Inventory
Control Point Leads the Way
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by
Robert
Antonio
June 30, 2000
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On May 5, 2000, the Naval
Inventory Control Point (NAVICP)
completed an online "reverse auction" and
awarded a contract using this process. Under an online
reverse auction, suppliers compete electronically in a real-time
environment for the government requirement. To federal
contracting types, this was big news. FreeMarkets, Inc.
operated the online auction process. NAVICP
estimated that the 51-minute auction saved it 28.9 percent over
the historical price for the items--recovery sequencers.
The winning offeror was Hi-Shear Technology Corporation with a
price of $2.375 million. NAVICP awarded the contract
within an hour of the auction closing.
Today, June 30, 2000, at 10:30
AM, Eastern United States time, NAVICP embarks on its next
auction. This is a more complicated procurement.
Today's procurement includes 1,530 line items.
Additionally, it is a total small business set-aside.
Finally, new ideas are added to the auction process.
There is no question that this
is a learning process--in real-time. As you read the key
parts of the amendments to the solicitation, you can see the
increased understanding of the participants. In reading
the specifics, ask yourself the questions that NAVICP must have
encountered. How do we auction 1,530 line items? How
do we allocate an overall auction price to unit prices within
the line items? What should be the starting point for the
bidding? Should we include bidding intervals within the
bidding process like typical auctions?
The basics for the first auction
appear in the left column and the basics for the current auction
appear in the right column. Key differences in the current
auction are identified in blue italic font. Analysis is
based on a reading of the solicitation documents. NAVICP
was not contacted for the purpose of clarification.
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Auction
Date |
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May
5, 2000 |
June
30, 2000 |
|
Solicitation |
|
N00104-00-R-K057 |
N00104-00-R-C903 |
|
Method of
Contracting |
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Competitive
Negotiation |
Competitive
Negotiation |
|
Items
Acquired |
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Definite
quantity contract for two Contract
Line Item Numbers (CLIN) for "recovery
sequencers" with National Stock Numbers
1377-01-180-1915 and 1377-01-053-9320.
CLIN 1 required 1 lot of
60 articles plus 8 test articles. CLIN 2
required 7 lots of 90 articles and 1 lot of 66 articles
plus 8 test articles per lot. Technical data was
required under each CLIN. |
Indefinite
quantity for 1,530
Contract Line Item Numbers (CLIN) for "lightweight
modular berths for shipboard use."
The solicitation contains a base year and 4
option years.
Each year includes CLINs
for two schedules--Schedule A and Schedule B with
about 150 subassemblies in each schedule.
Contract
with a total $200,000 minimum and $14,500,000 maximum
for the base and all option years.
Additionally, each CLIN has various estimated
unit quantities. The
quantities vary from several thousand to a couple
individual units. |
|
Solicitation
Issuance Date |
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March 23,
2000 |
May
23, 2000 |
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Solicitation
Closing Date |
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April 24,
2000 |
June
23, 2000 |
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Auction
Date |
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May
5, 2000 |
June
30, 2000 |
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Solicitation
Amendment 1 |
Highlights
include:
- additions to Sections
L and M of the solicitation, providing instructions
for submission of proposals, evaluation criteria and
basis for award, procedures for the "reverse
auction" called a "Competitive Bidding
Event (CBE)," and information for the CBE.
- added FAR
Clause 52.215-1, Instructions to Offerors (Oct 97),
Alternative 1.
|
Highlights
include:
- notification that the
"Competitive Bidding Event" (CBE)" is
to be held at 10:30 AM local time.
- “Section M –
Evaluation” is changed by deleting a clause that
states “the Government reserves the right to make
a single award” and revising another clause to
state “the Government intends to award the
contract, by Lot, to the eligible, low-priced,
responsible offeror.
For purposes of this procurement, the
‘Lot’ is considered to be all 1530 line items in
the solicitation.”
- other clauses
involving the auction process received technical
word changes.
|
|
Solicitation
Amendment 2 |
Highlights
include:
- deletion of a clause
not included in the auction process.
|
Highlights
include:
- “Section L –
Instructions, Conditions, and Notices to Offerors or
Quoters “ is changed
by stating “The CBE (the actual auction)
period shall be set by the Contracting Officer with
written notice to the Offerors included in the
competitive range.
Offers will not be accepted during the CBE
that exceed a ceiling based on the competitive
range. Prior to the CBE offerors will be notified in writing of the
ceiling.” (information
in parentheses is added for clarification.)
- some
clerical changes dealing with the auction process.
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Solicitation
Amendment 3 |
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|
Highlights
include:
- deletion of a
sentence dealing with the auction process that does
not have a significant impact on the process.
|
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Potential
Sources |
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Three
suppliers made part numbers: Hi-Shear,
Teledyne, and Quantic |
Total
small business set-aside |
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Submissions
of Initial Proposals
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Initial proposals were
to consist of a
- Standard Form
33,
- Schedule of
supplies and services with prices, and
- Representations,
certifications, etc.
|
Initial proposals were
to consist of a
- Standard Form
33,
- Schedule of
supplies and services with prices, and
- Representations,
certifications, etc.
Initial
proposals are to show the percentage of the final
auction price that each CLIN represents.
For example, if CLIN 200 was given an allocation
percentage of 1.6%, it will be allocated 1.6% of the
final auction price for the 1,530 CLINs.
To arrive at the unit prices for an individual
CLIN, the allocated price of the CLIN is divided by the
number of estimated units under the CLIN.
The
solicitation also allows offerors to list unit prices
without the percentage.
If that is done, the unit prices will not be
adjusted by the allocation process. To calculate
unit prices for CLINs that do have allocation
percentages, the total dollar amount of all CLINs that
did not include an allocation percentage is deducted
from the final CBE price for all 1,530 CLINs. The
final CPE price less the deductions is called the
"adjusted CBE price." The allocations to
individual CLINs is then made using the adjusted CBE
price. |
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Establishment of
Competitive Range |
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The initial pricing
proposal is to be used to establish the competitive
range. |
The initial pricing
proposal is to be used to establish the competitive
range. |
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Discussions
With Offerors |
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Offerors in the
competitive range are to be invited to participate in
discussions and discussions are to be conducted
through the reverse auction called a Competitive
Bidding Event (CBE). FreeMarkets provided
offerors with passwords, training, and software for
input to and monitoring of the CBE.
Offerors may make
revisions to their initial pricing proposals with
electronic offers during the CBE. During the
auction, offerors are to see each others' offers in
real-time but the offers are to be anonymous.
The initial time period for the auction is to be set
by the contracting officer. If an offer is
submitted within the last minute of the time period,
the time period is to be extended for an additional
minute beyond the time of that offer (provided the
offer was the lowest offer received). The time
period can be extended for additional one-minute
periods if a lower offer is submitted within the last
minute.
|
Offerors in the
competitive range are to be invited to participate in
discussions and discussions are to be conducted
through the reverse auction called a Competitive
Bidding Event (CBE). FreeMarkets provided
offerors with passwords, training, and software for
input to and monitoring of the CBE.
Offerors may make
revisions to their initial pricing proposals with
electronic offers during the CBE. During the
auction, offerors are to see each others' offers in
real-time but the offers are to be anonymous.
The initial time period for the auction is to be set
by the contracting officer. If an offer is
submitted within the last minute of the time period,
the time period is to be extended for an additional
minute beyond the time of that offer (provided the
offer was the lowest offer received). The time
period can be extended for additional one-minute
periods if a lower offer is submitted within the last
minute.
Offers
will not be accepted during the CBE that exceed a
ceiling based on the competitive range. Prior to the CBE offerors will be notified in writing of the
ceiling.”
In
changing their offer price during the CBE, the
offerors must change the amount of their prices by at
least 0.20%.
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Final Proposal
Revisions |
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An offeror's final
price revision of an offer during the CBE is to be
considered the offeror's Final Proposal Revision
(FPR). |
An offeror's final
price revision of an offer during the CBE is to be
considered the offeror's Final Proposal Revision
(FPR). |
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Contract
Award |
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Award
is to be made
to the low-priced, responsible offeror.
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Award
is to be made to the eligible, low-priced, responsible
offeror |
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Copyright © 2000 by
Robert Antonio |
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