State and Local Procurement Rules

Dec 27, 2011 | Government Resources

When selling to a state or local government, it’s important to have a basic understanding of the rules of the jurisdiction to which you’re selling. At the very least, understand the particular jurisdiction’s purchasing thresholds.

Overview of the States

Each state has a central procurement office, but they tend to do things differently. Some centralize procurement rules (using that word broadly) in statutes while others do so in administrative codes. Some rules are spread throughout the codes of individual agencies, such as departments of transportation. While general principles can be found throughout all jurisdictions, there is not much standardization. For example, only 18 states thus far have adopted the so-called Model Procurement Code.

Purchasing Thresholds

State and local agencies establish dollar ranges from zero to big dollar procurements. Buyers are required to use a particular procurement method within a given dollar range. A typical agency’s ranges and corresponding procurement methods might be as follows:

$0-$1,000 – Sole source buys are made with a government credit card.
$1,001-$10,000 – Informal quotes (verbal, email, fax) are obtained from three sources.
$10,001-$25,000 – Formal written request for quotes are sent to at least three sources.
Over $25,000 – Requests for proposals or invitations for bids are announced publicly.

The procurement thresholds for the 50 states and the 50 largest counties and cities are summarized in fedmarket.com’s eBook entitled “Doing Business with Government,” http://www.fedmarket.com/productTour/eBook/eBookSecondLevel.php.

Some of the similarities and differences among the rules of these 150 jurisdictions are:

Flexibility in making small buys is allowed for efficiency purposes — e.g., sole source buys, use of credit card, and minimal paperwork.
The number of dollar thresholds used to define procurement methods range for 2 to 5.
Intermediate ranges in between the smallest procurements (micro purchases) to publicly announced procurements (large purchases) usually allow limited competition and abbreviated paperwork to promote procurement efficiency.
Large procurements are publicly announced and vendors are required to respond with written and signed proposals or bids.

Agency regulations in general and threshold amounts in particular usually can be found at an agency’s website. If not, call the purchasing director and obtain a copy of the law and/or regulations.

The Sales Process

What does all of this mean in terms of sales? Sales people should understand:

How the pricing of your products/services fit into the dollar ranges. For example, for small buys you probably need to obtain a credit card holders list and contact many end-users, instead of a few official buyers (if the target agency has a credit card program; most do). This of course presumes your product/service pricing fits under the small purchase threshold.
The requirements and associated sales costs of bidding publicly announced procurements. Are buying decisions based strictly on price or is some form of “best value analysis” allowed in selecting the winning vendor? The more flexibility the buyer has in using best value analyses, the more important advanced selling becomes.

Knowing the rules will have an effect on how you sell and how you structure your pricing. For example, the rules might point you toward a strategy of selling a small contract at first to make the purchase easy for the end-user or buyer (i.e., the “foot in the door” strategy).

In short, understand the purchasing rules of the state and local agencies you are selling to. Without this understanding, you will be bumbling around in the dark in terms of how to sell to end-users and buyers. Perhaps worse, they will know you are bumbling in the dark and think that you shouldn’t be playing in the government market.