If you’re a vendor selling to local governments, a key component to your success is a solid understanding of how governments actually make purchases.

Governments use purchasing thresholds to determine whether a request to obtain a particular product or service must go out to bid or if it can be obtained via an unpublished quote. Knowing which threshold your company’s product or service usually falls under helps you understand whether you should be spending time searching for bid opportunities or if you simply need to become a registered vendor with your target governments.

Each local government sets its own spending limits, so it is critical that you check the thresholds set by your local government. However, here are some general trends that I’ve seen that apply to many local governments.

1.  Purchases under $1,000 (under $5,000 for larger governments)

Government purchases under $1,000 can be made through the use of a Purchasing Card or a “P-Card.” This card works just like a credit card. The government can search for a vendor in its database, call the vendor directly and make the purchase.

Businesses that provide products or services that can be purchased for $1,000 or less should become a registered vendor with all governments in their sales territory.

2.  Purchases from $1,001 to $15,000 ($5,001 to $25,000 for larger governments)

Making a purchase over $1,000 but under $15,000 can often be done through a quoting process. Purchasing agents will locate at least three vendors who provide the product or service they’re looking for and request a direct quote. All three quotes are reviewed and a decision is made to move forward with one of the vendors.

Businesses that provide products or services that can be purchased for between $1,001 and $15,000 should become a registered vendor with all governments in their sales territory.

3.  Purchases over $15,000 ($25,000 for larger governments)

Typically, purchases made by a local government in excess of $15,000 require purchasing agents to initiate a bidding process. For these purchases, a Request for Proposal (RFP) must be released publically for at least 24 hours, and usually, a total of three or more responses must be collected by a set deadline. The bids or responses are reviewed by a committee and a selection of the winning bid is made. The RFP response serves as the contract and although minor negotiations may be made once the winning vendor is selected, oftentimes the vendor is held to the bid as submitted in response to the RFP.

For these types of purchases, a vendor should be a registered vendor of the government, but registration alone wouldn’t ensure the vendor would be notified of the bidding opportunity. Vendors whose products are over $15,000 should employ some sort of bidding opportunity search process, either through an internal effort or by utilizing a Lead Notification service.

We encourage you to reach out to your local governments directly to learn more about their threshold(s) for purchasing. The more you know about how your local government(s) purchase, the smarter you are when it comes to earning their business.

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