Treasury plans auctions for $2B services contract

Officials want to use reverse auctions to award task orders under the TIPSS small-business contract

Treasury Department officials are opting for an unusual approach to get lower prices for information technology services in the latest version of its multiple-award contract.

On May 12, officials said they plan to use reverse auctions for awarding task orders under the fourth round of its Total Information Processing Support Services Small Business (TIPSS-4 SB) indefinite-delivery, indefinite-quantity contract. Market research firm Input puts the ceiling value of the contract at $2 billion.


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“To achieve the current best-value approach, the government has found it to be in its best interest to adjust the approach for evaluating the offeror’s cost and price proposal by using price analysis techniques,” according to the amended RFP for TIPSS-4 SB.

The TIPSS program has been providing IT support services for the IRS, the Treasury Department and its bureaus since 1995. Under the contract, companies can sell a wide range of information processing support services.

In evaluating the proposals now, though, officials will only conduct cost analyses at the task-order level based on agency requirements, the new amendment states.

Reverse auctions have their place and work best in specific settings, as the acquisition community has learned through the years. Larry Allen, president of the Coalition for Government Procurement, said reverse auctions had their heyday 10 years ago, but people soon found that the approach worked best for commodities and products because auctions must have clearly defined requirements for what's being purchased. The approach didn’t work as well for buying services, he said.

For reverse auctions, Treasury officials need to be very clear about what they are looking for in the services they plan to buy through TIPSS-4 SB — clearer than the descriptions they give today, Allen said.

Among other problems, officials who used reverse auctions to buy IT a decade ago often discovered after the auctions that they were not getting what they had expected. On the other side of the winning proposal, “contractors woke up with winner’s remorse,” Allen said. They realized they couldn’t do all that they had promised at the cost they had proposed.

“It’s an interesting approach," Allen said about Treasury's proposal. "But I’m not certain it will work for them.”

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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Reader comments

Wed, May 19, 2010

More government slugs who don't understand basic business....contractors are going to underbid, then they won't be able to afford the type of labor needed to make the project successful. Same story. Again. I think I am going to join the government. It's like a paid retirement for my brain.

Tue, May 18, 2010

It is interesting that the Department of Treasury's own reverse auction training (see http://treasury.gov/offices/management/dcfo/procurement/training/) seems to indicate that reverse auction is not the most appropriate way to bid this kind of contract (See "Primer", and "What's appropriate and what not").

Mon, May 17, 2010 Rob

I agree completely. You cannot provide a service without detailed requirements. Those of us who have tried, have suffered greatly. I can give them a rate based on expertise, but how that expertise is used is based entirely on requirements. The government must not fool themselves into thinking that any process is the same across the board even for the simplest process. Most agencies have their own way of doing things, even with published standards. Vehicles like the GSA pricing schedule will provide rates, but it fails to provide experience data or specific use cases for the service they provide.

Mon, May 17, 2010 Bob Lohfeld

This has got to be the dumbest thing government has done in the last decade. Can anyone say this with a straight face -- let's take the complex systems that manage the nation’s financial resources and build them with the cheapest labor we can find. Further, let's give this task to small business because big business would never go along with the plan. You would have to be mad to think this is a smart idea!

Mon, May 17, 2010

The comment by Larry Allen, president of the Coalition for Government Procurement, you cited is spot on. Treasury's latest plan to implement the reverse auction seems to be a combination of the absence of institutional memory and the distrust between the government and the contractors. Perhaps you could follow up with some articles, interviewing folks like Larry, reviewing what happened the last time the fed's tried this.

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