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Government bids are offers, from a contractor, to do work for a government agency, for a specific amount of money. In the United States, governmental bodies are required to seek bids for work that will cost a significant amount of money, usually more than $10,000 US Dollars (USD) — although the exact amount can vary from state to state. The government entity will generally put out a call for price quotes from companies. Companies then respond with an offer to do the work at a given price, and the government body decides which one will be accepted.
Governments often need projects completed for a variety of reasons. Generally, such projects are related to construction for road and infrastructure work, or for the razing of buildings. Since they use taxpayers' money, governmental bodies are required to look for businesses that offer the best value for the money, as well as avoid a conflict of interest. By requiring government bids, the law attempts to protect the taxpayer and his investment in the community.
Projects that require government bids generally have a high value, although this exact figure will vary depending on which governmental agency is pursuing the project. To determine the approximate value of the project, governments will usually seek a price quote or an estimate from their own engineers. This figure is then used to decide if the project will require a bid.
If the project falls within the required bid range, a notice is usually advertised in a number of places, such as a newspaper or trade magazine and on the Internet. Contractors typically submit their estimates to the given entity. The governing body will review all of the bids, and generally will choose to work with the contractor who offers the most precise work for the lowest price. On occasion, a government may decide to go with a higher-priced bid, but only if it can prove that the lowest-priced bidder is not worthy of the business. If the lowest bidder is not chosen, it is often known that that particular business performed unsatisfactory work in a previous project, or constitutes a conflict of interest.
For extremely large projects — usually those above $25,000 USD in the United States — government bids may be required to be sealed. When this occurs, it means that they are literally sealed shut within an envelope, and all of the envelopes are opened at the same, advertised time. This prevents the leakage of information to other contractors that would allow them to unfairly underbid competitors.