gerry waites on
Tuesday, July 11, 2000 - 05:40 pm:
I would like to thank everyone
for their responses and information. This was my first time
participating in the Open Forum and I found it to be very
helpful. Just a few points to add to the discussion:
1. Vern, I understand that I used the term best value rather
loosely and I guess technically it may be incorrect. But here's
my problem with the language. "Competitive Negotiation," which
by law may be the more technically correct title for the broad
catetory of non-low-bid projects, can be a misnomer since many
of these solicitations do not involve any "negotiation"
whatsoever. It seems that there are a lot of contracts awarded
under a best value/trade-off metod that never involve any
2. Also, isn't true that some agencies acutally refer to
"trade-off" solicitations as "best value." I think using the
best value title has benefits, since it is a term of art, at
least to some degree and, to some degree, it is known in the
industry. A number of state procurement systems, for example,
specifically use the term "Best Value" meaning an alternative to
sealed bidding, where other issues, such as qualifications,
performance, warranties and schedule, are considered in the
decision- making process.
3. I guess a lot of this is semantics, but the different terms
do create confusion. I also understand that we have to live with
the law now, and that because of the FAR language in place, Vern
is correct. At any rate, if the FAR ever gets another re-write,
it would be helpful to clear this up. By the way, Vern, you
should know that you are very highly regarded by many
contracting officers across the country, your name seems to be
4. I understand that the trade off or BVC negotiated process
takes longer, requires more resources and could present real
problems when not properly used. But I also think we may be
heading toward a system where low-bid is used more infrequently,
mostly for small and non-complex projects, and I think this is a
good thing. Even if performance and qualifications count for
only 10% of the overall score and price is at 90, at least there
is some serious performance incentives built in.
5. From working with and talking to a number of agencies, it
seems that there has been a lot of dissatisfaction with the
low-bid system, not just with federal, but with state and local
contracting agencies as well.
6. One big problem is that agencies seem very reluctant to
disqualify a contractor as non-responsible, even though they
have substantial discretion to do so for good cause. As a
result, performance evaluations become essentially meaningless.
I've seen this with both federal and state agencies. With best
value, or trade-off procurement, these evaluations become
7. So, to me, it seems agencies should be striving to build the
most efficient, most fair BVC systems possible. On smaller and
mid size projcts, for example, could evaluation factors be more
often limited to a few factors, and proposals be evaluated in a
few weeks time. Interestingly, state governments are becoming
interested in BVC mentods, both for construction and non-
construction, and federal and state could assist each other by
sharing information in this area. Does anyone know of any forums
for such information-sharing?
8. A related question I have on this subject is whether most of
the trade-off solicitations, apply a type of rating formula,
where price is scored, then non-price factors are scored, and
the offeror with the highest overall score wins. I've seen this
in some contracting programs and I am curious as to whether it
is very common,sometimes used, fairly common, or rare?
I'd also like to say to thanks to Vern, Joel Hoffman, Bob
Antonio, JET, Brian Fisher and Eric Ottinger for all of the
leads and information sources. I'm going to try to follow up on
these and I'll be glad to share the results if you are
interested. It seems that the data showing that a majority of
federal construction is going out under the trade-off/best
value, negotiated approach will not be difficult to document
through the Federal Procurement Data center.
I'm somewhat suprised that there is more data on the
cost-effectiveness issue, because while it is hard to measure,
it is a critical issue. I just saw one OFPP report that
mentioned a $10 million saving produced by using BVC methods in
one contracting program, but I don't know how well this is
backed-up. I can forward this if anyone is interested; I'd like
to see any other such reports or claims.
on Thursday, June 29, 2000 - 11:03 am:
Bob, as usual, your research and
source material are excellent - thanks!
Vern, regarding your comment concerning Gerry's point #21
(construction contract performance evaluations), I mostly agree
with you. Prior to the widespread use of competiviely negotiated
procurements and prior to the current attempts to effectively
use past performance information, the COE performance
evaluations were almost a joke. I can't speak for other agencies
The database was mostly used by CO's in making responsibility
determinations. Contracting (rightly so, perhaps) often did not
make the fruitless effort to declare the low bidder
non-responsive. Why? They usually were unsuccessful. SBA
routinely issued a certificate of competency, unless the bidder
had previously defaulted
The evaluation forms were too broad - there were only 4 or 5
broad performance areas to evaluate; it took a superhuman effort
to rate a contractor unsuccessful with no apparent benefit to
the evaluating office. The field office still ended up with the
same contractor - who now was ticked off because the COE
attempted to declare them non-responsive - and whom was jubilant
because they "beat the system" to get the contract; etc. As one
should see, it was a vicious cycle.
The newer, DD Form 2626 has 33 subareas. These suareas can be
more easily, subjectively rated as "outstanding", "above
average", "satisfactory", "marginal" and "unsatisfactory". The
evaluator can now fairly evalaute the subareas to show where a
contractor is strong or weak, without having to resort to an
overall "unsatisfactory" rating.
Source selection boards can better use these evalauations in
their COMPARATIVE analysis of past performance in making
I believe that field offices now realize that their evaluations
are being taken seriously. I also believe that the quality and
accuracy of the evaluations are improving.
I have been stressing this to my Design-Build classes each year,
since 1996. Hopefully the message will get out. We have 200-250
students per year receiving the message.
on Wednesday, June 28, 2000 - 12:50 pm:
Before I respond to your questions you should know that the
meaning of "best value" has changed. Before September 30, 1997,
it was merely a popular name for the approach to conducting
competitive negotiations in which the Government reserved the
right to award the contract to other than the offeror who
submitted the lowest-priced, technically-acceptable offer.
Today, that process is called the "tradeoff process." See FAR
15.101-1. The term "best value" is now defined in FAR 2.101 and
no longer refers to a specific contracting procedure. As
presently defined, an agency can use sealed bidding to obtain
Now in answer to your questions:
(a) To the best of my knowledge, no one knows the percentage of
contract actions or dollars that were awarded using the tradeoff
process ("best value"). The Government keeps statistics on how
many actions and dollars are awarded using sealed bidding and
competitive negotiation, but the competitive negotiation
statistics include both tradeoff process actions and
lowest-price-technically-acceptable process actions.
(b) I know of no reliable study based on empirical evidence that
demonstrates that the tradeoff process ("best value") has
produced better contract performance outcomes than sealed
bidding or lowest-priced-technically-acceptable competitive
negotiations. Personally, I believe that it has and does, but I
cannot prove it.
Be wary of Government agency claims to the effect that "best
value" has produced superior results. Such claims are usually
based on anecdotal evidence and are often made to prove the
wisdom of some course of action. Such claims may be true, but
they often are not verifiably true.
In response to some of your comments:
The shift from sealed bid to negotiated construction contracts
began long before 1997 and in one period during the late 1980s
and early 1990s it was quite controversial. The U.S. Postal
Service was a leader in using competitive negotiation to buy
construction, something that it undertook as part of the rewrite
of its contracting rules in the mid-1980s. The use of
competitive negotiation for construction seems to be less
controversial today. The Association of General Contractors may
be able to provide you with more information. As I recall, they
were a leading opponent of the change.
Comment 6: I was a construction contracting officer and I agree
that switching to competitive negotiation from sealed bidding
has often been a good thing. However, competitive negotiation is
usually procedurally more costly and time-consuming than sealed
bidding, and sealed bidding still works fine for many jobs.
One important strength of tradeoff process approach to
competitive negotiation is that it enables agencies to elude the
Small Business Administration's certificate of competency
program, which enabled some incompetent contractors to win
sealed bid contracts over the objections of agency personnel.
Comment 9: Using competitive negotiation techniques does not
automatically preclude award to below-cost bidders. The GAO has
limited agency discretion to deny a fixed-price contract to an
offeror on the grounds that its price is too low. You must do
some research with regard to GAO decisions about "price
Comment 10: The source of my statistics was the Federal
Procurement Data System, which you can find at www.gsa.gov. I
think Bob Antonio gave you the complete website information in
his response to you.
Comment 14: While I agree that competitive negotiation offers
advantages over sealed bidding in many cases, don't forget that
the Government has used sealed bidding to hire construction
contractors for many, many decades. While sealed bidding has
shortcomings, so does competitive negotiation. In the wrong
hands, competitive negotiation can become a real mess.
Comment 15: Generally, I would say that competitive negotiation
is more labor intensive for agencies than sealed bidding, so I
don't think that the trend toward greater use of competitive
negotiation was the result of budget cutbacks. If anything, it
grew out of the quality movement of the 1980s, and was
facilitated by the passage of the Competition in Contracting Act
of 1984, which eased the restrictions against the use of
competitive negotiation to award contracts.
Comments 16 - 20: While competitive negotiation should
make it easier to avoid the performance problems brought about
by tight and below-cost bids, it is not clear that all agencies
have taken advantage of its effectiveness in that regard. Much
depends on the mindset of the individual contracting officer.
Comment 21: You are right about performance evaluations. Keep in
mind, however, that the Government required agencies to prepare
performance evaluations for construction contractors long before
OFPP promulgated its policy about past performance and long
before the enactment of the Federal Acquisition Streamlining
Act's past performance provisions. See FAR 36.201. That program
has not been particularly successful in terms of the quality of
the evaluations, and "best value" contracting, in and of itself,
will not change that.
bob antonio on
Wednesday, June 28, 2000 - 08:14 am:
Joel, Gerry, etc.:
Here is the basic information that I provided Gerry last night.
It is a listing of the input forms and the organizations that
produce reports from that data source.
Here is the SF 350. Check Block C8.
This page provides huge files (16 MB) of SF 350 information.
I do not know what those files look like because they are too
large to download quickly. You need T1 or T3 service. This
information is provided by DIOR. They are here
The Federal Form is the SF 279. It is here
The information is in block 26. The various supply and service
information is further up the form.
This information is at the Federal Procurement Data System. That
A skilled user can make these systems sing-for a hefty price if
ordered outside of government. FPDS also provides a free annual
report that has some basics.
I also mentioned the design-build issue and gave him the site
for the law offices in Chicago that are provided in another
on Wednesday, June 28, 2000 - 12:41 am:
Gerry, I don't know if there any
reliable, official statistics for overall numbers of Best Value
vs. IFB in Corps of Engineers construction programs. However,
I'm familiar with two of the COE Districts' workloads and much
of the general Corps of Engineer's programs.
One District reported to me that 35-40% of their overall
construction program, last year, was Design-build (D-B is
awarded, using negotiated, best value acquisition method).
The other District reports about 40-50% of their overall
military construction program uses design-build - virtually all
of Air Force Materiel Command program is design-build and I'm
sure ALL of their large Air Force projects are at least
negotiated BV. Virtually all of Special Operations Command work
is D-B or negotiated. Some AF Commands are reluctant to use
Design-Build, particularly those in the Pacific and in Europe.
Some Army commands are reluctant to use D-B. Most Civil Works
Districts are not using much D-B but are starting to try it.
Generally, all foreign based US military construction is awarded
Best Value or at least using negotiated procurement. Central and
South American work is increasingly using D-B methods.
The Construction Industry Institute recently sponsored a Penn
State Study on cost and time growth for D-B vs. CM, vs.
design-bid-build acquisition methods. Mark Konkar (spelling?)
headed this study.
You might contact "Mark.Grammer@usace.army.mil"
for Corps of Engineers' statistics, if available.
Happy Sails! Joel Hoffman
By JET on Tuesday, June 27, 2000
- 11:43 pm:
This is dated cut and paste
information from a previous open forum discussion by Vern
Edwards,but it is the best source I know of w/o doing extensive
By Vern Edwards on Monday, May 15, 2000 - 10:47 am:
I don't know if this is the kind of statistic that you're
looking for, but according to data for FY98, DOD obligated $58.2
billion on prime contract award actions that were in excess of
$25,000 for which it sought full and open competition under CICA.
The partial distribution of those dollars by solicitation
procedure was as follows:
$40.1 billion by competitive negotiations
$ 6.0 billion by sealed bidding
$ 0.8 billion by a combination(two-step?)
$ 1.2 billion by A-E selection
$ 1.0 billion by broad agency announcement
$ 0.4 billion by multiple award schedule
Although there is no information about how the remaining partof
the $58.2 billion were awarded, the numbers give you an idea
about the relative significance of sealed bidding. $6 billion is
not a small amount.
on Tuesday, June 27, 2000 - 04:52 pm:
I have not been around as long as some of the other ARNet
"regulars" (involved with defense contracting only since 1982),
but I also have seen the trend away from what I call "check the
box" contracting (where the COs were hamstrung by rigid rules)
and more toward business-oriented contracting (where the CO uses
his/her discretion to fashion a deal that best suits the
uniqueness of a particular contract action).
Going to your specific questions -- "(a) What is the percentage
breakdown of BVC vs. Sealed Bidding on a government-wide basis
for all contracts, and for construction in particular?; and (b)
Is there any data or studies proving that BVC produces superior
results in terms of quality, cost-efficiency, timeliness of
delivery and accountability? -- I would suggest that you contact
If you call OFPP, I might suggest that your first point of
contact be Dave Muzio (202-395-6805). I don't recall whether or
not the office studied those issues during my tenure; David
could provide that information. If he cannot help you directly,
I am sure that he can give you some guidance (or another P.O.C.).
Eric Ottinger on
Tuesday, June 27, 2000 - 03:13 pm:
We have been moving to toward “best value” contracting over the
course of my career (which started in 1974). You are talking
about negotiation vs. sealed bidding. (Since the Part 15
Rewrite, anything we do in negotiated procurement is “best
Based on some casual conversations a few years back, I would say
that the buying offices are trying to use the process of
negotiation to put more of the responsibility on the contractor.
Without the negotiation process, the contractor usually “gets
well” on change orders.
Tuesday, June 27, 2000 - 02:46 pm:
After following what appears to
be a distinct shift in federal sector contracting over the last
few years toward Best Value Contracting ("BVC"), I was wondering
if anyone is tracking statistics and results? In particular, I
have two questions:
(a) What is the percentage breakdown of BVC vs. Sealed Bidding
on a government-wide basis for all contracts, and for
construction in particular?
(b) Is there any data or studies proving that BVC produces
superior results in terms of quality, cost-efficiency,
timeliness of delivery and accountability?
As a private sector attorney, working mostly in construction, I
find that most of my clients prefer the BVC approach -- provided
there are sufficient checks and balances to ensure fair
treatment and accurate evaluation of contractor capabilities and
We noticed what appeared to be a beginning of a shift and major
trend in federal construction and maintenance contracting toward
BVC around 1997. Some of the key points we found in this regard
are as follows:
1. Broadly speaking, BVC includes any contracts that are not
sealed bid and permit evaluation of non-price factors. (If there
is a downside to such an expansive definition, I'd appreciate
hearing any views on it.)
2. Tracking solicitations for construction and maintenance
contracts for 1997, there was nearly $2 billion worth of
projects awarded under the BVC approach. I'm not sure what
percentage this is of federal construction/maintenance ("C/M")
contracts this was, but it is significant, particularly since
most federal contracts were previously sealed bid.
3. Since 1997, the use of BVC appears to have substantially
increased for C/M projects and may even be close to or at 50% by
now (dollar-wise), especially when BVC/design-build projects are
included. It's my understanding, for example, that the Navy uses
BVC for all of its construction projects. Numerous other federal
agencies across the country are also using this method for all
sorts of C/M projects, from simple low-dollar projects as low as
$80,000 (e.g. West Point) to highly complex, mega projects, as
high as nearly $1 billion (Pentagon Renovation).
4. I'm not aware of any extensive or systematic comparative
studies between BVC and sealed bidding, in terms of the extent
of use, or end-results, but I would really like to know if any
are out there. In terms of results, the limited information I
did find favors BVC. For example, there was one short
comparative analysis in a report printed in Cost Engineering by
two form Army Corps engineers that showed, from the government's
perspective, BVC won hands-down over sealed bidding in terms of
cost/quality/schedule results and overall agency satisfaction.
The trend toward BVC would also suggest agencies are getting
5. To follow up on this, we did a type of focus group survey of
contracting officers and, using cold calls, contacted COs around
the country who were running BVC solicitations. The results were
uniformly positive and interesting because it was like having
the same interview over and over.
6. All COs said the results were good and better than sealed
bidding and that they got to reward good contractors and avoid
non-performers. Virtually all emphasized that BVC allowed them
to avoid the "change order" artists, who intentionally
low-balled the job, only to look for problems with the plans and
specs once they got on site, and would then find ways to try to
gouge the agency. Some said Best Value was the best thing that
happened in their contracting office in twenty years. (I'll be
glad to share any of the above information if anyone is
7. From what I've personally seen so far, I'm a believer in the
BVC system. It seems to produce better results for the
government and taxpayer and, on balance, is better for the
contracting community, although checks and balances can always
8. In fact, I know of many quality-oriented contractors who
ceased bidding under sealed bidding because of the low-ball
syndrome, but now are coming back and willing to compete on BVC
9. This means the quality of the competition can be enhanced by
using BVC, which is also good for the taxpayers. Too many
low-bid contracts end up costing 30 or 50 or 100 percent more
than they should, producing what the FAR explicitly recognizes
as the "false economy" of the low-bid system.
10. I recently read with great interest the earlier discussion
among Vern Edwards and others as to whether sealed bidding
should be terminated in federal contracting. I would say it
should not, but that its usefulness is very limited, e.g., if
you're building a simple parking lot, or other types of
acquisitions where quality, schedule and other factors are not
that important. (I should note that in terms of BVC usage, Vern
pointed out that DOD used competitive negotiation for $40
billion and sealed bidding for $6 billion; Vern, I'd greatly
appreciate your source for this and to find out, if you know,
what types of contracts the $6 billion was for?)
11. Legally, I don't think there is much of an issue. BVC can be
used as long as the agency determines that the contract award
will not and should not be made just "on the basis of price and
other price-related factors." FAR 6.401(a)
12. In construction contracts, as with many other types of
contracts, schedule, quality and numerous other "non-price"
factors need to be considered in most instances, if you want to
achieve the most advantageous deal for the government. Thus, it
is unlikely that the use of BVC could be successfully challenged
for most construction contracts and many other types of
contracts, a point backed up by literally solicitations.
13. Significantly, the overarching goal of the FAR can be read
to require agencies to use of the procurement method that will
give the government the best results for the taxpayer, i.e., the
best overall results in terms of quality/timeliness/ cost of the
goods and services procured. See FAR 1.102(a)(1), 1.102-2(b).
14. And, while sealed bidding was the method of choice for most
construction contracts in the past, it appears that this
approach did not yield very good results on many projects, a
fact that I suspect could be verified by an honest, objective
review of project records for virtually any construction
15. Too often there have been excessive cost overruns, project
delays, poor quality, excessive claims or all of the above.
Query: Did the trend toward BVC result, in part, from the
Balanced Budget Amendments and government cut-backs since
agencies now are forced to do more with less?
16. Further, it seems that the poor results from low-bid
contracts flow from inherent flaws and limitations in the system
itself. As one industry observer recently stated: it drives the
least-cost interpretation of the bidding documents. This is a
fact of life on low-bid contracts and tends to breed disputes,
claims and excessive change orders.
17. A related problem is that on low-bid obs, there is no
incentive to perform once a contractor wins the job. Minimal
performance is usually what is delivered and basically what is
expected. The problem is that, in terms of final costs and
overall value, there is a big difference and a long way between
minimal performance/minimal specification compliance and a high
quality, successful project. This is true for construction, as
well as other areas.
18. Plus, under low bid, the only recourse agencies have for
poor performers is to bird-dog the specs, fight over every
discrepancy and issue, dispute change requests and perhaps
eventually consider the ultimate threats of default, debarment,
or future non-responsibility determinations - triggers agencies
seem extremely reluctant to use.
20. BVC seems to turn everything around and effectively address
these problems. Contractors have every incentive to excel on
every job because performance on one may very well determine the
winner on the next. Innovation and partnering replace claims and
disputes. (And, this is fine, provided agencies don't deny
contractors "legitimate' change requests, which is an area that
could use some work).
21. It seems, and I think most would agree, that the key to an
effective BVC system is making sure performance evaluations are
fair and accurate and that future solicitations are free of bias
and agencies are privy to maximum, current performance
information on all bidders.
22. Difficult challenges, but still better than the low-bid
alternative. There have been some interesting developments in
BVC checks and balances. Systematic formulas, for example, which
score contractors on price and non-price and then make awards to
the contractor with the maximum total score (as opposed to the
agency's vague notion or alleged best business judgments). Other
checks exist as well. A best practices survey of such safeguards
would be beneficial and worth considering.
23. In closing, it appears that the real question should be not
whether to use Best Value, but how to use it?
24. At this point, I'll go back to my opening questions:
(a) Does anyone have any statistics or other information to show
how much federal contracting is being done by Best Value vs.
Sealed Bidding on a government-wide basis, and in particular for
(b) Does anyone have any data or know of any studies on
performance results in terms of how these two systems ultimately
I also gladly welcome any comments on any of the other points
raised above. I obviously went into some extensive detail, but I
see this as an important, interesting and timely topic for ARNET