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The term "no-bid contract" is a popular phrase for what is officially known as a "sole source contract" which means that there is only one person or company that can provide the contractual services needed, so any attempt to obtain bids would only result in that person or company bidding on it.
A no-bid contract 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 because there is no due-process but on the other hand, 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. Usually the reason is cost and urgency as a no-bid contract allows the government to get contractors working as quickly as possible in an "urgent" situation.
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 and most currently Amazon sourcing the Kindle for Second Language Teaching overseas by the State Department in a no-bid, $16.5 million contract because “the Amazon Kindle is the only e-Reader on the market that meets the Government’s needs, and Amazon as the only company possessing the essential capabilities required by the Government. It has international 3G, text-to-speech features and a long battery life, which “other e-readers such as the Barnes and Noble Nook, the Sony Reader Daily and Kobe [sic] e-Reader cannot provide."
Legal reasons for sole source contracts in the USA include:
- 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.
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