There are two basic types of government purchases – those that are price determinative and those that are not. When a government agency wants to decide which product or service to buy on the basis of price, it issues an Invitation to Bid (ITB). An ITB will establish a baseline set of qualifications for bidders that must be met to be eligible to respond. Once these qualifications are met, the only thing that matters is the bidder’s price. Lowest price wins.
The other type of government purchase, which is not price determinative, is a “best value” purchase. Government agencies issue numerous other types of solicitations when making a “best value” purchase, including but not limited to a Request for Proposals (RFP), Request for Qualifications (RFQ), Invitation to Negotiate (ITN), Request for Information (RFI), and Request for Letters of Interest (RLI). These solicitations all have one thing in common – flexibility on the part of the government agency to purchase products or services without regard to price. In some ways, that characterization is an overstatement. After all, in each of these solicitation processes price is part of the evaluation.
For example, an RFP may state that proposals will be evaluated based on: 40% – Cost Proposal, 30% – Experience and Qualifications, and 30% – Design or Plan. On the surface, in this example price is the most important factor. From a practical standpoint, however, price is not determinative so long as your price is competitive. The reason is that price is always objective; whereas, the other two evaluation criteria are subjective. So in this example, as a company trying to win, you should read these evaluation criteria as follows: 40% – Objective and 60% – Subjective. Because the evaluation includes subjective criteria, , this RFP is winnable even if your products or services are priced higher than your competitors’.
When a government agency issues a “best value” solicitation, it is inviting you to test your skills as a salesperson.