The federal government purchases millions upon millions of items every single year, from cleaning supplies to nuclear submarines and everything in between.
Government procurement is the process by which governments purchase goods and services. It is a complex process involving various stakeholders, including government agencies, contractors, and the public.
Government procurement can be divided into two main categories:
- Public procurement
- Government contracting
Public procurement is the process by which governments purchase goods and services for the general public. Government contracting is the process by which governments purchase goods and services for specific government programs or projects.
There are a number of different types of government contracts, including fixed-price contracts, cost-reimbursement contracts, time and materials contracts, incentive contracts, and indefinite delivery and quantity contracts.
The government procurement process typically involves the following phases:
- Pre-procurement phase: This phase includes planning and developing the procurement strategy.
- Procurement phase: This phase includes issuing the solicitation, evaluating bids, and awarding the contract.
- Post-procurement phase: This phase includes contract administration and closeout.
Governments use several different methods to procure goods and services, including competitive bidding, requests for proposals (RFP), sole sourcing, and framework agreements.
The key objectives of government procurement are to ensure transparency, cost-efficiency, fair competition, and social and economic goals.
Greenwood Aerospace is a trusted partner in government procurement. We offer a wide range of services, including bid preparation, contract negotiation, and contract administration.
Discover all of our services, how we assist complex logistics needs, and how our exclusive GPIQ intelligence software is helping us provide our contractors cutting-edge support.
Join us as we answer all your questions on the government procurement process, including:
- What is government procurement?
- What are the differences between public and government procurement?
- What are the major categories, methods, and phases for government contracting?
- What does Greenwood Aerospace offer for government procurement?
Let's get started!
What Is Government Procurement?
This question comes up often, so let’s dive into it.
Governments purchase products and services from private vendors through government procurement. The term "public procurement" is also used, and the process is heavily regulated. There are laws, rules, and regulations to encourage the ethical use of tax dollars. The ultimate goal of the government procurement process is to reduce corruption, which is why the regulatory burden is significant.
This regulatory process codified by the Federal Acquisition Regulation (FAR) is the principal set of rules regarding Government procurement in the United States and is codified in Chapter 1 of Title 48 of the Code of Federal Regulations, 48 CFR 1. All practices were performed under the Armed Services Procurement Act of 1947 and the Federal Property and Administrative Services Act of 1949. The process was streamlined, and the current guidance for government purchases was released in 1979, which is still followed today.
Regardless of department, mission, or function, all government agencies must follow these same rules to ensure there are no improprieties throughout the process. So, following these established frameworks is how business gets done between business and government (B2G). And by the way, this is a lot of business. B2G is a huge part of the U.S. economy: 2022 government spending is over 40% of the entire U.S. GDP.
Government Procurement vs. Public Procurement
Alright, so what is the difference between government procurement and public procurement? Not that much. First, make sure to read the article we wrote on this comparison.
Government and public procurement refer to the government purchasing goods, services, and contracts from private businesses.
The difference between these two items is more a matter of scope than anything else. When the FAA needs to procure bulk components to upgrade their ILS systems, that would be an example of government procurement, i.e., specific components or contracts for specific missions.
Public procurement is much more broad. It refers to government spending to improve entire communities or infrastructure improvements to entire cities or states. Think of it this way:
- Government procurements are actions conducted by individual departments for more targeted items that are specific to a project.
- Public procurement views the process much higher, funding the individual departments.
The main difference between public procurement and government procurement is the scope of the purchase. Public procurement refers to the purchase of goods and services by any public authority, while government procurement refers to the national government's purchase of goods and services.
Public procurement can include purchases by local governments, state governments, and even international organizations. On the other hand, government procurement is limited to purchases by the national government.
Public procurement can be a significant source of revenue for businesses—for example, public procurement accounts for over $4 trillion in annual spending in the United States. Government procurement is also a significant source of revenue for businesses, but it is not as large as public procurement.
Public procurement can be a complex and time-consuming process. Businesses that want to do business with public authorities must be aware of the regulations and procedures involved. Public procurement can be a great opportunity for businesses to win contracts and grow their revenue. However, it is important to be aware of the challenges involved in public procurement.
The Major Categories of Government Contracting
Government contracting is broken down into a few distinct categories. Not all purchases are created equally, so different frameworks cater to several general types of purchases.
These categories include:
- Fixed-price contracts
- Cost-reimbursement contracts
- Time and materials contracts
- Incentive contracts
- Indefinite delivery and quantity contracts
Let's take a closer look at each and how they impact the government procurement process.
Fixed-Price Contracts
Fixed-price contracts offer a set price or, in certain circumstances, an adjustable price. Since the contractor is solely liable for all expenses and any subsequent profit or loss, this type of contract imposes the greatest risk on the contractor. It is typically used for commercially available, off-the-shelf products and services.
Cost-Reimbursement Contracts
Contracts of the cost-reimbursement kind compensate for legitimately incurred expenses to the extent specified in the agreement. This form of contract entails less risk for the contractor because they will be compensated for all legitimate expenses incurred. Cost-reimbursement contracts are not frequently utilized for goods that are sold in commerce.
Time and Materials Contracts
According to acquisition.gov, “Sep 7, 2023A time-and-materials contract provides for acquiring supplies or services on the basis of- (1) Direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative expenses, and profit; and (2) Actual cost for materials (except as provided for in 31.205-26 (e) and (f)). (c) Application.”
Instead of quoting a fixed price, or when a fixed price may not be possible because of the type of work being performed, the contract will roughly describe the job's scope and a quote for a fixed hourly rate. Also quoted will be materials for the project.
Incentive Contracts
Acquisition.gov defines an incentive contract as “designed to obtain specific acquisition objectives by (1) Establishing reasonable and attainable targets that are clearly communicated to the contractor, and (2) Including appropriate incentive arrangements designed to (i) motivate contractor efforts that might not otherwise be emphasized.”
An incentive-based fixed-price contract allows for profit adjustments and final contract price determination through the use of a formula based on the ratio of the total final negotiated cost to the total target cost. A price ceiling that was agreed upon at the beginning will affect the final price; i.e., the price can get up to a certain target point but cannot exceed it.
Indefinite Delivery and Quantity Contracts
The General Services Agency (GSA) says this about indefinite delivery, indefinite quantity contracts: “Indefinite delivery, indefinite quantity contracts provide for an indefinite quantity of services for a fixed time. They are used when GSA can't determine, above a specified minimum, the precise quantities of supplies or services that the government will require during the contract period.”
Also, Acquisition.gov has this to say in Subpart 16.5: “Indefinite-quantity contracts and requirements contracts also permit- (i) Flexibility in both quantities and delivery schedule; and (ii) Ordering of supplies or services after requirements materialize. (3) Indefinite-quantity contracts limit the Government's obligation to the minimum quantity specified in the contract.”
Phases of Government Procurement
There are clearly defined phases of the procurement process that must be followed to ensure it meets the regulatory and legal thresholds. These are:
- Pre-procurement
- Procurement
- Post-procurement
Let's take a closer look at each phase and its importance in government procurement.
Pre-Procurement Phase
The pre-procurement phase of government procurement is the preparatory phase. This phase is just as important as the execution phase because this is when and where all of the requirements are laid out. All parties will fully understand the scope of the contract, what service is to be provided, or what product is being procured. All specifications are detailed, especially for procurement contracts.
Let’s say an airfield is purchasing snow removal equipment. All of the required characteristics must be clearly defined during the pre-procurement phase. Do you need plows, brooms, and treatment spreaders or sprayers? Specific horsepower or size requirements that are mandatory per applicable inter-department regulations? That is all part of the supporting documentation and data.
Procurement Phase
The procurement phase is just that: it is when the contracting office solicits bids and awards a contract. This phase, which can include issuance of Requests for Proposals (RFPs), competitive bidding, and contract awarding, demands a balance between meeting government requirements and leveraging the latest technological innovations. It's a period marked by intense scrutiny and negotiation, where aerospace companies must demonstrate not only their technical prowess but also their ability to deliver cost-effective, reliable, and sustainable solutions.
The procurement phase, therefore, acts as a catalyst for driving industry standards higher, pushing companies towards excellence in engineering, management, and ethical practices while fulfilling governmental and societal needs.
Once the service is fulfilled, the product delivered, and the procurement phase completed, we move on to the next step: post-procurement.
Post-Procurement Phase
The procurement process is over and done once the product is delivered or the service is completed. Not so.
All salient characteristics defined in the pre-procurement phase must be confirmed as accurate upon receiving the item(s), or the service is completed as advertised. This is fairly simple if you are ordering a copier; either it’s what you ordered or it isn’t.
But when it’s something like a construction project, this takes time. Having a runway repaved costs millions of dollars and also includes items like runway and taxiway light removal and replacement, and, more importantly, runway marking and striping. It can take days and weeks to comb over the entire project to ensure it was done properly.
Government Procurement Methods
There are different types of contracts and all different procurement methods. These include:
- Competitive bidding
- Request for Proposals (RFPs)
- Sole sourcing
- Framework agreements
Let's explore each method and it's impact on government procurement.
Competitive Bidding
Competitive bidding is one of the most common models of government procurement. It basically entails inviting multiple vendors to provide quotes on a good or service. The idea is to be fair in the acquisition process and drive down prices, as it encourages companies to develop more advanced, cost-effective solutions, fostering an environment where technological advancements and value-for-money are prioritized.
Request for Proposals (RFP)
RFPs are very common, especially regarding construction projects. Most government agencies have an open bidding website where projects are posted, and qualified or vetted contractors can submit bids. The main one for federal contracts is SAM.gov, but most states have something similar.
RFPs are crucial for ensuring that the specific needs and requirements of a project are met. They allow for a more tailored approach, where aerospace companies can showcase their unique capabilities and solutions, leading to more specialized and innovative outcomes.
Sole Sourcing
There are times when, for one reason or another, only one vendor is available for hire for a specific purpose. It might be a unique product or a service so unique either nobody else offers it, or no one else in the servicing area.
In these instances, sole sourcing might be the only viable option.
Framework Agreements
Sometimes a government agency will require service on a continuing basis. It might be for janitorial services or other service contracts that are for an extended period.
In this case, a framework agreement is the best option. These are long-term contracts that establish terms and conditions for the duration of the contract, ultimately streamlining the process.
Key Objectives of Government Procurement
Alright, so we have a pretty good idea of what government procurement is, and how it works. Here are a few of the key objectives of the process:
- Transparency: At the end of the day, transparency is everything in government procurement. Let’s be honest: plenty of private citizens would be more than willing to sue anyone and everyone within the federal government for just about any reason. The impropriety of acquisition is always a popular reason. The best defense against this is a fully transparent process with established guidelines that are well-documented.
- Cost-Efficiency: The goal of every government office at every level is to keep costs as low as possible while providing the level of services required.
- Fair Competition: The quickest way to end up in court as a manager in a government position is to be labeled unfair. Whether it is a hiring action or acquiring goods and services, everything must be done fairly. The playing field is purposely leveled to promote equal entry for all providers.
- Social and Economic Goals: The government will buy billions of dollars in goods and services no matter what, so there is a strong consideration for social and economic goals. As we said earlier, government spending makes up over 40% of the annual GDP. It is a huge primer for economic growth, with hundreds of millions of dollars returning to the communities.
Greenwood Aerospace is Your Trusted Partner in Government Procurement
We’ve done our best to simplify an incredibly complex topic. The government procurement process is best navigated by experienced professionals who’ve seen a thing or two over the years. Greenwood Aerospace is well-versed in the government procurement process. We know the many facets involved in aviation contracts and procuring physical assets as well. We have been doing this for over four decades and have helped numerous agencies, including:
- Department of Interior
- NOAA
- Department of Defense (all branches)
- Department of Energy
- Some of the largest defense contractors in the nation
Our goal is to line up your organization with the vendor who provides the product or services that best suit your needs.
When you are ready to get the best for your organization, give us a call or start an online quote, and we’ll get started!
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