FedBid emerging from a tough winter, says CEO

Controversial reverse auction provider FedBid has navigated a rough six-month period after critical reports and efforts to have it debarred from federal business threatened its operations, and is now even more focused on serving federal agencies, according to its CEO.

FedBid CEO Joe Jordan told FCW in an interview this week that his company still has the same number of government agency customers it had before a harsh Government Accountability Office report resulted in debarment efforts against it by the Air Force last winter.

"Our focus is back after a series of atypical events," said Jordan. "I've molded [FedBid] more in my image" – one that is more federal-agency oriented, reflecting Jordan’s status as a former administrator of the Office of Federal Procurement Policy.

FedBid split up its reverse auction operations in January following a scathing Veterans Affairs Department inspector general report on the company that said a VA official engaged "in conduct prejudicial to the government when she pressured contracting staff under her authority to give preference to and award a task order for reverse auction services" to the company.

In late January, Jordan said his company had taken action to address the integrity and transparency concerns the VA report raised, splitting the company's federal auction and commercial operations into separate companies. Additionally, FedBid founder and board Chairman Ali Saadat resigned and is no longer affiliated with the company. In February, FedBid signed an administrative agreement that stopped the Air Force's debarment proceedings. The company also appointed a special committee to examine responses or actions the company should take related to the report, initiated an independent review of employees' actions, implemented code of conduct certification overseen by an in-house compliance officer and installed a 24-hour ethics hotline.

In the ensuing months since the GAO report and the Air Force's actions, Jordan said his company is still seeing substantial business from federal agencies, especially as the summer and fall "busy season" gets going ahead of the end of the fiscal year. Jordan said an independent auditor is about to submit a favorable first quarter report to the Air Force on FedBid operations and adherence to ethics practices.

The difficulties last winter, he said, have had a "silver lining," testing the company's ability to hang on to its customers. "Few businesses get to test their customers' valuation of them. We got to," he said. "Nine months ago we had 75 agency customers. We still have 75 agency customers," he said.

Jordan maintains those customers are sticking with reverse auctions because they squeeze value out for their users, a primary goal for agencies with stagnant budgets.

And, despite  critics like the GAO who contend the company's fees are too high and the practice can limit competition, OFPP Administrator Anne Rung's June 1 letter to agency acquisition managers providing advice on how to use reverse auctions, as well as GSA's own reverse auction effort, are evidence that the acquisition vehicle is an integral part of federal procurement.

Rung's advice to contracting officers on how to use reverse auctions, said Jordan, is spot on. In addition, Jordan advises going by the "3 Cs" to determine when a reverse auction would be appropriate--clear specifications, compelling spend, and competitive supply.

Agencies, he said, have to be very specific about what they're looking for when using a reverse auction. "Don't just say 'I want a car,'" he said. Specify the make, model and features, he advised. The "sweet spot" for the "spend" in a reverse auction tends to fall between $3,000 and $300,000, he said.

Auctions that will draw more than a single vendor are best, Jordan said, adding that in some cases auctions can draw bidders that might not have been considered under an agency's market research.