| Currently, federal
contracting activities work in an environment where regulation and legislation
are not
keeping pace with current events. As federal agencies innovate,
they attempt to work within the framework of this existing
policy. However, lagging policy often catches up with the innovator.
For example, the legal forums--including the Comptroller General and U. S. Court of Federal
Claims--will use current policy to arrive at any required
decisions. Recently, our contracting world
has been introduced to the online reverse auction. Under
an online reverse auction, suppliers compete electronically in a
real-time environment for the government requirement. The
reverse auction was applied using the negotiation method of
contracting in Part 15 of the Federal Acquisition Regulation
(FAR). Although negotiation is a forgiving method of
contracting, it still has its policies. So, can
the negotiation procedures in FAR Part 15 peacefully coexist with reverse
auctions?
The following table highlights
the focus of this article. That is, when do
"discussions" end and when are "final proposal
revisions" requested and received in the reverse
auction? The table below provides excerpts from the FAR
and the solicitations used in reverse auctions. Underlined
italics are provided to add emphasis.
|
Comparison of FAR and Reverse Auction |
|
FAR
excerpts |
Reverse
Auction excerpts |
|
FAR
15.306 (d) When negotiations are
conducted in a competitive acquisition, they
take place after establishment of the competitive range
and are called discussions. |
After
receipt of initial proposals and establishment of the
competitive range, the Contracting Officer intends to
conduct a competitive, anonymous, on-line reverse
auction ("auction"). FreeMarkets refers
to such an auction as a Competitive Bidding Event
(CBE). This
CBE shall constitute discussions with the offerors. |
|
FAR
15.307 (b) At the conclusion of
discussions, each offeror
still in the competitive range shall be given an opportunity to
submit a final proposal revision. The contracting officer is
required to establish a common cut-off date only for receipt of
final proposal revisions. |
During
the CBE, Offerors may revise their initial pricing
proposal through submission of electronic offers during
the anonymous CBE. The final such revision during the CBE
will be considered the Offeror's Final Proposal Revision (FPR).
If
an offer is submitted within the last minute of the time
period, the time period shall be extended for an
additional minute beyond the time of that offer
(provided the offer was the lowest offer received.)
The time period shall be extended for additional one
minute periods if a lower offer is submitted within the
last minute. The end of the last minute during
which revised offers are permitted as addressed in this
paragraph, shall be considered the close of discussions. |
As seen in the table, the
reverse auction constitutes discussions. During these
discussions, the final proposal revision is received.
However, this is not consistent with the FAR. The FAR
requires an opportunity for final proposal revisions at the
conclusion of discussions. Additionally, the FAR requires
the contracting officer to establish a common cut-off date for
receipt of final proposal revisions. In the reverse
auction, the contracting officer neither requests a final
proposal revision nor states a specific cut-off time. That
is left to the offerors during the heat of the reverse auction
and an offeror may not realize that it has submitted its final
proposal revision until after it observes a bid that underbids
its offer. As a result, an offeror determines its own
cut-off point during discussions. Often, that
determination is made after it has submitted its final proposal
revision.
As used, the reverse auction
does not comply with the specific requirements of FAR
15.307(b). Should reverse auctions be stopped and should
this innovation be abandoned? No! They should
continue through the deviation process or on a designated test
basis. Finally, reverse auctions should be evaluated to
determine if they successfully supply the government's
requirement and if they are fair to offerors. If the
reverse auction proves successful, it should be incorporated
into federal contracting policy.
|
