government to use a Competitive contract with competition or a Sole-Source contract to one company?
– Explore the dynamics of the competitive process of the procurement based on market research and obtaining adequate pricing information.
– Explain why the procurement was considered to be fair and reasonable.
– Explain why the Federal Government is able to make an award. Present the conditions that must be met.
– Support answers with facts based on governing authorities and price-related market research.
– An example of a competitive procurement is when you have 2 or more sources, mostly 3 sources in the Federal Government.

Conclusion/Recommendations:
– Provide a recommendation
– Summarize the factors used when determining to use Competitive or Sole-Source Procurement in a scenario to provide computers for the Federal Government

Reference:
– Supply Chain Management 5th Edition ISBN 978-0-07-809664-8
– Government Contract Law in the Twenty-First Century by Charles Tiefer and William A. Shook
ISBN 978-1-59460-804-9
– https://public.cyber.mil/policies-guidance/

Solution

The U.S. Federal Government’s Procurement Process- Computer

Abstract

Competitive and sole-source procurement are common types of negotiations used in the purchase of goods and services by the federal government. The primary issue in the research is the ideal approach for the U.S. federal government’s procurement process for computers. The paper focuses on determining the factors that determine the selection of each method. Findings from the research show that the unicity of products, the inadequacy of other sources, and the urgency of needs are considered in determining the use of competitive and sole-source procurement. Based on findings from the study, it is suggested that competitive procurement should be used in the purchase of computers because it is reasonable and fairer.

I.            Introduction

This research presents the concepts of competitive and sole-source procurement as used in the Federal government’s procurement process of computers. Procurement is an integral part of every organization, as it enables the latter to obtain key inputs required in everyday activities. Like other businesses, the Federal government also indulges in procurement and the acquisition of goods and services needed in its various departments from private parties. The focus of this paper will help the reader better understand the two procurement strategies that governments can use to purchase computers and factors such as unicity of products, the inadequacy of other sources and urgency of needs, that must be considered in determining to use competitive and sole-source procurement.

A.    Procurement Mythology

Over the years, the perception of procurement has changed significantly, with much strategic attention being paid to the exercise. As opined by Bowersox, Closs & Cooper (2012), purchasing was traditionally “regarded as a low-level managerial activity charged with the responsibility to execute, and process orders initiated elsewhere in the organization” (p.134). This perspective reveals that procurement was initially viewed as a short-term practice that was solely aimed at obtaining the required resources at the ideal prices. However, this procurement mythology has changed in modern times, with the practice being considered a strategic-level activity (Bowersox, Closs & Cooper, 2012). Notably, in present times, procurement is viewed as a strategic practice that involves the building of long-term relationships with suppliers to secure the provision of goods at the minimum possible price.

Similarly, the procurement process in the Federal government today is more of a strategic-level activity. Notably, like other businesses, the federal government enters into contracts to obtain materials required in its various units. Furthermore, in some scenarios, the government gives tenders to different suppliers based on their bids and ability to meet the qualifications as established in the Federal Acquisition Regulation (FAR).

     II.            Types of Procurement

The federal government can use two types of procurement strategies to acquire computers, competitive and sole-source procurement. The two concepts differ in terms of the nature of the purchase. For example, as defined by scholars, the sole-source acquisition is a “federal contract awarded or proposed for an award, without competition” (Dilger, 2011, p.1). Githinji and Moronge (2018) also add that sole-source, also referred to as single-source procurement, is a form of direct purchase where goods and services are acquired from only one source. Notably, sole-source is a non-competitive type of procurement where the contract to supply products and services is awarded to a single private supplier without the government establishing a competitive process.  Where sole-source is not applicable, a different strategy of procurement, such as competitive purchasing, can be used.

Besides being an option for procurement by the federal government, sole-source procurement is referenced in part 6.302 of the FAR, which makes such contracts legally binding. Notably, part 6.302 of the FAR states that some established authorities permit contracting without providing for full and open competition (“6.302 circumstances permitting”, n.d.). In other words, sole-source procurement is considered an exception for competitive purchases.

Also, some requirements for justification to support sole-source are referenced in part 6 of the FAR. Notably, section 6.303 states that the procurement process can be used when only one responsible source and no other supplies or services can satisfy agency requirements; in unusual and compelling urgency; in industrial mobilization, engineering, developmental, or research capability, or expert services; in instances of an international agreement, when authorized or required by statute; to promote national security and public interest. In essence, sole-source procurement is sought when only one supplier can meet the agency requirement, where the commodities being purchased are complex and require a high level of security, or when the government enters into an international agreement to buy the product from a specific private vendor.

Conversely, competitive procurement is a form of purchasing that involves a competitive purchasing process. Komarinski (2005) states that in a competitive procurement, the government solicits competitive responses from qualified vendors after developing a detailed set of instructions about the goods and services required. Tiefer and Shook (2012) also add that under competitive procurement, officials have substantial discretion to analyze and select proposals that represent the best value for the government. Therefore, unlike a sole-source purchase, competitive procurement involves the use of tenders to obtain goods and services from suppliers that offer the best value in terms of quality and price.

A.    Comparison between Sole-source and Competitive Procurement

Figure 1: Sole Source Procurement

Figure 2: Competitive Procurement

As can be seen in figure 1 and 2, competitive procurement involves multiple contractors whose response are solicited during procurement while in sole-source procurement, the buyer selects a single seller.

Like sole-source, competitive procurement is also referenced in part 6 of FAR, making such contracts legally bidding. Notably, this part of the FAR provides that, with certain limited exceptions, contracting officers shall promote and provide for full and open competition in soliciting offers awarding government contracts (“Part 6- Competition requirements”, n.d.). Competitive procurement is sought in instances where value is crucial, in terms of low prices offered by different vendors.

Furthermore, a few procedures are established in part 6 of the FAR for use in a full and open competitive procurement. The FAR provides for the use of the acquisition in sealed bids, competitive proposals, the combination of competitive procedures, and other competitive procedures such as architect-engineer contracts (“Part 6- Competition requirements”, n.d.). Notably, the FAR requires the use of sealed bids, an invitation for vendors to bid, when the federal government utilizes full and open competitive procurement.

B.     Example of Application of Sole-source and Competitive Procurement

As the literature suggests, sole-source procurement is a procurement awarded to a single-supplier, usually in instances where goods and services can only be obtained from one supplier or where the specifications of the commodity require the use of a specific source. An example of a sole-source procurement by the federal government is the purchase of an integrated automated fingerprint identification system (AFIS). Notably, AFIS has been in use by the Federal Bureau of investigation for almost two decades in the storage and dissemination of electronic image and fingerprints in the criminal justice system. Due to the complexity of the system, and the need for counties within the country to share the stored data, the federal government may source the AFIS from a specific vendor such as Sagem Morpho Inc. The fact that the purchase is made from a single-source without the establishment of a tendering process makes the identified scenario a sole-source procurement.

However, there are instances where the federal government is required by the law to adopt competitive procurement, mainly in scenarios in which goods and services can be obtained from different sources. For example, if the federal government wants to purchase new chairs for its offices, it can indulge in competitive procurement by developing a detailed set of instructions about the nature and quantity of chairs it requires and soliciting responses from different vendors. In such a scenario, the federal government may select the tender for the supply of the chairs based on the supplier’s bid and ability to meet the established specifications. Soliciting responses from different suppliers qualifies the selected example as a competitive procurement.

C.     Cost/Price Analysis Techniques in Procurement Process

Besides making provisions on the use of the two methods of procurement, part 15.404-1b of the FAR also establishes cost/price analysis that the federal government can use to ascertain that the price agreed upon with the supplier is fair and reasonable. On the one hand, the FAR provides that price analysis shall only be used when certified cost or pricing data are not required (“15.404-1 proposal analysis”, n.d., par.1). Notably, in price analysis, the federal government only focuses on the unit price of the goods and services as established by the vendor to determine whether the agreed-to price is fair and reasonable.

On the other hand, there may be instances when the FAR requires the government to look beyond the unit price during procurement, thus necessitating the use of cost analysis. As established by FAR, cost analysis evaluates the reasonableness of individual cost elements when certified pricing data are required” (“15.404-1 Proposal analysis techniques”, n.d., par.1). Notably, cost analysis in this scenario involves the exploration of the cost incurred by the vendor in the production of the goods, to determine the reasonableness of the agreed-to price.

Besides the two primary methods of analysis, there are few other analysis techniques that the federal government can use to determine the reasonableness of prices, including a comparison of competitive bids. This technique is applicable in price analysis, and it involves the comparison of prices obtained in tenders (“48 CFR 15.404-1 proposal analysis”, n.d.). Notably, under this technique, the federal government compares all the prices quoted by the private vendors to determine whether the agreed-to price is reasonable. In instances where the quoted prices are competitive, the government may be absolute that the unit price is reasonable and fair.

Furthermore, the federal government can use a comparison of prior quotations as a technique of price analysis. This technique involves a comparison of proposed prices to historical prices paid for the same commodity by the government or other commercial institutions (“48 CFR 15.404-1 proposal analysis”, n.d.). Notably, under this technique, the federal government can refer to prior data about a similar purchase to determine whether the agreed-to price is fair and reasonable. If the quoted and historical prices are similar, or they vary insignificantly, the government can be absolute of the reasonableness of the prices.

Besides the price analysis techniques, the federal government can also use cost analysis procedures such as cost data verification to ensure a fair and reasonable price during an acquisition. Under this technique, the FAR requires the government to verify cost elements incurred by the vendor, such as indirect cost rates, labor rates, and cost of money to ascertain the reasonableness of prices. As can be noted, this technique differs from those used in price analysis in the sense that the government has to audit the costs incurred by the vendor to determine whether the quoted prices are fair. Also, the technique of comparing costs proposed by the vendor for individual cost elements with previously incurred costs by the same or different vendor for the same item may be used to analyze the fairness of the quoted prices (“48 CFR 15.404-1- proposal analysis”, n.d.). In general, the price analysis techniques involve a comparison of elements of costs incurred by a vendor in the production of an item to ascertain the reasonableness of the agreed-to price.

D.    Use of Contracts as a way to Provide Incentives in Procurement

As the literature suggests, like other businesses, the federal government can apply incentives to contractors to improve the latter’s performance and schedule through the use of contracts. Notably, a 2001 memorandum by the director of defense logistics agency states that the choice of contract type is a primary strategy for structuring contractual incentives (“Incentive strategies for defense”, 2017). For example, the government can use contract-length considerations to provide incentives to its private vendors. To illustrate, if the government enters into a five-year contract with a supplier, it can provide the latter with the benefit of reducing its start-up costs and maintenance as the costs would be covered adequately through the established long-term relationship with the government (“Incentive strategies for defense”, 2017). Consequently, reduced costs of operations would trigger the contractor to justify their investment and improve on their performance. When evaluated in a multifaceted perspective, the incentives would benefit both the supplier and buyer. On the one hand, the government can be assured of maximized efficiency by the contractor. On the other hand, the contractors incur lower costs during the procurement process.

E.     Application of Incentives in Federal Government’s Procurement Process of Computers

Based on the synthesis of information on incentives in procurement, it is likely that providing incentives in the scenario of computer purchase by the federal government would be beneficial to both the supplier and the buyer. Notably, as the literature suggests, incentives such as schedule-based incentives enhance the commitment from a supplier to deliver an item within the time desired by the customer (“Incentive strategies for defense”, 2017). Therefore, if the government provides a schedule-based incentive, it can boost the performance of the supplier and willingness to deliver the computers within the shortest time possible.

Furthermore, incentives would be beneficial in the identified case scenario by helping foster the supply of quality computers to the federal government. As opined by scholars, negative incentives can cause a contractor to take action and avoid undesirable results during procurement (“Incentive strategies for defense”, 2017). Therefore, if the government sets a negative incentive for the provision of substandard computers, the selected vendor can take action to ensure the quality of the items, to avoid any potential deductions on the incentives.

Synthesis of information from the literature suggests that providing incentives would be beneficial in the planned procurement. Notably, through the use of incentives, the federal government can obtain the computers on time. Furthermore, incentives can foster the supply of quality computers for use by the agency.

F.      Application of Procurement Contract

In the selected case scenario, it would be more cost-effective for the federal government to use a competitive contract with competition rather than a sole-source contract when procuring computers. As opined by the United States Congress Economic Committee (1973), when the sole-source contract is used, especially in procurement in the defense department, the contractor knows that they are the only entity that has been approached by the government for the commodity. Therefore, it would be virtually impossible for the government to get the lowest available price after a negotiation under the single-source contract. Markowski, Hall, and Wylie (2010) also add that “sole sourcing produces neither the best supplier performance nor best value for money for the buyers” (p.123). Therefore, if the federal government opts to use the sole-source contract in the purchase of computers, the deal would be cost-ineffective as profit would be a crucial function of cost used by the contractor.

Nonetheless, growing evidence suggests that a competitive contract with competitive procurement would create a cost-effective acquisition of the items. For example, as observed by Markowski, Hall, and Wylie (2010), the defense procurement arm (DPA) has significant tools to obtain the best possible price through the use of credible threats to switch suppliers. In other words, in a competitive contract, the buyer has an option to switch suppliers, thus increasing their bargaining power for the minimum possible price of an item. Therefore, holding the supplier coordination costs constant, competitive procurement would be more cost-effective in the purchase of computers as the government would have the power to bargain for the best value for money from the vendor.

Besides being cost-effective, a competitive contract would be more beneficial to the Federal government compared to sole-source procurement as it would facilitate the acquisition of the best value for the agreed-to price. As opined by Markowski, Hall, and Wylie (2010), sole-source does not provide the best value for money for the buyer. This information suggests that while the government may obtain the desired item at the negotiated price, it may not be the best quality of the commodity in the market as only a specific vendor would be selected to supply the goods. Conversely, soliciting competitive responses from different vendors would enable the government to have an array of products for comparison, thus making the competitive contract a more beneficial strategy in terms of value. Furthermore, by using competitive procurement, the government would get the most improved designs and technology of the computers, as all contractors would strive to offer the best commodity to get the federal government contract.

G.    Dynamics of the Competitive Process

While competitive procurement appears to be a simple process, theoretically, it is practically dynamic and incorporates various competitive processes such as market research. As studies suggest, market research is conducted in public procurement to determine the availability of vendors and alternative solutions that would meet the minimum requirements (“Principle and practices”, n.d.). For example, when a competitive procurement is used in the acquisition of computers for the federal government, the first step of the process would include market research to determine the available suppliers from whom responses about the tender can be solicited. Furthermore, market research would be essential to decide on various options of computer designs and upgrades that the government can obtain from the market. In essence, market research is a critical process in public procurement that enables the procuring entity to gain insight into the conditions surrounding the commodity before the actual purchase is made.

Furthermore, the competitive process of procurement also incorporates other dynamic activities such as obtaining adequate pricing information before awarding a tender to a specific vendor. As the literature suggests, one of the tasks that the buyer should conduct before awarding a tender is evaluating the proposal form from a cost perspective (Duica, Florea & Anisoara, 2018). Notably, the buyer must obtain adequate pricing information to make an informed decision about the purchase that is cost-effective and equal to the value of the commodity. In the scenario of the federal government’s purchase of computers, market research can be conducted to obtain adequate pricing information of different vendors before accepting an offer. Pricing information may also be essential from a buyer’s perspective as it would enable the latter to quote prices that align with the market rates.

H.    Competitive Procurement as Fair and Reasonable

Unlike sole-source procurement, competitive contracts are considered fair and reasonable because they offer fairness and equal treatment to all parties who compete. As opined by in the public procurement procedures handbook, “good procurement is one that is impartial, consistent and offers all interested suppliers, purchasers, and consultants an equal opportunity to compete” (“Standardized procurement procedures”, 2013, p.6). All these conditions are met by a competitive contract, which makes it a fair and reasonable method of procurement. Notably, the strategy is fair as it offers all eligible suppliers an equal opportunity to obtain a contract with the federal government. For example, in the procurement of computers, vendors who supply the items are given a chance to place their bids for consideration by the procurement officials. The fact that competition is promoted in the approach makes a competitive contract a fair strategy for public procurement.

Furthermore, competitive procurement is considered reasonable because it offers an opportunity for the buyer to conduct price analysis. As noted, one of the techniques for determining the reasonableness of the agreed-to price is comparing prices obtained in tenders (“48 CFR 15.404.1- proposal analysis”, n.d.). This cost/price technique can only be utilized where there exist different vendor’s proposals to allow the buyer to evaluate and determine the reasonableness of a bid. The fact that proposals can be compared in competitive contracts makes the strategy a reasonable procurement approach.

I.        Conditions to be met in Competitive Procurement

In a competitive contract, the federal government can make an award because responses are solicited from different private vendors. As noted by Komarinski (2005), in a competitive procurement, the government seeks competitive responses from qualified vendors after developing a detailed set of instructions about the goods and services required. As such, when different proposals are obtained from the market and evaluated against the established set of instructions, the federal government can eventually make an award.

However, other than meeting the established instructions, there are various conditions that vendors must satisfy for the federal government to make an award, among the most general being financial stability. As stated in the FAR, for a prospective contractor to be awarded a tender, they must have adequate financial resources to perform the contract or ability to obtain them (“Part 9- contractor qualifications”, n.d.). Arguably, regardless of a supplier placing a favorable bid compared to their counterparts, they may not be awarded a tender if they lack adequate financial resources to meet the requirements of the contract. In the context of the federal government’s competitive procurement of computers, a similar condition must be met for an award to be made to a specific vendor. Notably, the supplier must have the financial capacity to supply the required number of computers needed by the government.

Additionally, the vendor must meet the condition of the performance schedule to be awarded a tender. As stated in FAR, the government has numerous business and commercial commitment; thus, prospective contractors must be capable of complying with the proposed delivery schedule (“Part 9- contractor qualifications”, n.d.). This information implies that if the federal government requires the supply of computers within a month, the vendor must meet this condition in their proposal to be awarded the tender.

Furthermore, provisions in the FAR suggest that performance is a crucial condition in the awarding of government tenders. Notably, it is argued that a contractor ought to have a satisfactory performance record for the government to award them a tender (“Part 9- contractor qualifications”, n.d.). Satisfactory performance record may be gauged from prior bids that a vendor has indulged in or, in the absence of performance history, based on critical assessment of the procurement committee regarding the forecasted performance of the supplier.

Business ethics and integrity is also among the essential primary conditions that suppliers must meet to be awarded a tender. The FAR states that a prospective contractor must have a satisfactory record of business ethics and integrity to be awarded a federal government tender (“Part 9- contractor qualifications”, n.d.). In the context of the procurement of computers, prospective vendors may be required to exhibit business ethics such as fairness, integrity, and respect for others to be awarded the tender.

Other standard conditions that suppliers may be required to meet in a government tender include access to adequate facilities and equipment; and eligibility to existing laws and regulations. The FAR provides that for a prospective contractor to be awarded a tender, they must possess or have access to technical equipment and facilities. Additionally, the vendors must be qualified to receive an award under applicable laws and regulations (“Part 9- contractor qualifications”, n.d.). Similarly, in the context of the procurement of computers, the prospective contractors must have access to other complementary equipment for installing the computers and be eligible for laws that govern domestic public procurement to be awarded the tender.

III. Conclusions/ Recommendations

A.    Factors to Consider in Selecting a Negotiation Strategy

The selection of a procurement approach in a scenario of the provision of computers for the federal government is based on several factors, among them, the nature of the product. As opined by Holloway (2011), the unicity of the required products is an essential factor to consider when selecting whether to use competitive or sole-source procurement. Unicity of a product implies that the features of the commodity in demand are homogenous among all suppliers, or the market value is constant across all vendors. When taking a pragmatic approach in such a situation, it would be costly to use competitive procurement compared to sole-source acquisition as the proposals may be similar among all vendors. Therefore, the nature of the product is a crucial factor in determining the negotiation approach to use.

Additionally, a growing literature suggests that the number of available sources is a factor to consider when determining whether to use competitive or sole-source procurement. For example, as opined by Holloway (2011), it may be more costly to enter into a competitive procurement in a market characterized by the inadequacy of other sources. In other words, if there are limited vendors providing computers in the United States, for example, it may be costly for the government to conduct the competitive process as results would be similar to awarding the tender to a specific contractor. Therefore, the adequacy or inadequacy of sources is a crucial factor to use in determining whether to use a sole-source or competitive procurement in the acquisition of computers for the federal government.

Apart from the nature of the products and adequacy of other sources, the urgency of the commodity is also a significant factor to consider to determine the ideal negotiation approach. Holloway (2011) suggests that it may cost more to use competitive procurement where there exists an emergency of the product. If the buyer’s need is an emergency, contractors may charge higher for their services, thus nullifying the applicability of competitive procurement in such a scenario. For this reason, it is also crucial that the urgency of computers is considered in determining the most appropriate type of negotiation.

Figure 3: Illustration of factors to consider in selecting a negotiation strategy

 B.     Recommendation

Synthesis of the information from this research suggests that competitive procurement would be the ideal negotiation for the purchase of computers by the federal government. As is evident from the study, competitive procurement is likely to produce the best value for money compared to sole-source procurement (Markowski, Hall & Wylie, 2010). Notably, by soliciting responses from different vendors, the federal government can get the best bid for quality computers as each supplier would do their best in terms of ideas and designs to be awarded the tender.

Furthermore, based on findings from the research, it is recommended that the federal government should adopt the competitive procurement contract because it is more reasonable and fairer. As the literature suggests, competitive procurement meets the standards of good procurement; it is impartial, consistent, and offers an equal opportunity for all eligible suppliers to compete fairly (“Standardized procurement procedures”, 2013). In competitive procurement, all vendors dealing in the supply of computers have a chance to compete on level ground and receive an award based on the ability to meet the set requirements and nature of their bids. For this reason, it is recommended that the federal government should use competitive procurement in sourcing computers.

References

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“6.302 circumstances permitting other than full and open competition” (n.d.). Acquisition. Gov. Retrieved from https://www.acquisition.gov/content/6302-circumstances-permitting-other-full-and-open-competition

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