By Steve Kelman

Blog archive

The Lectern: How much competition is enough?

An advance warning -- this post is for contracting wonks.

In a recent report, the Defense Department inspector general criticized the department for failure to compete IDIQ product orders. A closer look at the report makes it clear that the large majority of the cases the IG talked about involved failure to do a further competition among vendors on IDIQ contracts for IT hardware, beyond the prices that were already on the IDIQs in question.

I have mixed feelings on the IG report -- which makes my reaction probably less-unfavorable than for many other IG reports (!). On the one hand, prices on the typical multiple-award IDIQ IT contract already reflect considerable competition, and generally are quite good, usually noticeably better than GSA list prices, for example. And it has generally been the practice in government to treat these IDIQ IT contracts as a sort of catalogue, off which one places orders without further competition. Given this, it doesn't seem appropriate for the IG to present common, and not crazy, practice as if it were some kind of contracting abuse. This seems to be an example of IGs seeing themselves as a replacement for agency managers.

On the other hand, the idea of a second-stage competition through these IDIQs for IT hardware may be a good one from the government's perspective -- an idea whose time may be coming. The Homeland Security Department is applying this idea in its First Source IT IDIQ, in which they are doing reverse auctions among the contract holders for specific delivery orders. There was initially a lot of resistance from vendors, but the practice seems to be becoming institutionalized.

A second-stage competition, using reverse auctions, is a good way to keep competitive pressures going for the life of the contract -- which counters the otherwise near-universal tendency for IDIQ pricing to deteriorate, from the government's perspective, over time. So the substance of the IG's report may make good sense, even if the suggestion of waste, fraud, and abuse -- and the IG's unnecessary second-guessing of program managers -- doesn't.

Full disclosure: I have not just one but two conflicts in expressing this opinion, although they go in opposite directions. I am on the board of advisers of Fedbid, the online marketplace that provides DHS First Source with reverse auction services. I am also on the board of directors of GTSI, whose business includes IT hardware reselling and which doesn't like reverse auctions or second-stage competitions for IDIQs at all. In any case, my opinions are determined by my judgment of what's best for agencies and taxpayers.


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Posted by Steve Kelman on Dec 06, 2007 at 12:08 PM


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