This analysis covers FAR Subpart 14.5 - Two-Step Sealed Bidding, a hybrid procurement method that combines the technical evaluation of a negotiation with the rigid price competition of sealed bidding.
Overview
Two-step sealed bidding is a specialized acquisition method used when the government lacks sufficiently definite specifications to conduct a standard sealed bid but wishes to maintain the rigid price competition of FAR Part 14. It consists of a non-priced technical proposal phase (Step One) followed by a sealed price bidding phase (Step Two) limited to those offerors who submitted acceptable technical solutions.
Key Rules
- Sequential Process:
- Step One: Submission and evaluation of technical proposals (without prices). Proposals are categorized as Acceptable, Reasonably Susceptible of being made acceptable, or Unacceptable.
- Step Two: Submission of sealed priced bids, restricted to offerors whose technical proposals were deemed acceptable in Step One.
- Pricing Restrictions: Pricing or cost information is strictly prohibited in Step One. If included, the Contracting Officer must remove it before evaluation.
- Mandatory Conditions for Use:
- Specifications are not definite or are too restrictive for standard bidding.
- Definite technical evaluation criteria exist.
- More than one qualified source is expected.
- Sufficient time exists for a two-step process.
- The contract must be Firm-Fixed-Price or Fixed-Price with Economic Price Adjustment.
- Step Two Competition: Unlike standard bids, Step Two is not synopsized publicly as a new opportunity; it is a closed competition among those who cleared Step One.
- Conversion to Negotiation: If Step One results in only one (or zero) acceptable technical proposal, the agency may discontinue the two-step bidding and proceed via negotiation (FAR Part 15).
Responsibilities
- Contracting Officer (CO):
- Synopsizes the requirement and ensures the Request for Technical Proposals (RFTP) includes all mandatory notices and evaluation factors.
- Safeguards proposals and ensures no pricing information reaches the technical evaluators.
- Determines the acceptability of proposals and conducts discussions or requests clarifications to move "susceptible" proposals to "acceptable."
- Notifies and debriefs unsuccessful offerors.
- Publishes the names of successful Step One offerors on the GPE (Governmentwide Point of Entry) for subcontracting purposes.
- Offerors:
- Develop technical approaches (engineering, manufacturing, testing) that meet government requirements without mentioning price.
- Ensure Step Two bids conform exactly to the technical proposal submitted in Step One.
- Technical Evaluators:
- Review Step One proposals strictly against the criteria in the RFTP.
- Avoid considering "responsibility" (e.g., financial capability) during the technical evaluation phase (which is handled separately under FAR 9.1).
Practical Implications
- Complex Acquisitions: This method is highly effective for "complex items" or performance-based requirements where the government knows the required outcome but needs industry to propose the specific technical approach.
- Risk Mitigation: It prevents the government from being "locked in" to a low bid for a technically inferior solution, which is a common risk in one-step sealed bidding.
- Reduced Protests: By allowing a discussion phase in Step One to clarify ambiguities and make proposals "acceptable," the government reduces the likelihood of protests regarding restrictive specifications or non-responsiveness.
- Administrative Burden: Agencies must account for a longer procurement lead time. Because it requires two distinct phases of submission and evaluation, it is significantly slower than standard sealed bidding or simplified acquisitions.
- Strategic Sourcing for Subcontractors: Because the government publishes the list of firms that cleared Step One, small businesses and subcontractors can strategically target these firms for the Step Two bidding phase.