The most common way that formal competitive bids can be avoided is when a contract value falls below a certain dollar threshold. Above that threshold and a formal competitive sealed bid is usually required.
At the local government level, the threshold amount can vary considerably from one agency to another. There is no rhyme or reason to what the thresholds are and it is not uncommon to have 2 neighboring cities of similar sizes with very different threshold levels. I have seen them as low as $10,000 and as high as $250,000.
Any vendor wanting to do business with a local government agency should research what the thresholds are because it may be that you are able to set your prices below the threshold and avoid a long costly process that is highly competitive.
How do you find out what the threshold is?
Every government agency will have a set of rules, codes and ordinances that govern the way its business is run. One part of these ordinances will be a procurement code. The purpose of this section is to provide the agency with a unified purchasing system, to maximize the purchasing value of public funds and to provide safeguards for the integrity of the system. The procurement code will clearly outline what the threshold levels are. Sometimes there are multiple thresholds and different levels for some services (like construction) that are frequently purchased and command a high value. The best way to locate an agency’s ordinance is to look for details on their website. There are some sites that store codes for a number of local governments. For example Municode claims to have the codes for 1,600 local government agencies.
If you are below the threshold does that mean you can totally avoid competition?
Unfortunately not, even informal solicitations will require the agency to get quotes from other vendors. But a formal process with voluminous documents and strict rules will not take place, making the life of the vendor much more straightforward.
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