Not so 'reverse' auctions
- By Carl Peckinpaugh
- Jun 26, 2000
I've been hearing a lot about the government's various experiments with
"reverse auction" purchasing techniques. In reverse auctions, sellers "bid"
against one another for specific orders by offering successively lower prices
until a winner is declared.
In some cases, multiple buyers may aggregate their purchasing power
to get deeper discounts on the total quantity than any one purchaser. Occasionally,
provisions may be established for additional buyers to join in after the
auction has started.
The General Services Administration has been playing with those ideas
for nearly a year. Most recently, GSA began to suggest that it might let
agencies use reverse auctions when placing orders under GSA's Federal Supply
Schedule multiple-award schedule contracts. This is upsetting some industry
Observers say the use of auction techniques in connection with GSA's
MAS contracts would be inconsistent with the program's emphasis on best-value
source selection. Agencies use best value to weigh items other than cost,
such as the proposed technology. Ironically, the auction techniques under
consideration are much closer to GSA's legal authority for the FSS program
than is the current best-value methodology.
The statutory authority for GSA's FSS program is part of the Competition
in Contracting Act of 1984. CICA requires agencies to obtain full and open
competition in all but the smallest contracting decisions, unless limits
on competition are justified and approved. In addition, CICA defines as
competitive the placement of orders and contracts under GSA's MAS programs
if "participation in the program has been open to all responsible sources;
and...orders and contracts under such procedures result in the lowest overall
cost alternative to meet the needs of the government."
Congress noted when it passed CICA that "schedule contracts should be
used when GSA can negotiate quantity-discount contracts, with delivery to
be made directly to the using agencies in small quantities at diverse locations."
GSA issued regulatory guidance that has obscured the critical centrality
of the low-cost approach in the use of GSA MAS contracts. Thus, for example,
the Federal Acquisition Regulation now encourages agencies to consider many
noncost factors in choosing which MAS contract to use.
GSA's guidance for using the FSS program is misleading, at best. The
introduction of the best-value concept appears problematic. The statutes
that authorize GSA's MAS program allow agencies to purchase from schedule
contracts only when the purchase represents the lowest cost to government.
There is no room for cost/technical trade-off decisions with GSA MAS contract
purchases. In the recent Delta International Inc. bid protest decision,
the General Accounting Office reminded GSA and other agencies of this important
It is too early to tell whether reverse auction systems will have a
significant place in government purchasing. If they do, the GSA FSS program
would seem to be the best fit.
—Peckinpaugh is corporate counsel for DynCorp, Reston, Va.