Reverse auctions need more scrutiny to curtail the win-lose situation

proxibid.com

Reverse auctions are back in the news yet again this week, highlighted by recent testimony before the House Small Business committee, in which the discussion revolved around the proper use of reverse auctions, and potential to harm both the government and industry without clear guidance and policy. 

This is nothing new. Government Accountability Office (GAO) reports were critical of the process, in addition to criticism by the Small Business Committee’s Contracting and Workforce Subcommittee, which held a joint hearing with the Veterans’ Affairs Committee’s Oversight and Investigations Subcommittee.

Firstly, I think reverse auctions are a great tool to save money, increase competition (especially for small businesses), and speed up procurement times. However, there is one caveat: when used appropriately.

On that note, one of the best articles on appropriate usage came from Stan Soloway of the Professional Services Council, who advised the proper use should come through simple commodity buys where requirements are not to any level of sophistication that warrant another buying method:

…Reverse auctions and strategic sourcing, along with the precipitous rise in low bid buying and efforts to create standardized labor rates that ignore how high performing businesses have to be run, reflect a broader and disturbing tendency toward commoditizing both people and capabilities. This trend assumes that the ability to do something minimally or adequately equates to doing it well, let alone exceptionally well. It understates the critical importance of historic performance and ignores the reality that high quality professional services and technology are highly nuanced and constantly evolving….

I have written about this issue in the past (click here), and the GAO report started the salvo of calling into the question the use of reverse auctions through disturbing findings at the center of testimony provided by Michelle Mackin, Director of Acquisition and Sourcing Management at the GAO:

…Competition and savings-two of the key benefits of reverse auctions cited by the agencies we reviewed-are not always being maximized… because not all reverse auctions involve what we refer to as interactive bidding, where vendors engage in multiple rounds of bids against each other to drive prices lower. We found that over a third of the fiscal year 2012 reverse auctions had no interactive bidding-and agencies paid $3.9 million in fees for these auctions…

Of course, one of the main issues with reverse auctions is the transparency and oversight of the process and the contracts themselves. Dan Gordon said in his hearing that this function is "inherently governmental." He also stated:

…FedBid has an organizational conflict of interest. They control the data. They control the information," said Gordon. "They have a financial interest in having as many reverse auctions as possible, regardless of whether the procurement is suitable for one…

The vast majority of reverse auctions are run through FedBid, the Vienna, VA, based company that got a slap on the wrist after an inspector general report from Veterans Affairs exposed major issues with ethics and business practices.

The most troubling issue is the negative consequences that happen more often than not to small businesses, as the race to the bottom continues to put undue pressure on companies that are already struggling to survive in this hyper-competitive federal market.

I hope that reverse auctions get a thorough review, because I feel it is doing more harm than good to both the taxpayer, and the firms that are using this practice in hopes of winning federal business. 

Re-branding Government Contracting, Mission Impossible?

eganenergy.com

An interesting question was posted by Francis Rose of FederalNewsRadio.com on the bad reputation of the federal contracting community in a recent article titled “Why do feds and contractors have such a bad reputation outside DC?"

The federal government, and contractors that supply goods and services to the government, do amazing, lifesaving work every day. We normally take for granted these services, like clean air, safe water, and the one of the best standards of living in the world.

So why do feds and contractors have such a bad reputation outside DC?

Well, there is no question that there is a concerted effort, driven by politics, to denigrate public service and the government itself. Regretfully, these messages are very powerful, and overshadow those messages of the important work the government, along with support contractors, currently perform.

However, the two points Mr. Rose makes are both a question and an enigma:

…Government should be more aggressive in telling its good news to people who understand it, and want to hear and repeat it…

No doubt. This is one thing that government does very poorly. Strategic communications is just something that government apparently does not seem to do well, especially as it pertains to sustaining a message, and getting stakeholder buy in.

When the MythBusters initiative launched at the Office of Federal Procurement Policy (OFPP) in 2011, I had always made it a point to cover this initiative, as it pertained to market research and communicating with industry, in classes that I taught to federal project managers. Many students had heard of this campaign, and the information we covered in the classes resonated well.

A few years later, it is rare that any student has even heard of the initiative.

One initiative that can hopefully turn this trend around comes again from OFPP, by way of the Anne Rung, the administrator, who launched a series of podcasts highlighting successes with some agency's prominent procurements.

The inaugural podcast featured Mark Naggar, project manager of the Department of Health and Human Services' Buyers Club. He detailed the use of the TechFAR Handbook and the Digital Services Playbook, on which his team built services using agile and iterative practices to and quickly contract and deliver the development of IT system prototypes.

It is these type of things that government should do more of, and get the message out there about success government is having.

The second point:

…Companies that sell in the government space should be more thoughtful about the stories they tell…

This one is a mystery. Many companies spend substantial resources on creating case studies, white papers, and discussing their products and services as a part of their marketing. Nonetheless, the message about their great work seems to be lost in the cacophony of failures of government, and how contractors are either at fault or guilty by association.

I could not agree more with Mr. Rose, as we need more success stories out there from both sides. They exist, so we all need to help overcome the challenges that missteps create in exacerbating an already bad public perception.

Acquisition 360: Will Anyone Listen?

Photo from blog.ketchum.org

This past week, Office of Federal Procurement Policy (OFPP) Administrator Anne Rung, released guidance on a new initiative to help improve the acquisition process. This new initiative, known as Acquisition 360, is a proposed rating system to gather feedback from government and industry stakeholders on particular IT acquisitions. Ms. Rung’s memo provided stakeholders the surveys necessary to garner this feedback, but many questions remain about the utility of this initiative, and whether or not stakeholders will use the data to actually improve the acquisition process itself.

The idea is not necessarily new, as it has been compared to a “Yelp” like review tool to give broad information to give decision makers a high-level view of potential problems with a particular acquisition at the tactical level. Further, the mechanism was piloted at the General Services Administration with their Governmentwide Acquisition Contract One Acquisition Solution for Integrated Services or OASIS.

Acquisition 360 has review mechanisms for both industry and government. The surveys are not meant to be a tool to provide a critique of individuals, but rather, the process itself.

Although Ms. Rung, and Deputy Administrator Leslie Field addressed some of the questions about the efficacy of this initiative with Jason Miller of FederalNewsRadio.com, three fundamental questions remain about potential for these surveys to be successful:

(1) Will stakeholders actually complete them?  – From the government’s perspective, it is yet more potential paperwork given to overburdened acquisition personnel. Stakeholder engagement may be difficult, even though thoughtful feedback may pinpoint potential issues that require further root cause analysis and subsequent re-engineering to address. Nonetheless, this initiative can be seen as a way to target personnel, or further mechanisms for oversight and accountability. Although these surveys will not be used for this purpose, perception can be reality.

(2) Is anonymity ensured? – Although industry covets the opportunity to provide constructive criticism to improve the overall process to engagement and doing business with the federal government, firms may be weary to provide this type of information for fear of possible retribution. Companies often dare not rock the boat, as retribution can be swift and damaging to a company’s reputation. Further, the government can certainly make an educated guess about who would be providing the criticism, based on the circumstances of a particular acquisition.

(3) Will the feedback be useful? – The surveys are intended to provide comprehensive, high-level feedback on the end-to-end pre-acquisition process. Assuming thoughtful comments that provide enough information for decision-makers, will these managers for both government and industry use the information to improve their internal processes?

The reality is that the current environment is a type of Cold War, where industry and government are in a state of almost rampant animosity. It is a vicious circle where firms are on the offensive with protests and challenges to government procurement, due to budgetary pressures and ferocious competition for every federal dollar spent on goods and services. Government has almost battened down the hatches, hoping to weather the storm of criticism of every move, and thus believing that openness and transparency through collaboration and communications is a losing proposition.

These barriers only continue to grow stronger, and productive opportunities to improve the process through communications continue to be a challenge. However, changes are desperately needed. 

No one is expecting this initiative to be a silver bullet, but I applaud OFFP and Ms. Rung for proactive action to break the barriers that hinder constructive change and open the doors to communications.