Government procurement 101 – How to sell to governments
While CCC’s government to government (G2G) contracting approach provides a direct, unsolicited proposal route to seize on international opportunities, it’s helpful as an exporter to have an understanding of government procurement processes.
The size of the government procurement market varies depending on the country, level of government, and industry sector. According to the Organisation for Economic Co-operation and Development (OECD), public procurement accounts for an average of 12% of gross domestic product (GDP) and 29% of government expenditures in OECD countries.
According to the Federal Procurement Data System in the United States, federal government procurement spending exceeded $597 billion in the 2020 fiscal year. State and local government procurement spending in the US is estimated to be several times that amount. In the European Union, public procurement accounts for around 14% of GDP, with an estimated value of over €2 trillion.
With numbers like those stated above, it is easy to see that the government procurement market is a significant sector and why companies should have a better understanding of governments procure processes to better succeed.
Purpose of public procurement processes
With trillions of dollars flowing through hundreds of thousands of governments agencies to acquire goods, services, and construction projects, formal and structured public procurement processes are must as they provide:
- Accountability: Ensuring that public funds are spent responsibly and in the public interest.
- Competition: Encouraging better prices, higher quality products and services, and innovative solutions.
- Fairness and transparency: Delivering an open and transparent process where all potential vendors are assessed equitably and minimizes risk of bribery, corruption, conflict of interest and favouritism.
- Impartial evaluation and decisions: Allowing selection to be made on the criteria and evaluation factors set out in the process and comply with relevant laws and regulations.
- Value for taxpayers’ money: Obtaining goods and services at the best possible price, while ensuring that quality standards and specifications are met.
For companies, participating in government procurement processes provides many benefits including:
- Business stability: Winning a government contract can be a significant source of revenue and often offers long-term and stable contracts.
- Access to a growing and stable market: Governments are always buying and once you have experience selling to one government, selling to other governments becomes easier.
- Diversification: Selling to the governments helps companies diversify their customer base and reduce their reliance on a single market or customer.
- Credibility and reputation: Working with governments enhances a company’s credibility and reputation.
- Innovation and technology: Selling to governments can be an opportunity to build innovation and technology capabilities to deliver solutions for unique problems.
As the above demonstrates, formal public procurement processes provide many benefits for both the contracting organization and the vendor. However, there are many considerations that need to be considered when governments decide to procure a product or service.
There are several different government procurement processes and potential vendors should understand the terms of each before submitting a bid. Government procurement types include:
Traditional procurement or Open Tendering: This is where the buyer sets out the requirements and invites bids from suppliers. The supplier with the best bid is then awarded the contract.
Two-stage procurement – This is like an open process, but potential bidders must meet an initial set of criteria before they can be invited to bid.
Restricted procurement – This process limits bidding to a small number of potential vendors that are invited to bid on the contract.
Directed or Sole-source procurement – This process allows the government buyer to make an exception to competitive tendering in the case of an urgent or sensitive procurement.
Government-to-Government procurement – This process allows two governments to negotiate a procurement arrangement for one government to supply the other government with the product, service, or project the purchasing governments requires.
Design-Bid-Build procurement: This is where the buyer first hires a design professional to create plans and specifications for the project. The buyer then solicits bids from contractors to build the project based on the plans and specifications.
Engineering, Procurement, and Construction: The standard EPC project delivery system eliminates the bidding process of the commonly used design-bid-build (DBB) system and enables the owner to externalize risk to a single party—the contractor who will design and build the project.
Design-Build procurement: Unlike Design-Bid-Build procurement, the buyer contracts with a single entity to both design and build the project.
Public-Private Partnership (PPP) procurement: This is a type of procurement where the public sector contracts with the private sector to provide a public service or infrastructure project. The private sector partner typically finances, designs, builds, operates, and maintains the project, while the public sector retains ownership.
Each procurement type has its own benefits and drawbacks and vendors should understand the requirements for each before committing to a bid or contract.
CCC offers an online tool, that lists bid opportunities from 30+ sources, covering and 200+ jurisdictions. You can review notices on these platforms or sign up to receive notifications when appropriate opportunities for your business are posted.
Government procurement stages
Whatever the type of procurement process, it will generally include these stages:
Needs identification: This is the first stage in the procurement process where the government department identifies a need for goods or services.
Planning: The department creates a procurement plan which outlines what is required, how much is needed, when it is needed, the procurement process and any associated timelines.
Sourcing or Contract notice: This stage involves identifying potential suppliers who can provide the required goods or services. This may involve sending out a Request for Information (RFI), Request for Proposal (RFP), or Request for Quotation (RFQ) to potential suppliers. Most governments have a dedicated platform where contract notices are posted (e.g., CanadaBuys.canada.ca in Canada, TED in the EU or SAM in the U.S.).
Bid submission – All vendors submit information and documentation as indicated in the tender documents.
Vendor assessment: The purchasing department evaluates the bids or proposals received from potential suppliers and selects the one that best meets their needs. This involves considering factors such as price, quality, delivery time, and the supplier’s reputation.
Contract award - Once a supplier has been selected, the department or agency negotiates the terms and conditions of the contract.
Delivery: The vendor or supplier delivers the goods or services, as specified in the contract.
Invoicing and payment: As goods or services are received as outlined in the contract, the vendor or supplier submits an invoice for payment.
Performance evaluation: After the contract is complete, the organization evaluates the performance of the supplier/vendor to determine if they met the requirements of the contract. This helps to inform future procurement decisions and improve the procurement process.
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Building a bid for government opportunities
A bid proposal allows vendors to demonstrate their aptitude and knowledge for a procurement project. It also allows potential government clients to assess pricing details so they can make an informed decision on who is more likely to meet their project needs.
Because bid proposals are a critical aspect of government procurement, it is important that vendors get it right. For vendors, be sure to follow all instructions precisely, provide all elements of your submission in the format and language specified, and submit your bid package before the deadline. Other tips include:
Get the full tender documents: Request the full tender documents to make sure you don’t miss anything.
Research the client: Learn more about their challenges and core values and tailor the language of your bid to show how you meet the needs of the bid and support the client.
Provide all requested information in the format specified: Missing information or details that demonstrate a failure to understand the requirements will count against you and may result in your bid being eliminated.
Prepare for language requirements: Secure a professional translator early and make sure to leave enough time to have your documents translated before the deadline.
Highlight additional competencies: Any additional competencies you have, such as environmental records or other corporate social responsibility initiatives, can help reinforce the full value your company brings to the project.
Include terms and conditions: Don’t forget to include information about expectations, general and special conditions or any other information that may affect how you will deliver the project.
Check out our blog on How to build a better bid to learn more.
CCC understands the challenges Canadian exporters face when selling to foreign governments and what government buyers face when making acquisitions internationally. Read about our customized government to government contracting approach.
Whether preparing a bid for a competitive process or a proposal for a sole-source arrangement, here are some tips to boost your chances of success.
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