Reverse Auctions: A Tool to Realize Real Cost Savings

As Government continues to leverage its buying power through continued fiscal pressures, one process that is not getting enough attention is the use of reverse auctions. Reverse auctions are an effective and efficient means of realizing large savings on purchases of not only commodities, but highly defined services as well. Although current initiatives exist such as the General Service Administration’s (GSA) Federal Strategic Sourcing Initiative (FSSI), which encourages adoption of industry best practices, federal buyers are simply not going far enough in leveraging their buying power to maximize price savings. To achieve maximum efficiency, the Government should begin to create holistic strategic souring initiatives that include reverse auctions as a mechanism for cost savings, since programs such as FSSI are simply catalog buys to bidders that have been pre-qualified, and mimic the GSA Schedules program. Further, many Program Managers and other acquisition officials I have spoken to state that they do not always get the best prices by using these types of pre-negotiated arrangements, and thus buy either directly from vendors or execute procurements outside these initiatives. The result is ineffective buying and the continuation of not maximizing efficiencies to the detriment of the taxpayer.

Reverse auctions are by definition a structured competitive bidding event where competition can be maximized to help drive the price lower over the course of the event. One common reason I have heard for the poor adoption rate is technology barriers, which is a frankly a disingenuous reason. The benefits of potentially significant cost savings, enhanced transparency, increased collaboration, increased competition all outweigh any barriers that seem to be artificially created by Federal organizations. If the Office of Management and Budget (OMB) and the Obama Administration are serious about Open Government and accountability, then enhanced adoption of reverse auction should be further explored.

Another stumbling block to adoption is the issue of transparency, as the risk adverse nature of Government creates issues that should not exist through fear of protest that seems to be paralyzing acquisition decision-making. The reverse auction process is Acquisition 2.0 in motion, as reverse auctions create a structured and automated negotiation process with transparency at its core, since the process depends on vendors creating a clear and documented process for creating the pricing structure and the subsequent contracted price. It is the openness of the process that should be embraced, since the reverse auction allows for real time pricing feedback, and also allows acquisition officials to have real time visibility into the negotiation. This type of structure and the transparent process creates and enhances competition, reduces complexity, enhances collaboration, and ensures compliance with the acquisition policies and regulations.

It is these types of procurement methods that should be embraced, and will need to be further explored to help create holistic strategic sourcing initiatives for realizing true cost-savings by adjusting processes, ensuring leadership drives change, and breaking the endemic status-quo culture of Government. Successful examples of reverse auctions already exist through both Defense and civilian agency use, so lessons learned are available for use and need to be expanded upon to help with widespread adoption. As OMB continues to issue guidance on improving federal acquisitions and government management in general, reverse auctions need to be part of this process of continuous improvement and increasing accountability to the taxpayer.

Acquisition Reforms Will Focus on Oversight

As the lame duck session of the 111^th Congress comes to a close, some in the acquisition community are left to wonder what lays ahead for the acquisition reform initiatives of the Obama Administration. According to many experts, the shift in political power may not make much difference for the IT and procurement communities.

I am not sure that is the case, according to plans that Rep. Darrell Issa (R-Calif.) has stated as incoming chairman of the House Oversight and Government Reform Committee. Issa has said that the Telework Enhancement Act (H.R. 1722) lacks many of the safeguards necessary to prevent fraud, waste, and abuse. Specifically, Issa claimed employees can take advantage of the lack of direct manager oversight, does not require agencies to prove how much money they’re saving, and does not create jobs.

Although Rep. Issa continues to draft his agenda for the new Congress, I am not going to hold my breath that this process will not be politicized, when Rep. Issa makes statements such as “I want seven hearings a week, times 40 weeks.” Rep. Issa also stated he looks forward to working with the Office of Management and Budget (OMB) and industry on ways to address wasteful spending from failed government IT programs. I think OMB is really making some important strides on this front, so we’ll either see either a real oversight agenda moving forward or more political witch-hunts as in the past.

On the Senate side, Sen. Claire McCaskill (D-Mo.) remains chairwoman of the Homeland Security and Governmental Affairs Committee’s Contracting Oversight Subcommittee. Sen. McCaskill will continue her focus on interagency contracts and reforms to the 8(a) set aside programs for Alaska Native Corporations. I hope these initiatives continue, as Sen. McCaskill has much unfinished work to do regarding abuses in these programs, so I hope that Rep. Issa seizes the opportunity to really craft bipartisan and meaningful relationships with other members on ferreting out waste, fraud, and abuse.

Another important issue is the effect of the midterm elections on open government, transparency, accountability, and the overall Gov 2.0 movement. I believe that significant movement will come on this issue, as politicians move from political use of Web 2.0 for campaigns, to executing Gov 2.0 initiatives to execute transparency initiatives and hold government accountable. Again, I hope that this renewed focus on using Gov 2.0 tools to advance Open Government and allow for more citizen engagement. However, it is hard to fathom considering this hyper partisan political environment where Congress scores so low in providing these services themselves.

I would like to see the latter happen. But I have reason to lack hope. Tim Evans, a program analyst who works on Web analytics and customer service measurement at the Social Security Administration, posted a story by Larry Freed of The Digital Citizen about a recent survey in which ForeSee Results found “a clear and proven relationship between transparency, satisfaction and trust,” and “higher transparency leads to higher citizen satisfaction with government, which in turn leads to higher trust.”

Unfortunately, “when it comes to transparency, citizen satisfaction, trust, accountability, perceived goodwill, competence and integrity, American citizens give Congress the worst scores across the board,” Freed wrote.

Not the most encouraging situation, but let’s give Rep. Issa the benefit of the doubt that he will wield his gavel responsibility to protect the taxpayers and not a political party and its agenda. Change we can believe in? We have heard that before.