Not so 'reverse' auctions

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

participants.

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

rule.

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.