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By Steve Kelman

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What to make of GSA's reverse auction play

GSA's reverse auctions won't have an auctioneer with a gavel, but Steve Kelman wonders if they'll even be fair to other players. (Stock image)

As FCW has reported, GSA launched a reverse auction site last week. As many blog readers are aware, I sit on the Board of Advisors of FedBid, the commercial company that has introduced reverse auctions to many government agencies and is the leading reverse auction services provider in this market. I have been asked, not surprisingly, what my reaction is to GSA’s new site, which appears to have been developed to compete with FedBid and other commercial reverse auction providers. (Let me note that I speak only for myself here, not FedBid.)

As a general matter, competition is a good thing for any market, including the market for reverse auction services. Like any other market, as demand for reverse auctioning in government grows, it will inevitably create more and stronger competition. On the other hand, there could be intellectual property issues with GSA’s tool (I claim no expertise in IP law), and there also is a philosophical issue about whether it is appropriate to use government funds to develop an application that is already commercially available, which will then compete with private companies while charging government customers nothing.

The bottom line, I think, is that from the perspective of government agencies, competition for reverse auction services is good, just as it is for other products or services. It is a good thing for two reasons. First, the GSA imprimatur adds a new level of legitimacy and visibility to reverse auctions as one of the techniques, in these tight budget times, for government to save money.

If reverse auctioning is a good thing at all, anything that helps it spread beyond where it is used now is good for agencies and taxpayers alike. It is very possible that an expansion of reverse auctioning as a technique will expand the market for commercial reverse auction providers as well as for GSA. I also expect that the presence of another significant player in the federal reverse auction market will encourage further improvement and innovation in the industry. That’s a good thing.

There is a source of worry, however. GSA plans to limit its reverse auction vendor base to GSA Schedule contract holders. I am somewhat concerned that GSA may favor its own site as a place for schedule vendors to participate in reverse auctions or, in the extreme, forbid schedule holders to use any other site. It is even possible that GSA might seek to require agencies to get approval from them before using any other than GSA’s reverse auction site.

These are not far-fetched possibilities: GSA unfortunately has a history of efforts to establish itself as the monopoly source of supply, including in the recent past trying to strangle inside-the-government competing GWAC contracts. This should be the last thing that agencies will want, since the danger would be to make them dependent on an inferior government supplier for reverse auction services. Hopefully, GSA will take this opportunity publicly to make it crystal-clear that reverse auction competition will occur on a level playing field.

Posted on Jul 16, 2013 at 1:24 PM

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Reader comments

Fri, Aug 16, 2013 Al Ortiz

Reverse Auctions have their place. However, if GSA is doing its job effectively, allowing already vetted on-schedule GSA items to be auctioned adds FedBid's 3% to prices that are theoretically determined to be 'fair and reasonable'. And it covertly pushes these costs out to the agency/task order level. When evaluating so called 'cost savings' does anyone factor the costs incurred to originally negotiate and maintain these items on schedule? And underhandedly, FedBid says that they'll allow for relief of over priced transactions by reducing to equal to THAT VENDOR's GSA negotiated price. Have we lost sight of the original reason for the 'pre-negotiated' philosophy behind Multiple Award Schedules? If we're really about costs savings, let's look at the WHOLE cost and not just that portion that makes FedBid rich.

Thu, Aug 1, 2013

I'd encourage anyone who is curious about FedBid to do a little research about it. There is nothing shady about FedBid, there is nothing to hide. If you became informed about FedBid, I think you would be surprised at how many positive things are going on with the company and at how well they operate. Before jumping to conclusions and making assumptions, please take the time to research the company.

Mon, Jul 22, 2013

Dr. Kelman has every right to write on reverse-auctions and policy. His opinions are as valuable today as ever. My only comments are: 1) the reference to 'intellectual property issues' should be explained because vendors and agencies should be made aware asap, and 2) GSA wont mandate only their RA tool. I think Kelman is stretching a bit for FedBid's benefit and it seems like he may have been fed the "IP issues" concern by FedBid, but that is his right as a blogger.

Fri, Jul 19, 2013 Michael Hardy

Steve Kelman has responded to some of the reader comments here in out blog "The Conversation." Check there for his thoughts.

Thu, Jul 18, 2013

Kelman's relationship with FedBid is adequately disclosed- don't understand the first two comments. This gist is "You're involved- shut up". No passing grade on first amendment knowledge here. I disagree with Kelman that the Government can compete with the private sector. It can only crowd out the private sector. Social Security crowds out the annuity market, for example. This will drive FedBid out of business, but not because of any merit on GSA's part.

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