Negotiations in federal contracting comes in two forms depending on the type of acquisition; sole source or competitive. Previously I touched on the competitive negotiation when I wrote about discussions, but now I want to explain the two ways the government approaches a negotiation and the differences between a sole source and a competitive negotiation as described in FAR Part 15, Contracting by Negotiation. Under both types there is a formal process of documentation and reviews the government acquisition team will work through to prepare. By understanding the government’s process, offerors will be better equipped to negotiate their position.
The competitive negotiation (a.k.a. discussions), is very structured to ensure the integrity of the process is maintained. Here the contracting officer walks a narrow line with regards to what is discussed (or negotiated). In this negotiation, the objective is to point out significant weaknesses or deficiencies in a proposal with the intent of helping the offeror understand what is needed for an acceptable proposal; however, the contracting officer is not required to address each aspect of the proposal that could be improved upon. Furthermore, just because the offeror addresses the issues identified, does not guarantee that they will be in line for award. Offerors still need to present a competitive solution taking into consideration the evaluation criteria and addressing all discussion issues. Therefore, offerors preparing for discussions should be extremely familiar with the solicitation’s evaluation criteria and ask many questions to increase their understanding of the issues. Perhaps even more important, listen to the government’s responses and if you are uncertain what the contracting officer is saying, then ask for clarification.
To the contrary, under the sole source negotiation the government is able to be more direct with issues and the process may follow the more traditional back and forth negotiation that ends with a ‘hand-shake’ deal (formalized in a contract or modification). In this type of negotiation, the government will be very explicit and normally address ALL the issues they have with the proposal since there are less constraints as compared to the competitive negotiation. In this situation you will likely find even the smallest of issues (i.e. lodging costs) being addressed via costs analysis. For this reason, most requiring offices prefer this approach for complex requirements since they can have more insight into the details thereby minimizing the risk of unsuccessful performance; however, FAR competition requirements do not always accommodate these wishes. The take away here is that when preparing for a sole source negotiation, expect that even the small details of the proposal will be examined and offerors should enter the negotiations prepared to support the individual cost elements since the contracting officer will not be able to rely on competition to demonstrate price reasonableness.
The required negotiation documentation of each approach differs significantly as well. The competitive process documents the negotiation in the evaluation reports which are then rolled into a summary report and then into the source selection authorities decision document… ugh!!! During the discussions the government will send offerors evaluation notices which then must be addressed and sent back to the government for further assessment. This process may go on for several rounds before the government request final proposal revisions. In short, the competitive acquisition will likely result in several document exchanges during the negotiation and the final documentation will include a combination of 5-8 briefings and documents. By comparison, under a sole source acquisition there will be a technical evaluation and then the price negotiation memorandum (PNM) which is developed in whole via the Pre-PNM and Post-PNM. The Pre-PNM will outline the negotiation objectives the contracting officer will use during the negotiation. This will include a target price or a negotiation range that requires approval to proceed depending on the dollar value. The negotiation itself may be handled via a series of emails or face-to-face negotiations, but the process itself is significantly less formal than the competitive acquisition. Upon conclusion the contracting officer will document the outcome of the negotiation in the Post-PNM and proceed to award. What this means to the contractor is that the negotiation under a sole source process will likely be a lot quicker than a competitive acquisition… so plan accordingly your team’s availability. The sole source negotiation may be complete in a matter of days or weeks while the competitive negotiation could take anywhere from a week to a couple months.
As you can see here the negotiation processes between a competitive acquisition and sole source differ greatly; however, the one way they do not differ is that the government prepares for each. For that reason, be sure to take the time to prepare your team and take a proactive approach to the negotiation and formulate a strategy based on the situation.