Experts: Value beats price to avoid fake IT

As government regulators consider tougher ways to block counterfeit information technology products from entering the federal marketplace, they’re restarting an old debate about whether to award contracts based on the lowest bid or the best value.

At a meeting Dec. 11 regarding newly proposed rules on counterfeit IT, Laura Auletta, a procurement policy analyst at the Office of Federal Procurement Policy, said she was surprised to hear that contracting officers believe they should award a contract to the lowest bidder to save money instead of finding the best value.

Contracting officers and acquisition officials often interpret the Federal Acquisition Regulation to mean that the lowest bid should get the award, said James Bockman, a former NASA official who worked closely with the agency’s procurement employees.

“They see that as saving the government money,” said Bockman, who is now a special projects engineer at Aerospace Corp.

The FAR gives civilian agencies broad discretion in making decisions based on price or other best-value parameters, such as the company’s experience and management capabilities. But government and industry experts say acquisition workers are concerned about making a mistake and paying for it with a career-ending embarrassment. With today’s emphasis on curbing waste and abuse, they say contracting officers often choose the vendor with the lowest price.

However, federal officials agree that the government should strive for quality and ensure that agencies don’t buy products that are tainted with malware or poorly made.

The prevalence of counterfeit IT and electronic parts has exploded in the past five years after roughly 20 years of level numbers, officials say.

“The whole supply chain is infected with counterfeit parts,” said Brian Hughitt, manager of quality assurance at NASA’s Safety and Assurance Requirements Division.

The sudden increase has led regulators to add tougher checks to the FAR. Counterfeit IT products lead to financial losses for government agencies and companies, and they pose a threat to national security, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council wrote in a Nov. 18 Federal Register notice.

The new rules’ draft language would require agencies to buy all IT products from original equipment manufacturers, software developers, or authorized distributors or resellers. In addition, agencies would have to require companies to offer proof in contract proposals that their products are authentic.

Edward Chambers, a procurement analyst at the General Services Administration who is leading the regulatory proposal, tried to allay initial concerns from industry and government officials by saying the language is preliminary.

At the meeting, government officials disagreed about who’s to blame if an agency buys fake IT or electronic parts. Hughitt said a federal employee should take no blame if an agency buys a phony product because the contractor should know what it’s selling to the government.

However, the government does not use rigorous scrutiny when evaluating products, said Brad Botwin, director of industrial studies at the Commerce Department.

“The sloppiest processes are on this side of the house,” he said, referring to the government, particularly the Defense Logistics Agency. The liability for counterfeit parts rests on contractors and the government.

As the debate continues, officials say they need to find a way to increase scrutiny without putting companies out of business. But the checks are necessary because counterfeit products will continue to be a problem, Botwin said.