No-bid contract
 | The examples and perspective in this article may not represent a worldwide view of the subject. (December 2010) |
The term "no-bid contract" is a popular phrase for what is officially known as a "sole source contract". A sole source contract implies that there is only one person or company that can provide the contractual services needed, and any attempt to obtain bids would only result in one person or company being available to meet the need. It is awarded usually, but not always, by a government group after soliciting and negotiating with only one firm (see 48 CFR § 2.101). These contracts can be negotiated much more quickly than a typical competitive contract but they are often fraught with suspicion that the company used illegal or immoral means to exclude competitors (usually by cronyism or bribery). Nevertheless, U.S. law permits the government to award sole source contracts under specified circumstances (48 CFR Ch. 1, Part 6) but no-bid contracts are illegal under European Union commissioning law.[citation needed]
Urgency is often the rationale for sole source contracts, and cost uncertainty is the rationale for cost-plus contracts. They permit the government to get contractors working as quickly as possible. Examples of potential no-bid contracts include those awarded to Blackwater and Halliburton by the United States government for work relating to the War in Iraq. Both of these companies have been accused of operating unethically. While competitive contracts have been awarded in very short times, such speedy procurements are not easily done and are thus relatively unusual.
Legal reasons for sole source contracts in the USA include [1]:
- only one firm has a product that will meet the projects needs or only one firm can do the work;
- the existence of an unusual and compelling urgency;
- for purposes of industrial mobilization or expert services;
- an international agreement;
- sole source is authorized or required by law, e.g., socio-economic programs;
- national security and
- the public interest.
Use of such authorities requires written justification and approval at specified levels. See 48 CFR Ch. 1, Subpart 6.3.