Which step in two$-$step sealed bidding requires the submission of sealed bids?

Two$-$step sealed bidding allows negotiating prices, thus "sealed proposals" are submitted, not "sealed bids."

Bidders submit bids first in step $1.$ If their price is reasonable, then they are allowed to submit technical proposals for negotiation.

Two$-$step sealed bidding is much more flexible than normal sealed bidding. In two step sealed bidding, the contracting officer can either request bids up front in step one, or later in step two, especially if numerous bids are expected.

$$ Bidders submit bids in step $2$ if their technical proposals were determined acceptable in step $1.$