No-Bid Contract: Everything You Need to Know
A no-bid contract may also be listed as sole source intended, and it is generally used to quickly hire a vendor for a certain job.3 min read
Updated November 10, 2020:
A no-bid contract may also be listed as sole source intended, and it is generally used to quickly hire a vendor for a certain job. There is no need for a competitive bidding process with this, unlike contracts that have a formal bidding process. When government agencies use bids as the main source model, they're indicating that the services or terms they want to acquire can only be provided by a single person or company.
No-bid contracts are easier to negotiate compared to open-bid contracts because, since the vendor is the only supplier who can give the agency what they need, they almost always get the price they asked for initially. If the agency wants the option to pursue no-bid contracts, they need to follow a strict set of rules and are only awarded sole-source contracts under very particular circumstances.
Inside the Critical Bid and No-Bid Decision
When talking to business development professionals about what's crucial when figuring out if they should bid on a federal contract or not, they'll often say knowledge is key. This is the most essential factor when making a bid decision, as you must understand the customer themselves, their requirements, and the objectives. When making business development pursuit decisions, the following should be determined to see if it's worth it to put the company's resources and time into a bid:
- Do you understand the work?
- Do you know the customer or have worked with them in the past?
- Is it a small effort your internal team can accomplish, or is this a massive undertaking?
Contractors should be ready to stop the process if they find the capture team isn't making progress towards a viable bid. They should never accept a project that seems risky, such as never being able to understand what the customer wants. If multiple bid opportunities need to be considered, it's essential to have an objective approach to eliminate the ones that have the least chance of winning.
Relevant business intelligence is necessary to be objective, so you must have a disciplined approach and all the facts. Try to have an objective measure so you can get the right insight into what the actual probability of success of an opportunity is.
How No-Bid Contracts Hurt the Competitive Bidding Process and Lead to Wasteful and Inefficient Use of Public Funds
Many agencies know that no-bid contracts can hurt the bidding process instead of helping them, as well as decrease the chances for startups and small businesses to win contracts with the government. As more no-bid contracts get issued in the United States, issuing agencies are spending unnecessary amounts of money to prevent competitive bidding from happening. However, these misappropriated funds can be spent somewhere else that makes more sense.
To prevent the competitive bidding process, the number of vendors who can bid on government contracts gets reduced, which means agencies might not get a fair value price for the service or product they purchase. President Obama made the argument in 2009 that no-bid contracts were inefficient and wasteful, but four years later his office spent even more money on no-bid contracts than in the past.
In 2012, $115.2 billion was spent on them, which was a nine percent increase from 2009. Local and state governments have begun to look at why there are so many opportunities that are being awarded without going through a formal bid process. Even with the increase in these contracts, competitive bidding is still alive and well. Agencies depend on competitive bidding to help decrease costs and find quality services and products that can be purchased at a reasonable price. Competitive bidding also lets agencies get to know the vendors better and find out what they sell.
This gives them an opportunity for agencies to ask dependable vendors to bid on their next contract, and it also gives agencies a guess of how many vendors are available that can provide certain services and products. They'll also find out which vendors are interested in supplying their products to the agency and can complete the contract requirements. This also allows the vendors to introduce their company to possible customers.
If you need help with a no-bid contract, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.