Does the Lowest Bidder Always Win?

Editor's Note: This post was originally published in October 2019 and has been updated for accuracy and comprehensiveness.

“I felt exactly how you would feel if you were getting ready to launch and knew you were sitting on top of 2 million parts – all built by the lowest bidder on a government contract.”

This apocryphal quote comes from the early days of NASA. Some attribute it to Alan Sheppard. Others claim it was John Glenn.

Either way, no one can agree on who said it or the exact phrasing. What did happen, though, was the perpetuation of a government contracting myth: it always comes down to the lowest bidder.

From a Second Glance

There’s a reason why giants like Amazon, Chevrolet, Exxon, and others work with the federal government. It’s lucrative. If it weren’t, then no one would be doing it. It’s as plain and simple as that.

Essentially though, there has to be a middle ground for everyone. Businesses need to make a profit from their products and services. No one emerges as the victor when people compete to get paid the lowest. When that occurs, why invest any time or money to get awarded? 

This also makes sense from the other side of the coin. Would you really purchase a product or service simply because it was the cheapest option?

Probably not. Quality and presentation can go a long way. A job well-done only comes with one bill; a job done poorly comes with two. Plus, the federal government allocates over $500 billion every year to be spent on contracts. They don’t have to be that frugal.

Unless you and your competitor are virtually identical, then perhaps the price would be what tips the scale. However, plenty of factors come into play before it even gets to that point.

Set-Asides

This one alone dispels the “lowest bidder” myth. Every year, the government conducts market research before spending hundreds of billions of dollars on contracts. When this research is finished, they will find out how much of this work can be done by small businesses.

These opportunities are set-aside and become exclusively available to smaller entities. Here is a list of small-business set-asides:

• Economically Disadvantaged / Women-Owned Small Business (ED / WOSB) 
• Service-Disabled / Veteran-Owned Small Business (SD / VOSB) 
• Historically Underutilized Business Zone (HUBZone) 
• 8(a) Program 

Past Performance

Do you think the price tag holds more weight or…proven experience and trust? The government wants to find contractors with great track records. When competing for an opportunity, they tend to sway in the direction of contractors they have previously worked with.

So how does anyone get his or her foot in the door?

Well, it’s still a good idea to gather information and testimonials from any private sector contracts you’ve fulfilled. When starting, and depending on your industry, you’ll want to search for smaller contracts or subcontracting opportunities. This way, you can slowly build trust and develop a working relationship with the federal government.

Marketing

Presentation of your business, communicating what you can do, and how that information gets to a procurement officer matters a lot.

You may already have a marketing department or agency working for you. However, marketing your services to the federal government is a different ballpark.

From your capabilities statement to your DSBS profile, how long would it take a government official to find this information on your website? Could they find it on your website? Does your business have any testimonials on hand?

Put yourself in the shoes of a procurement officer deciding between two businesses. Business A has all the information you need on its website, and it’s easy to find. Business B, on the other hand, seems to provide the product or service you’re looking for, but what you need as an officer requires extensive digging.

Who would you rather work with? Which candidate seems more serious about government contracting?

The answer is obvious.

How well you present your business will play a huge role when competing for government contracts.

Registration Status

Did you know that you could be registered in the System for Award Management (SAM) but still deemed ineligible for government contracts? No matter what you do, this can render all of your other efforts and advantages useless.

For those of you who are unfamiliar, SAM is where every contractor has to start. Without it, you can’t even begin to bid on opportunities. Like most government registrations, permits, and licenses, SAM has to be renewed. Specifically, though, the deadline for SAM renewal occurs every year. 

The catch is that if you don’t renew your SAM registration within 60 days of the deadline, your business will get flagged by the government.

To them, it’s risky to award a contract to a company whose SAM registration status may be compromised soon. Also, with some of these contracts lasting for several years, they would probably prefer businesses that are prompt about taking care of this renewal.

Basically, if you do get put on this watch list, you can miss out on a big opportunity just because your SAM registration is about to expire.

Covering Your Bases

It’s humorous to think that the government is cheap when it comes to space exploration or other monumental projects. The reality, though, is that government contracting isn’t so one-dimensional. The factors mentioned above can and will come into play.

As a potential client, the federal government always needs work to be done, they pay well, and they’re recession-proof. That’s why, before you even take your first steps, you need to be armed to the teeth with the right resources.

USFCR is the world's largest third-party government contractor registration firm. Since 2010, we have been providing the people, processes, and technology that help businesses of all sizes sell to government agencies.

From small businesses to Fortune 500 companies, thousands have trusted USFCR to assist with their SAM registrations.

No matter your industry or size, we offer various services to help you reach and exceed your government contracting goals.

Originally published Oct 21, 2019, 2:15:33 PM, updated July 25, 2022