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Alternative Procurement Primer

Origination Date: March 9, 1996
Revision Date: April 23, 1998

The goal of government purchasing is to buy commodities and services through competitive procurement practices.

As NASPO explains it in "State and Local Government Purchasing, 4th Edition", National Association of State Purchasing Officials on page 15:

"In performing their primary duty of representing the taxpayers' interests, public procurement officers must carry out their work under public scrutiny and in accordance with policies that take advantage of the benefits of competition. Thus, statutes and rules customary require state and local governments to utilize competitive procurement practices in all procurement, usually by means of competitive sealed bidding or competitive sealed proposals where the procurement involves an amount over a specified dollar level. this requirement is intended to secure sound value, to guard against favoritism and profiteering at public expense, and to promote the interest of private enterprise and the health of local economies by providing equal opportunities to compete for government business....Competition is the central principal of public procurement....Competition requires the largest manageable number of potential vendors who supply a wide spectrum of product or services in a number of marketplaces. With this in mind, most state and local government procurement statutes, ordinances and rules provide that procurement exceeding a specified dollar amount must be made using formal competition, with public notice, sealed bidding and public bid opening."

Even when making purchases at a low dollar level, most government procurement offices are still required to follow a relatively informal competitive process. Whether formal or informal, government purchasing agents rely on the competitive marketplace to buy commodities and services. Here are some over-simplified definitions:

Specifications:
While competitive bidding can be as informal as calling several vendors for telephone quotes, the formal bidding process relies on written specifications to clearly define the desired purchase. Technical specifications actually define the item, but bid specifications also include many other details involved in doing business with the state, details that range from practical things like delivery points to compliance with various social programs.

Generic Specifications:
Bid language that describes physical characteristics must be generic (instead of using name brands) to ensure the maximum competition. Purchasing agent may be able to rely on national standards, such as ASTM.

Performance Standard:
A performance requirement specifies an acceptable quality level, such as maximum allowable jams. Simply put, the product has to work as intended.

Qualified Products List:
Based on product testing in advance of a competitive bid, bids are only allowed on acceptable products. Although advance product testing is time-consuming and costly, this approach is especially useful if performance problems are anticipated.

Bid Development:
Purchasing agents must understand what the end-user wants to buy, and must translate those needs into a written description. If there is confusion, or dissatisfaction with past contracts, a standards committee of agency end-users may be initiated to improve the specification.

During bid development, the purchasing agent must make sure that the requested purchase is reasonably available in the marketplace. Purchasing agents must identify potential vendors and use a bidder list in order to make sure that likely providers are included in the bid mailing. If there are issues, a pre-bid vendors' conference may be held to discuss and improve the specification.

If the contract covers a common, fairly standard item, then the purchasing agent is more likely to be revising existing specifications than creating brand new ones.

Bidder List:
A bidder list contains potential vendors to whom the bid will be sent.

Low Bid:
Contracts are awarded to the lowest responsive and responsible bidder. This means that in addition to the lowest price, the successful bidder has to have complied with all requirements of the bid and has to appear to be capable of providing the good or service offered.

Contract Term:
Contracts are often awarded for one year, with the potential for two one-year extensions, if mutually acceptable.

Price Increases:
Because prices can change dramatically within one year, contracts usually permit pricing changes.

These brief definitions cannot cover every situation, of course, but they may help non-purchasing professionals understand some of the realities of government procurement. More importantly, these definitions may help you to understand how the resources offered here are intended to help purchasing professionals to make decisions and to write effective bid specifications. Almost every alternative procurement raises one or more of the following issues: price, performance, competition, and availability. If you are trying to interest purchasing agents in a new or different product, you must try to anticipate how your proposed product fits the competitive bidding process.

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