The FAR Councils are now requesting comments on reverse auctions. See

http://www.wifcon.com/todays.htm

Does anyone have anything to add?

By Linda Koone on Tuesday, October 31, 2000 - 08:26 am:

Bob:

Inevitably, either the FAR Council or the GAO will have to establish rules for conducting reverse auctions.

There are conflicting points of view on some of the aspects of reverse auctions already.

Look at the Navy's guidance for reverse auctions at:Reverse Auction. (Web address:

 http://www.abm.rda.hq.navy.mil/revauct.cfm in case my link doesn't work)

Then take a look at DSCC Auction user guide for conducting their on-going auctions at: DSCC Reverse Auction (Web address: http://dibbs.dscccols.com/RFQ/Auction/, in case my link doesn't work)

Of particular interest to me is that on one hand, the Navy feels compelled to responsible for ensuring vendor connectivity before and during the reverse auction; and on the other hand, DSCC takes responsibility only for computer related problems at their end (see guidelines under Firm Closing)

Personally, I think DSCC has it right. Although there is no legal precedence for reverse auctions, prior GAO decisions related to lost quotes in FACNET (see B-281556 American Material Handling, Inc., February 24, 1999)seem to support DSCC's approach.

By bob antonio on Tuesday, October 31, 2000 - 08:59 am:

Linda:

I think it is imperative that OMB (OFPP) take some actions to prevent litigation before the Courts or the Comptroller General make pronouncements based on federal acquisition rules.

Reverse auctions are taken from the commercial world. I believe OFPP has authority to wrap these auctions under some test procedure. This was done for NRC's focused source selection.

The last thing we need is litigation creating a mongrelized and federalized commercial practice. However at the pace we are moving, we may get there.

By Ramon Jackson on Tuesday, October 31, 2000 - 09:37 am:

Linda,

The Navy link seems to work, but it is in a "waiting for reply" loop so I haven't seen the language you saw.

Navy's sense of responsibility may be excellent here. I question the application of practical sense considering all the potential client and network problems they may be facing. I'm not quite sure how Navy plans to do that. A big "help desk" perhaps? A sensible systems approach in such situations is to state your interface standard and place the burden of match on those connecting.

If I were a bidder would my repeated "waiting to connect" when I went to their site be protestable even if it is due to my configuration or network situation? If Navy has stated responsibility perhaps so.

By Eric Ottinger on Tuesday, October 31, 2000 - 09:56 am:

All,

In my experience, for every really innovative idea there is one guy with a shovel who wants to go do, and 10 others who want to write rules, prepare schedules, chair meetings, and otherwise “help” the doer.

Why don’t we let the agencies write their guides and hold off on writing real policy until we have some experience and know what the real problems are.

I sense that GAO and other helpers are reluctant to be seen as getting in the way of acquisition reform, and thus don’t want to get involved unless really pushed.

If this method is used for relatively small dollar items for the moment, there shouldn’t be much motivation for offerors to protest on the basis of occasional technical screw-ups as long as the mechanism is doing what it is intended to do overall.

In my experience with truly innovative concepts, “friends” are ultimately more dangerous than enemies.

However, Bob may be right in arguing that a bit of preemptive policy making may be needed to prevent being pulled back into an old paradigm.

Eric

By Kennedy How on Tuesday, October 31, 2000 - 12:56 pm:

Eric,

The problem I see is that while we're gathering real world experience, some crybaby is going to litigate over the results, so instead of guidance and regulations and 'best practices', you're going to get case law and legal precedents. We 1102 are constantly trying to minimize the possibility of litigation.

Our activity has decided that we do have a candidate for reverse auctioning. It seems that we're going to try it. One of the reasons why we haven't done it before was because the quantities and dollar values didn't appear to be worth the while to set up this process. I'm not sure what your definition of relatively small dollar is concerned, but our perception is that it has to be worth the interest of our vendor base to try it.

I, for one, am interested in the outcome, base on conversations here regarding reverse auctioning.

Kennedy

By Ramon Jackson on Tuesday, October 31, 2000 - 01:11 pm:

Eric,

My point is purely technical, though those difficulties might lead to protests in this area if an agency has stated it takes technical responsibility. Accepting responsibility for external clients isn't trivial. Doing so calls for considerable effort, expense and frustration.

By Linda Koone on Tuesday, October 31, 2000 - 01:40 pm:

I believe that Eric got the impression that the reverse auctions are being conducted for low dollar value procurements from the DSCC link.

DSCC is using an auction technique for small dollar value procurements. They are conducting these auctions a little differently than those that gained all of the publicity over the past few months. Rather than a stated 30 -60 minute auction period, these, as far as I can tell, last for days or weeks.

On the other hand, the NAVICP has limited its use, up to this point, to higher dollar value procurements.


Ramon: I think you understand my concern. I agree that the Navy is taking on a big responsibility.

I believe that FAR coverage is a good idea, as long as it is not too specific; however, I think it may already be too late.

By Eric Ottinger on Tuesday, October 31, 2000 - 01:45 pm:

Kennedy,

I was just thinking out loud.

If Bob thinks some preemptive policy making is needed, he is probably right.

Now that I have actually read the notice in the Federal Register I would note that the FAR Councils are not very keen to start writing policy. They recognize that it might be best to get some experience, find out what works and what causes problems before they write policy in the FAR.

I guess my definition of “relatively small” is large enough to make it worthwhile but not so large that the losers will be highly motivated to protest.

As much as we all want to revolutionize the world and do it quickly, I think that really innovative ideas have a much better chance of surviving if they keep a low profile and develop a solid record of success before unreasonable expectations are raised and too many helpers get into the act.

In my experience truly innovative ideas have worse odds than the little chicks that you see on Nature shows and they survive only if the parents are very alert and very shrewd. Friends with other agendas are almost as predatory and dangerous as enemies.

Clear ground rules in the solicitation would appear to be the best approach for avoiding protests. But for the moment, I think that it would be advantageous for different agencies to try different approaches until we can reach a consensus on what works best.

Ramon,

I am not qualified to address the technical questions, but I would think there are sufficiently reliable Internet and off the shelf software solutions available at this time.

I guess, I would send the offeror a confirmation message and also post a phone number where, if nothing else works, he can call me if he submits a bid and it isn't getting through.

Just thinking out loud--

Eric

By Eric Ottinger on Tuesday, October 31, 2000 - 01:59 pm:

Linda,

I guess my definition of “relatively small” was meant to be pretty situational. If I were worried about the possibility that a sore headed protester might damage my new concept by bringing lawyers and judges into the act prematurely, I would try to stay under his threshold of pain.

Eric

By bob antonio on Tuesday, October 31, 2000 - 02:54 pm:

Eric:

I do not think policy is desirable at this time. However, I believe OFPP can place techniques in test mode. If they can protect these reverse auction efforts from possible litigation by placing them in test mode, I think that is the way to go. The Government needs to determine where reverse auctions fit within its acquisition process. That will take some experience and analysis.

Currently, some agencies are trying to mold the negotiation process around the reverse auction process. I have no idea how our FAR requirement for request for final proposals can be applied to reverse auctions. If rules like that do not fit, we need to identify them. Maybe this is a commercial practice that should be authotized as it is used in the commercial sector. If a commercial process meets all of the intents of Congress, eg., competition, prices, small business, etc., then maybe we should have a special provision for reverse auctions.

By Eric Ottinger on Tuesday, October 31, 2000 - 03:20 pm:

Bob,

Again, thinking out loud--

A test mode might be a good idea, but wouldn't that limit the number of agencies that would be allowed to particpate?

I presume that the only thing that is being negotiated in an auction is price. Why do we need a request for final proposals?

I think we are underestimating the extent to which the whole system is geared to reform right now. My guess is that if there is some ligigation and the court imposes some unworkable, retrograde requirement, Congress will be willing to quickly pass a law to eliminate the retrograde requirement.

Litigation isn't always a bad thing. it is the way that we find out where the real problem areas are.

Agencies work too hard to fit this approach into a business as usual mode will (I hope) find that other agencies with more courage or more good sense, will establish the model for the future.

The bottom line is that the system is no longer very sympathetic to marginal offerors with marginal complaints. And that is as it should be.

Anyway I should note that I have no expertise in this area and I am talking in generalities.

Eric

By bob antonio on Tuesday, October 31, 2000 - 03:38 pm:

Eric:

Here is 41 USC 413 of the OFPP Act. I took a quick look at it and it looks like OFPP under (a) can authorize a test with selected agencies. That is good because it would limit the number of auction software we are buying or developing. Some are using online auction houses too. Under (b) OFPP can "request from Congress" the authority to protect the test from litigation.

That request means these things require planning. Well, we knew about the first auctions in May. It is October now. Maybe that would have been time for Congress to act--maybe not.

---------------
Sec. 413. Tests of innovative procurement methods and procedures

.....(a) The Administrator may develop innovative procurement methods and procedures to be tested by selected executive agencies. In developing any program to test innovative procurement methods and procedures under this subsection, the Administrator shall consult with the heads of executive agencies to -
..........(1) ascertain the need for and specify the objectives of such program;
..........(2) develop the guidelines and rocedures for carrying out such program and the criteria to be used in measuring the success of such program;
..........(3) evaluate the potential costs and benefits which may be derived from the innovative procurement methods and procedures tested under such program;
..........(4) select the appropriate executive agencies or components of executive agencies to carry out such program;
..........(5) specify the categories and types of products or services to be procured under such program; and
..........(6) develop the methods to be used to analyze the results of such program. A program to test innovative procurement methods and procedures may not be carried out unless approved by the heads of the executive agencies selected to carry out such program.

.....(b) If the Administrator determines that it is necessary to waive the application of any provision of law in order to carry out a proposed program to test innovative procurement methods and procedures under subsection (a) of this section, the Administrator shall transmit notice of the proposed program to the Committee on Government Operations of the House of Representatives and the Committee on Governmental Affairs of the Senate and request that such committees take such action as may be necessary to provide that such provision of law does not apply with respect to the proposed program. The notification to Congress shall include a description of the proposed program (including the scope and purpose of the proposed program), the procedures to be followed in carrying out the proposed program, the provisions of law affected and any provision of law the application of which must be waived in order to carry out the proposed program, and the executive agencies involved in carrying out the proposed program.

By Eric Ottinger on Tuesday, October 31, 2000 - 03:53 pm:

Bob,

Quoting the FAR Councils notice:

"The Councils understand that interested parties have varied opinions on the need for guidance on the Government's use of reverse auction techniques. The opinions include: … Explicit coverage in the FAR is not needed because FAR 1.102(d) permits any technique that is not expressly prohibited. … Other guidance is needed, such as best practices guides, agency instructions, or training. Therefore, the Councils are seeking input that will help them determine the best approach to help inform thinking regarding the use of reverse auction techniques. 1. Need for guidance. The Councils ask that respondents discuss whether guidance related to the use of reverse auction techniques is needed at this time. Respondents are encouraged to discuss potential advantages and disadvantages."

From the point of view of the FAR Councils, it isn’t clear, at this point, that any additional guidance, waivers, deviations, test programs, etc. are needed.

What is wrong with this point of view? Why not go with it, and see what input they receive?

Eric

By bob antonio on Tuesday, October 31, 2000 - 04:20 pm:

Eric:

That is basically what I am saying.

However, I would like a test protected from litigation which OFPP may have requested or could have requested from Congress. That does not mean that Congress would have provided them with authorization to protect the test from laws that they identified under 41 USC 413 (b).

My only point is that we eliminate the need for help from the Comptroller General's bid protest unit and the Courts and that we gather the information from the test and determine what works and what does not work.

By Eric Ottinger on Tuesday, October 31, 2000 - 04:47 pm:

Bob,

Perhaps,

In my experience, if the test agency buys shoes, we will have a very good policy for buying shoes; if the test agency buys PCs, we will have a very good policy for buying PCs; if the test agency buys aircraft parts, we will have a very good policy for buying aircraft parts. If we want to find out what works for everyone, we need to empower numerous buying offices to try this out.

For the moment, I think the best way to avoid being “helped” by the litigators is to avoid sticking your head up too high. Walk before you run. Do small dollar buys before you do large dollar buys.

In any case, I don’t think we disagree on much.

Eric

By Ramon Jackson on Tuesday, October 31, 2000 - 07:06 pm:

Eric,

Wrong assumption. You might as well assume every spark plug will work in every engine. The ease most of us see in this sort of environment takes a lot more effort when it goes from casual web crawling to actually doing business. When it goes to time based, accurate and secure functions things get a bit more complicated.

There are all sorts of solutions out there and most more or less play nicely with one another. Others do not. This is particularly true if you are doing things requiring a good audit trail and checking on exactly who is communicating with you as I would hope these agencies are doing (If not maybe we can become "mystery bidders" and have some real fun).

It has been a while and things have improved somewhat, but as late as a couple of years ago we couldn't even get all DoD players "talking." Our own development contractor for design of a DoD "internet" access system had trouble meeting our requirement for PO access to contract information.

Funny story there. Imagine the fun I had when one of the managers told us what we were asking for wasn't what they did. I replied this certainly made us lose confidence they could solve the much larger problem for which they'd proposed and claimed expertise. I got my own little surprise. The technical team didn't do the required work. That fell into something like "corporate publishing" and had entirely different people. We got it more or less fixed, they took lots of flak and got punished a bit. The PM found a new job.

The whole point of expensive things like the DII COE and DSP is to fix these problems within DoD. The fact they are still quite active leads me to believe the problem hasn't been solved since I sat in those dark conference rooms and listened to tales of woe. Things are getting better, but not completely fixed. How many times have your systems people been in to make things talk happily? That is a good part of hardware/software maintenance we are paying millions for now.

I think Navy has enough such problems internally. They don't need to take on the universe of connectivity and configuration problems found outside. Much better, I think, to publish their interface requirement and tell all bidders it is up to them to insure connectivity. Let the bidder's maintenance people check client and network settings and troubleshoot.

By bob antonio on Wednesday, November 01, 2000 - 07:45 am:

Linda:

In an earlier question--now in the archives--you asked if CCR registration was consistent with commercial practice. This morning I was thinking about when an offer is public information in a reverse auction.

I think the two questions are somewhat related.

On sealed bidding, an offer is public upon opening. Since offers are visible to competitors as they are placed, that would seem consistent with the opening of offers--in this case bids. Since under sealed bidding bids are public information, should all reverse auctions be visible to the general public? I looked at one of the sites you provided yesterday and it required registration to participate. So if we are adopting a commercial practice, is the requirement for any type of registration for viewing the auction improper. I'm not sure.

I have not looked at the e-bays or mercata or whatevers. However, some seem to be open and some closed. I would suspect the B2B system that the auto industry is developing with its suppliers will be closed. So what commercial practice does the government follow--e-bay or the auto industry?

Now if the process is called negotiation and discussions as it was under the NAVICP solicitations, then we have a different issue. However, we receive authorization from offerors to disclose their prices and it is fine for them to see each others' offers. Should they be public information during the process?

In the article I wrote on the NAVICP reverse auction, I had difficulty with the request for final proposal revision--let's call them a BAFO. The FAR requires the request for a BAFO to be made at the conclusion of discussions. However, the reverse auction is the discussion. So it is a "chicken or the egg dilema" about when discussions end and when a request is made. I think it is an impossibility under our current process. We could butcher the language and make it fit though.

Here is the FAR provision.

15.307 Proposal revisions.

(a) If an offeror's proposal is eliminated or otherwise removed from the competitive range, no further revisions to that offeror's proposal shall be accepted or considered.

(b) The contracting officer may request or allow proposal revisions to clarify and document understandings reached during negotiations. 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. Requests for final proposal revisions shall advise offerors that the final proposal revisions shall be in writing and that the Government intends to make award without obtaining further revisions.

In the end, the FAR Councils are going to need to accept some sort of commercial practice. If they try to conduct reverse auctions cloaked in the federal acquisition process, I think they are open to a variety of questions.

By Linda Koone on Monday, November 06, 2000 - 01:27 pm:

Bob:

In my limited research on auctions/reverse auctions conducted via the internet, it seems that personal or individual auctions such as E-Bay or eWanted.com publicly disclose pricing (and identity of bidders), whereas business auctions such as GMonlineauctions.com or fastparts.com (SOLD!Auction) disclose pricing only to registered users. Following the commercial business practice over the personal practice for federal auctions seems to make sense to me.

As far as the NAVICP Reverse Auction and the attempt to classify the reverse auction process as a request for final proposal revisions, I think it was just an attempt to make the process fit within the framework of the regulations, which is probably a natural tendency when one is faced with a new concept.

It is probably better to describe the process as a reverse auction using the flexibility permitted at FAR 1.102(d) instead of trying to make it fit into existing FAR coverage.

Will that happen in the future? Hard to say. You know, we have precedence now. And that is sometimes very hard to argue against.

By Kennedy How on Thursday, December 07, 2000 - 12:17 pm:

I'm sneaking this message in at the 30 day deadline before it moves to the archives!

My activity conducted it's first reverse auction yesterday. I wasn't able to attend, due to a doctor's appointment, but according to the people who were monitoring it, it was a disappointment. We had 7 participants registered, including the current contractor, but for some reason, we only got one bit, by somebody else, at the same price as the current contract.

I think we kinda hoped that with 7 entities, we would have a round or two of bidding, but apparently, the first shot was the best, and nobody else could beat it. Everybody had their best shot first, which is what the vast majority of potential contractors prepare; that's what we've always told contractors in the past. Speculating here, maybe they weren't ready for a wholesale plummeting of their initial positions.

Still, we apparently have another candidate, this one has a bigger quantity and larger dollar value, which might encourage participants to be more aggressive in their competetiveness.

Kennedy

By Steve Aronson on Thursday, December 07, 2000 - 03:15 pm:

Our input in response to the data call is likely to be:

1. No FAR prescriptive language; just language that makes it explict that reverse auctions are an acceptable pricing technique.

2. "Guidance" should be issued in the form of "best practices" guides to provide lessons learned, not straitjacket mandates.