Governments buy many products and services it
needs from suppliers who meet certain qualifications. The United States
federal, state, and local governments apply standardized procedures by which to
purchase goods and services. Government contracting officials use procedures
that conform to the Federal Acquisition Regulation (FAR); a standardized set of
regulations used by all federal agencies in making such purchases. The set of
regulations provides procedures for the procurement process, from a need for a
product to the time the purchase is complete.
When government agencies want to purchase
certain products or services, standard procedures are generally followed
through a requirement process. Part of this process is market analysis, which
determines what industry has available expertise and often a formal request for
information (RFI) is issued (Lee, Johnson, & Joyce, 2013, p. 372).
Next, the bidding procedures begin through issuance of invitations for bid (IFBs),
request for proposal (RFPs), and requests for quotations (RFQs) (Lee et al.,
2013, p. 372). Sealed bidding is how governments contract competitively when
its requirements are clear, accurate, and complete. IFB’s are used when
governments have a reasonably detailed conception of what is to be purchased.
In this situation, competitors produce similar services or products, so price
becomes the main determining factor. RFPs and RFQ’s are used to not only
examine a business’s feasibility but also the health of the bidding company and
the ability of the bidder to actually do what is proposed (Staff, 2011). Once
bids have been received, they are analyzed, reviewed, and a decision is made.
In the case of IFBs, awards are given out to the lowest qualified bidder,
determined to be responsive and responsible by the contracting officer. For an
RFP, a best value analysis is performed to ensure selecting a bidder is of
value to the organization. Awards can be given to a higher bidder who has the
best approach in solving an issue. Additional steps in the contracting process include
inspecting the product or service received and paying the contractor. However,
not all spending is issued though a bidding process. Other small purchases can
be made through government credit cards which can pose a challenge to auditors (Lee
et al., 2013, p. 373).
authors of Public Budgeting Systems stress the importance of government
contracting in today’s budgetary process. While fundamental to the operations
of government, contracting is not always handled well in budgets. Some local
governments exclude contracts from their budgets and others report them only in
lump sum. With the growing emphasis on results-oriented budgeting, governments
have been forced to report contracts in their budgets (Lee et al., 2013, p. 368).
A procurement program attempts to purchase only what is needed, avoid stock
outages, and keep unit costs low. Governments expect procurement to review each
budget to make sure that savings realized during the year are reflected in
appropriate adjustments for the next year. This requires budget flexibility
that can adjust to the uncertainty of projects in progress, while providing
visibility and control to all involved stakeholders for understanding the
real-time current state of any particular budget at any point in time.
The effective use of technology has recently
gained heightened attention in the public procurement process. The widespread
use of the internet and information technology has posed some challenges and
incentives in the procurement arena. Many State and local governments have used
information technology as a vehicle for communicating between the business
community and government procurement. For example, GovCB.com, helps businesses
win government contract and find potential teaming partners online (Lee et
al., 2013, p. 379). The General Services Administration is another government
agency that uses computer technology to compare prices on products and place
orders but also configure products. An important component to the procurement
process is contract management. Problems arise when government agencies overpay
contractors when meeting their obligations. Government agencies are now
required to use recovery auditing systems to identify overpayments and recoup
money that was misspent.
agencies have also used cloud technology to revolutionize the way they operate
business to convert paper-based processing to electronic processing and
storage. This will allow contract writing systems to operate via a cloud
application, potentially create huge cost savings, and offer flexibility and
agility to respond to new challenges and opportunities. On the other hand,
potential risks in cloud technology can present security threats to the
information that is stored in the cloud itself.