Steve Charles has provided, in the article Selling To The Government: Contracting Methods, a handy guide to the usual, basic procurement methods used, particularly by the federal government. It is a thumbnail picture of a complex regime, useful to get a quick focus on the various methods and distinguish them from each other. It is part of an "ongoing series on selling to the government" that I commend to you for an introduction to a comprehensive regime.
The methods he describes are:
Sealed BiddingHe finishes his article with tips on how to approach an RFP, from the perspective of an offeror. Have a read, particularly if you are new to this game.
Sealed bidding works like this: Agencies describe exactly what they want to buy in a solicitation called an invitation for bid (IFB). Companies submit secret bids to provide it. The award goes to the company that is considered to be the "lowest responsive, responsible bidder."
"Responsive" means the bid conforms exactly to the solicitation's specifications; "responsible" means the government makes a determination that the winning company can deliver on its offer.
In which companies publicly underbid each other, with the lowest bidder winning the business. Reverse auctions are a method for buying commodity items, often small quantities of brand-specific part numbers. A handful of agencies use them to conduct quarterly or semi-annual procurements of products from approved vendors for predetermined configurations and quantities of office machines such as desktops, laptops and printers, but few manage to have the discipline necessary to aggregate requirements and pool money like that.
[I describe this method as the "Ebay method", the distinguishing feature being that all bid prices are disclosed and serial bids are allowed, allowing the strongest player to crowd out the competition; good for the government, maybe, but not so good at creating a loyal and willing pool of competitors.]
Negotiated Procurement (RFPs)
Contracting by negotiation is the underlying premise of a solicitation issued as a request for proposals (RFP). After companies submit proposals, federal source selection teams can ask for clarification and hold discussions with companies. It isn't much less competitive than sealed bidding, but it's much more complex.
Like sealed bidding, this approach is full and open. It's slightly less price-competitive than sealed bidding because an award may hinge on factors other than price, giving an advantage to companies that understand the wider context and intent of the procurement. Also, especially in large procurements, agencies can exclude companies from the original round of consideration based on the quality of companies' proposals, whereas the point of sealed bidding is to examine every bid for the absolutely lowest price.