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.

Definition of Transparency

Continuing our focus on transparency, I now turn to some interesting research done by Nextgov. They, along with their sister research organization the Government Business Council, created a survey of 430 federal managers between Feb. 25 and March 2 on the definition of transparency and their ability to execute on that definition. The results of the survey can be found here.

The impetus for the need for transparency comes directly from President Obama himself, who stated very clearly his intentions to make government more transparent in his memo released Jan. 21, one day into his presidency.

"Transparency promotes accountability and provides information for citizens about what their government is doing," he wrote. "My administration will take appropriate action, consistent with law and policy, to disclose information rapidly in forms that the public can readily find and use."

The focus on transparency also was profiled by Government Executive magazine in its April cover story, "Behind the Curtain." This story focused on the definition of transparency, the types of information that can be released, and the format for that information. Both Nextgov and Government Executive found that federal managers were most concerned about what constitutes transparency. Further, the results create a mixed message of that definition, along with a clear picture of obstacles the transparency initiative will have in the federal government.

Most respondents believed they are being overburdened with data calls for information that has already been made available to the public. Computer security was also a major concern, as technology will drive the visibility of the transparency initiative. However, the reality is that federal agencies simply do not have the resources to make all the applicable data accessible, even though positive survey results indicate federal managers seemed to be open to transparency. This is an encouraging sign from a group normally risk averse and typically resistant to change. Nonetheless, the real impediment that transparency will have is the view of who has the onus of transparency. According to federal managers, it is not their problem.

… They said the president, Congress and top government executives needed to drive it. But that's only half the equation, Miller said. "My take on this is it's going to take strong leadership not only at the top of an agency but also at the lower levels," she said. "What does it mean for the agency to be transparent and what does that look like?"…

…Alan Blautis, director of Cisco Systems Inc.'s Internet Business Solutions Group who has held numerous government management positions in his 28 year government career, summed up managers' lack of interest in taking the responsibility for transparency this way: "There's a strong status quo mentality" among federal managers, he said. "So, here's the question: Who outside of the White House or the stimulus groupies, have you heard talk about transparency?"… (Emphasis mine).

That is the unspoken truth; a deafening silence from Congress and senior government leaders on the value of transparency. President Obama can only provide so much push for the initiative, as leaders need to execute on the initiative and rally the troops to open government. It is a very challenging and difficult environment that needs leadership outside the White House to convince agencies on how and why transparency is of value to government operations and helping strengthen confidence in government.