Federal Procurement Process Highly Publicized Incidents Such

¶ … Federal Procurement Process Highly publicized incidents such as the federal government purchasing at $500 hammer or $2,500 toilet seat continue to capture headlines as examples of a federal procurement process gone awry, but these notorious examples have become few and far between in recent years, due in large part to significant reforms such as the Federal Acquisition Streamlining Act of 1994 that minimized some of these problems. Despite these substantive reforms, the federal government continues to receive criticisms concerning the manner in which it administers the procurement process.

In order to gain new insights in this area, this paper provides a review of the relevant literature to describe the legal and administrative framework and socio-economic considerations of the federal procurement process. A summary of the research and important findings are presented in the conclusion. Review and Discussion Legal Framework At present, federal procurement contracts are governed by a number of statutory and regulatory requirements, including the Federal Acquisition Regulation (FAR) (Nou, 2009).

The FAR sets forth detailed procedures concerning virtually all aspects of the federal procurement process including notice and competition as well as awards and contract management (Nou, 2009). In addition, the Competition in Contracting Act of 1984 mandates that federal government agencies use one of two defined methods for their competitive bid procedures: (a) sealed bidding and (b) competitive proposals (Nou, 2009).

There are a number of other legal issues involved in the manner in which the federal procurement process targets eligible vendors for its needs using the sealed bidding or request for proposal approach. For instance, according to Nou, "The sealed bidding process essentially entails formally advertising specific procurement needs and then awarding the contract based on the lowest bid. Using price as the sole criterion for government contracts can be an attractive metric because it removes discretion from public officials, while also saving taxpayer money" (2009, p. 744).

By sharp contrast, Nou (2009) reports that the procurement by competitive proposals involves the publication of a request for proposals (RFP) that provides companies with information concerning what is needed by the federal government -- for what reason or purpose. On the one hand, the RFP approach appears to favor well-entrenched vendors because it is typically based on prior performance and proven capabilities, particularly with respect to federal contracts.

A lack of such experience, though, is not necessarily a disqualifying factor but it is clear that companies familiar with the process and that have established contacts in the federal procurement network enjoy a competitive advantage over those that do not. On the other hand, though, the RFP approach can also be used to target minority- or veteran-owned enterprises by affording them a preference, again depending on the precise needs of the federal agency or agencies that are involved (Nou, 2009).

For example, Nou notes that, "Unlike sealed bidding, competitive proposals are intended to allow greater discretion and the recognition of criteria other than price alone. At the same time, this discretion is still constrained through further regulations that restrict the specific rules, criteria, and information that can be used to award the final contract" (p. 745).

While the RFP approach is not the only mechanism whereby disadvantaged contractors can gain a foothold in the federal procurement network, it does represent an extension of other federal policies that are intended to promote federal business dealings with this sector. In this regard, Nou reports that a stated purpose of the Federal Acquisition Regulation is to promote "business [conducted] with integrity, fairness, and openness"; consequently, federal agencies are required to set out detailed evaluation criteria and follow these criteria when awarding a contract.

Most major government purchases of information technology are acquired through competitive proposals" (2009, p. 745). Socioeconomic Considerations Clearly, as the largest purchaser in the world, the United States federal government exerts tremendous socioeconomic influence domestically and abroad (Sparks & Wichmann, 2007). Pursuant to the provisions of federal policies for minority and/or economically disadvantaged businesses, companies can receive special 8(a) designation from the Small Business Administration that provides them with a competitive advantage in the federal procurement process.

According to Sparks and Wichmann (2009), "The SBA confers 8(a) status after documenting and verifying a small business's need. Some minority-owned businesses qualify automatically (for example, Alaskan- and American Indian-owned businesses). Other minorities must demonstrate both economic and political disadvantage" (p. 745).

Qualifying companies with the 8(a) designation can request and receive noncompetitive awards up to $3 million from federal agencies; in addition, although it is preferable for 8(a) companies to participate directly in the provision of goods and/or services under these provisions, it is not required; however, it is becoming increasingly common practice to establish joint ventures with other companies that perform these services (Sparks & Wichmann, 2009).

Administrative and Socioeconomic Framework Given the enormous amounts of money that are involved, the potential for correspondingly enormous savings through a more streamlined federal procurement process is clear. For instance, during the early 1990s, federal procurements for less than $100,000 required more than 3 months to complete compared to just 1 to 4 weeks in the private sector, and the federal government required more than 4 years to complete purchases of information technology compared to just over a year in the private sector (Farazmand, 2001).

Moreover, throughout the early 1990s, there was a dearth of timely oversight in the federal procurement process. In this regard, Farazmand emphasizes that, "Although there are signs of improvement, so lax has the federal government been in following up on the performance of contractors that even debarred and suspended firms can still receive federal contracts" (p. 106). In response to these problems, the U.S.

Congress passed the Government Performance and Results Act of 1993 and the Federal Acquisition Streamlining Act of 1994 that makes purchases of less than $100,000 much more straightforward; in addition, this law also allowed federal employees to make purchases up to $2,500 with government-issued purchase cards (Farazmand, 2001). The implications of this law on the private sector are multifaceted but largely favor companies that already have contracts with the federal government with a proven track record of performance.

For instance, according to Sparks and Wichmann (2007), "Direct purchases using federal government purchase cards (GPC) do not follow the standard procurement process, and buyers have incentives to locate and use GSA contract holders" (p. 33). In reality, becoming eligible to compete for federal procurements contracts is not a complicated process and the federal government has taken steps to streamline it wherever possible. In sum, to become eligible for federal contracts, companies must: 1. Obtain a data universal.