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 international opportunities, it’s helpful for exporters to understand government procurement processes.
Government procurement, or public procurement, is when a government department or public sector agency purchases goods, works, and services from an organization for themselves or the taxpayers.
Public procurement is used to purchase a range of goods, including office supplies, IT services, and large infrastructure projects. It plays a significant role in a country’s economy, as governments are often the largest buyers of goods and services.
The size of the government 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, the United States federal government is expected to spend $1.1 trillion on contractual services and supplies in the 2024 fiscal year (obligated amount). In the European Union, public procurement accounts for around 14% of GDP, with an estimated value of over €2 trillion.
Purpose of government procurement processes | Why pursue government contracts | Procurement types |
Government procurement stages | Building a bid for government opportunities
Purpose of government procurement processes
With trillions of dollars flowing through hundreds of thousands of government agencies to acquire goods, services, and construction projects, formal and structured public procurement processes are a must as they provide:
- Accountability: Ensuring 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 minimize the risk of bribery, corruption, conflict of interest and favouritism.
- Impartial evaluation and decisions: Allowing selection to be made based on the criteria and evaluation factors set out in the process and complying with relevant laws and regulations.
- Value for taxpayers: Obtaining goods and services at the best possible price while meeting quality standards and specifications.
- Support policy goals: Public procurement is used to advance broader social, environmental or economic goals,
- Manage risks: Governments, with their procurement processes and due diligence requirements, take a structured approach to reducing delays, covering overruns, and improving the quality of deliveries.
- Ensure compliance with legal and ethical standards: Public procurement is governed by local laws and international agreements, and public procurement processes ensure proper conduct and fairness in public spending.
- Foster innovation: Targeted procurement processes can stimulate innovation by encouraging the development of new and innovative solutions that meet public needs.
Why pursue government contracts
Participating in government bids provides many benefits for companies. Since government markets are often the largest in a country, winning contracts with government departments and agencies can significantly boost a company’s revenue. They are also a significant source of recurring revenue and long-term and stable contracts from a market with a lower risk of defaulting on payments.
Selling to the government helps companies expand their customer base and reduce reliance on a single market or customer. Once you have the experience, reputation and credibility of selling to one government, selling to other governments becomes easier.
Finally, selling to governments can be an opportunity to build innovation and technology capabilities and deliver solutions for unique problems or meet emerging public policies.
Procurement types
There are several different government procurement processes, and potential vendors should understand the terms of each before submitting a bid. Some government procurement types include:
- Traditional procurement or open tendering: In this method, the buyer sets out the requirements and invites supplier bids. The supplier with the best bid is awarded the contract.
- Competitive dialogue: Purchasing agencies thoroughly discuss each aspect of the procurement with suppliers before specifying the requirements and before inviting the suppliers to submit their complete and final tenders or proposals
- Competitive procedure with negotiation: After the initial bidding phase, the government may negotiate with the most competitive bidders to refine proposals before selecting a winner.
- Design-Bid-Build (DBB) procurement: 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.
- Design-Build procurement: Unlike Design-Bid-Build procurement, the buyer contracts with a single entity to design and build the project.
- 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.
- Engineering, Procurement, and Construction (EPC):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.
- Government to government (G2G) procurement – Allows two governments to negotiate a procurement arrangement in which one government supplies the other government with the product, service, or project the purchasing government requires.
- Joint procurement: An arrangement where multiple government bodies collaborate to procure goods and services to deliver overall best value and efficiencies through economies of scale.
- Lease-purchase procurement: This process allows governments to lease equipment, property, or other assets with the option to purchase them at the end of the lease period.
- Negotiated procedure: This is like restricted procurement, where a government negotiates directly with one or more suppliers without formal competitive bidding. It is often used when unique or highly specialized requirements or competition would not provide an acceptable solution.
- Pre-commercial procurement: Involves governments purchasing research and development (R&D) services for new technologies or solutions that are not yet commercially available.
- Public-private partnership (PPP) procurement: This is a type of procurement in which 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.
- Restricted procurement – This process limits bidding to a few potential vendors invited to bid on the contract.
- Reverse auction procurement: Is the opposite of a traditional auction and is where multiple sellers compete for the business of a single buyer. During this competition, the sellers ultimately drive the item’s price down.
- Small business set-asides: Governments often reserve certain procurements for small or disadvantaged businesses (e.g. women-owned, veteran-owned, etc.) to encourage participation from specific segments.
- Two-stage procurement: This is like an open process, but potential bidders must meet initial criteria before being invited to bid.
Each procurement type has its benefits and drawbacks, and vendors should understand each requirement 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:
- Market research and needs identification:This is the stage in the procurement process where the government department understands what is available in the market and identifies its specific needs for goods or services. This stage may also include engagement with relevant stakeholders to gather input on needs and priorities, ensuring that the procurement plan aligns with organizational objectives.
- Planning and budgeting: The department creates a procurement plan that 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 include sending a Request for Information (RFI), Request for Proposal (RFP), or Request for Quotation (RFQ) to potential suppliers. Most governments have a dedicated platform for posting contract notices (e.g., CanadaBuys.canada.ca in Canada, TED in the EU , or SAM.gov in the U.S.).
- Bid submission – All vendors submit information and documentation as the tender documents indicate.
- Vendor assessment:The purchasing department evaluates potential suppliers’ bids or proposals and selects the best one that meets their needs. This involves considering factors such as price, quality, delivery time, and the supplier’s reputation.
- Negotiation and contract award – Once a supplier has been selected, the department or agency negotiates the terms and conditions of the contract to ensure the best value for money.
- 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 the contract outlines, the vendor or supplier submits an invoice for payment.
- Performance evaluation: After the contract is complete, the organization evaluates the supplier/vendor’s performance to determine whether they met the contract’s requirements. This helps to inform future procurement decisions and improve the procurement process.
Finding tender opportunities with Canadian provinces and territories
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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.
Vendors must get it right because bid proposals are critical to government procurement. For vendors, 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 ensure 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.
- Feedback from previous vids: Gather feedback from past bids to identify areas for improvement in your proposal strategy.
- Review eligibility requirements: Ensure that you meet all eligibility and compliance criteria the government agency sets, including any specific qualifications or certifications.
- 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 leave enough time to have your documents translated before the deadline.
- Budget justification and risk management plan: If requested, include a detailed budget that justifies your pricing and clearly outlines how costs are allocated. Also, address potential risks associated with the project and how you plan to mitigate them.
- Highlight additional competencies, case studies or testimonials:Any additional information, such as past projects, environmental records or other corporate social responsibility initiatives, can help reinforce the total value your company brings to the project. Incorporate those in the appropriate sections of your response or list those in appendixes.
- 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 deliver the project.
- Submit proposal: Consider having someone else review your proposal for clarity and coherence and ensure it is error-free and professionally presented. Submit your proposal in the way requested in the bid documents.
- Follow up: Consider following up with the procurement office to confirm receipt and to express your continued interest in the project.
Check out our blog on How to build a better bid to learn more.
This post was last updated on October 17, 2024.
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.
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