Should the Government Compete with Private Sector Reverse Auction Services?
Spend Matters welcomes a guest post from David C. Wyld, the C.E. Laborde Professor of Management at Southeastern Louisiana University and founder of the Reverse Auction Research Center.
At the end of the day, how are we to assess the General Services Administration’s GSA Reverse Auctions offering? This article series has pointed-out significant issues with the new competitive bidding platform —from the strategic decision to run the program in-house to the decision to market it as a “free” service that saves taxpayer dollars. These are important matters that may or may not be able to be solved within the present structure of the GSA’s competitive bidding platform.
Yet, overall, GSA leadership is to be applauded —even congratulated—for the intent of their bold move into reverse auctioning. Their action has brought a great deal of attention, both within federal acquisition circles and in the media, to the value of the competitive bidding model for public sector procurement. GSA’s embrace of reverse auctions as a mechanism to create competition, produce savings, shorten acquisition cycle times, and improve transparency in federal procurement will likely advance the utilization of competitive bidding, both on the GSA Reverse Auctions platform and in reverse auctions facilitated by private sector partners. Thus, as one who has worked for more than a decade to advance the use of competitive bidding in the public sector to make government acquisition “faster, better and cheaper” through my work with the Reverse Auction Research Center, I believe GSA’s leadership may indeed have helped “rise the tide” for all wanting to save money and increase transparency through raising awareness of reverse auctioning.
Federal Intervention into the Marketplace
Yet there continue to be questions regarding the introduction of the new, government-run GSA Reverse Auctions platform. Nick Wakeman, Editor-in-Chief of Washington Technology, recentlyquestioned why the GSA was pursuing a “reinventing the wheel” strategy by taking on the existing model of private sector partners facilitating reverse auction competitions between suppliers seeking federal contracts. Likewise, in a recent article (“What to make of GSA’s reverse auction play”), Dr. Steve Kelman, who is a Professor of Public Management at Harvard University, recently observed that “as a general matter, competition is a good thing for any market, including the market for reverse auction services. Like any other market, as demand for reverse auctioning in government grows, it will inevitably create more and stronger competition…. there also is a philosophical issue about whether it is appropriate to use government funds to develop an application that is already commercially available, which will then compete with private companies while charging government customers nothing.”
So should a federal agency, funded (in essence, fully subsidized) by taxpayer dollars compete with private sector service providers who are providing a “faster, better, cheaper” alternative to the government-run offering? In the end, that may be more of an ethical question than a legal one. Although there are federal guidelines in place that restrict government competition with the private sector under certain circumstances, it is likely that GSA used an existing broad-based support services contract to facilitate its development effort, thus sidestepping any legal or regulatory issues.
But consider the fact that there are commercial reverse auction providers currently holding GSA Schedule contracts. In other words, it appears that GSA reviewed a particular commercial service offering with a recent history of considerable success under the Schedule program and decided to build its own competing service in order to increase its market share and control of its customer base. Note that this was for a single type of service under a single Special Item Number (132-52, for Electronic Commerce and Subscription Services), under a single Schedule (70). There are thousands of other services that might hold a similar attraction for GSA – particularly consulting services that could further help the agency expand its reach and connection into its customer base.
The GSA reverse auction project seems to have set an unsettling precedent, enabling a service-focused agency to re-brand a commercially provided service offering for internal government use in place of proven private-sector service providers. So where do you stand on the issue? Your answer may depend on whether you think GSA may decide to target your company’s service offering next.
It will be highly interesting to see how the results from the GSA-administered events compare to the track record produced by the private sector service providers. The results should not just be judged based on purchase price savings, but in terms of the competition generated in the events. Small businesses and disadvantaged firms have benefited from participating in reverse auctions for federal contracting opportunities, winning the vast majority of such competitions. While the GSA has provisions in place for small business participation in its auctions, the competition metrics will be especially crucial to look at in making any assessment on the success or failure of the program.
When small and businesses and disadvantaged firms win in such competitions, they not only can shake-up, and shape-up, large, incumbent suppliers, but also create jobs and economic viability for their small companies by competing in, and winning, federal contracting opportunities. Finally, it will be interesting to see if there is indeed a “rising tide” of competitive bidding in the federal sector due to the attention to, and validation of, the reverse auction model as a best practice for acquisition in practice. The story is evolving—stay tuned!
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