Overview
FAR 14.408 outlines the procedures and requirements for awarding a contract under sealed bidding, ensuring the award is made to the responsible bidder whose conforming bid is most advantageous to the Government based solely on price and price-related factors. It establishes strict protocols for contract formation, price reasonableness determinations, and the handling of specific scenarios like equal low bids or economic price adjustments.
Key Rules
- Award Criteria: The Contracting Officer (CO) must award to the responsible bidder whose bid conforms to the invitation and is most advantageous to the Government, considering only price and price-related factors.
- Contract Formation: A contract is formed when the Government provides a properly executed award document to the bidder; the bid and the award together constitute the legally binding contract.
- Low Competition: If fewer than three bids are received, the CO must investigate the cause and initiate corrective action for future solicitations, though the award can still proceed.
- Price Reasonableness and Responsibility: Before award, the CO must make an affirmative determination of the bidder's responsibility and ensure the price is reasonable, specifically checking for materially unbalanced bids.
- Prompt Payment Discounts: These discounts are excluded from the price evaluation but are incorporated into the resulting contract terms.
- Economic Price Adjustments (EPA):
- Bids with EPA clauses that lack a price ceiling are typically rejected.
- If the Government provides an EPA clause, bidders who limit the downward adjustment or exceed the maximum upward adjustment are deemed nonresponsive.
- Tie-Breaking (Equal Low Bids): When bids are equal in price, priority is given first to small business concerns in labor surplus areas, then to other small businesses, and finally to other concerns. If a tie remains, the winner is selected by a drawing by lot.
- Documentation: The contract file must include a justification for the award, including reasons for rejecting any lower-priced bids and a description of how any ties were broken.
Practical Implications
- No Negotiation: Unlike Part 15 (Contracting by Negotiation), COs in sealed bidding cannot negotiate price or terms; they must accept or reject the bid as submitted.
- Administrative Rigor: COs must be meticulous in documenting the "responsibility" and "responsiveness" of the low bidder to mitigate the high risk of bid protests in the sealed bidding environment.
- Preference for Small Business: The tie-breaking rules provide a statutory advantage to small businesses and those in economically distressed areas (labor surplus) when pricing is identical.