Treasury plans auctions for $2B services contract

Treasury Department officials are opting for an unusual approach to get lower prices for information technology services in the latest version of its multiple-award contract.

On May 12, officials said they plan to use reverse auctions for awarding task orders under the fourth round of its Total Information Processing Support Services Small Business (TIPSS-4 SB) indefinite-delivery, indefinite-quantity contract. Market research firm Input puts the ceiling value of the contract at $2 billion.

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“To achieve the current best-value approach, the government has found it to be in its best interest to adjust the approach for evaluating the offeror’s cost and price proposal by using price analysis techniques,” according to the amended RFP for TIPSS-4 SB.

The TIPSS program has been providing IT support services for the IRS, the Treasury Department and its bureaus since 1995. Under the contract, companies can sell a wide range of information processing support services.

In evaluating the proposals now, though, officials will only conduct cost analyses at the task-order level based on agency requirements, the new amendment states.

Reverse auctions have their place and work best in specific settings, as the acquisition community has learned through the years. Larry Allen, president of the Coalition for Government Procurement, said reverse auctions had their heyday 10 years ago, but people soon found that the approach worked best for commodities and products because auctions must have clearly defined requirements for what's being purchased. The approach didn’t work as well for buying services, he said.

For reverse auctions, Treasury officials need to be very clear about what they are looking for in the services they plan to buy through TIPSS-4 SB — clearer than the descriptions they give today, Allen said.

Among other problems, officials who used reverse auctions to buy IT a decade ago often discovered after the auctions that they were not getting what they had expected. On the other side of the winning proposal, “contractors woke up with winner’s remorse,” Allen said. They realized they couldn’t do all that they had promised at the cost they had proposed.

“It’s an interesting approach," Allen said about Treasury's proposal. "But I’m not certain it will work for them.”