Low Bid Tyranny,
Past Performance,
and Reverse Auctions
BY r o b e rt e . lloy d
The popularity of reverse auctions has increased in recent
years, but the basic methodology has remained largely
unchanged. Opportunities exist to add innovative features to
reverse auctions, expand the usefulness of contractor past
performance evaluations, and reduce reliance on price alone
as a deciding factor in source selection.
Reverse auctions have become commonplace across the
landscape of U.S. federal acquisition in recent years. The
reverse auction has been widely praised as an efficient buying
method, and criticism has generally been minimal. The
popularity of reverse auctions is not limited to the public
sector. In popular culture, this tool is also a prominent
feature in private-sector purchasing, with eBay being a
well-known example. Shipping Wars, a current reality
television show on the A&E network, even makes the tool an
integral part of the drama. Rather than focusing only on
price, commercial practice in the reverse auction field has
evolved beyond the federal approach and offers a ready means
to consider contractor past performance as a primary
evaluation factor in an easily managed fashion. The challenge
for federal buyers is how to emulate this success, and this
article offers both a foundation within existing regulations
and the practical means to do so.
Reverse Auctions: Appeal and Criticism
In reverse auctions, federal agencies buy supplies or services
from a contractor using an Internet-based tool “in a competitive and dynamic environment where sellers successively bid
prices down until the auction completes.”1 Various reverse
auction service providers (or “online marketplaces”) exist in
the “.gov” space, including FedBid and Ariba at the federal
level and K2 Sourcing for state/local governmental purchasing. Each reports considerable benefits from reverse auctions.
In Europe, there is an explicit directive governing reverse
auctions in public procurement,2 but in the U.S. government,
the term “reverse auction” does not appear in the Federal
Acquisition Regulation (FAR). Nevertheless, this tool has been
interpreted as a permissible acquisition method based on the
latitude granted by FAR 1.102(d) and 1.102-4(e), where the
absence of a prohibition is sufficient to enable contracting
offices to use methods such as reverse auctions. The former
prohibition on auctions was removed from the FAR in 1997.
The landmark Government Accountability Office (GAO)
decision authorizing reverse auctions looked favorably on
their use for simplified acquisition.3 In that case, GAO cited
FAR Part 13 as providing the requisite, flexible authority and
discussed the benefits of lower prices and increased competition from reverse auctions. A more recent GAO decision in
2011 likewise concluded that reverse auctions did not violate
law or regulation.4
The popularity of reverse auctions is considerable in both
public and private sectors. Over a decade ago, there was talk of
About the Author
ROBERT E. LLOYD, CPCM, Fellow, is an employee of the U.S.
Department of State. The views expressed herein are those of
the author, and do not necessarily reflect the views of the U.S.
Department of State or the U.S. government. Lloyd has worked in
acquisition operations and policy at six federal agencies over three
decades. He has published more than two dozen articles in
professional journals and books.
Journal of Contract Management / Summer 2013
7
low bid t yranny, past performance, and reverse auctions
“The Auction Economy” in private industry.5 Corporate reverse
auction activity is reported to be in the billions of dollars,
involving thousands of customers.6 The public sector likewise
conducts a high volume of reverse auctions.7 In U.S. government contracting, precise numbers are not readily available,
primarily because the Federal Procurement Data System does
not capture information on reverse auctions as a method of
acquisition, although the system could certainly be modified
for that purpose. For example, a “Yes/No” field could be
added to capture governmentwide reverse auction data.
Reverse auctions are often touted for their costs savings,
whether in government or industry.8 Examples of savings
achieved are significant, routinely reported to be as much as
millions of dollars on a single purchase.9 Other advantages
cited include:
• Greater transparency, due to the public nature of the
auction, price visibility, and audit trail10;
• Increased competition11; and
• Administrative benefits such as reduced acquisition
lead time or greater productivity in the acquisition
workforce.12
The reverse auction is not without its critics. For example, a
common critique is that reverse auctions are not appropriate
when buying complex services13 or construction.14 Contractors complain of the reduction of profit margins as bidding
intensifies,15 while advocates reply that this only forces firms
to become more efficient.16 Other criticisms point to potential
collusion,17 as well as a lack of time for bidders to reassess
costs when bidding online and excessive reliance on pricebased awards.18
When it comes to price, reverse auctions suffer from a sense of
ambivalence. The same quality that gives reverse auctions a
great deal of their appeal (the virtue of cost control) is at the
same time grounds for criticism (the sin of excessive dependence on price). The oft-cited critique of the low-bid regime is
reflected even in the FAR itself, which states (at 9.103(c)):
“The award of a contract to a supplier based on lowest
evaluated price alone can be false economy….”
In 2012, the Department of Veterans Affairs (VA) suspended
its reverse auction activity when issues were raised about
internal controls, questions arose concerning possible negative
impacts on small business participation, and suppliers
lamented a perceived overuse of FedBid.19 Promotion of small
business programs has long been a positive trait claimed by
reverse auction supporters.20 Even so, VA’s suspension came
8 Summer 2013 / Journal of Contract Management
on the heels of a letter from the Small Business Administration to the Office of Federal Procurement Policy raising red
flags about the impact of reverse auctions on small businesses,
in addition to concern about use of the tool for services
instead of supplies.21 The fact that the VA soon resumed its
use of reverse auctions, following issuance of a revised
policy,22 attests to the enduring popularity of reverse auctions.
Criticisms were evidently either found to be invalid or were
properly addressed in the revised approach.
Since the VA episode, the Defense Logistics Agency has made
reverse auctions mandatory for buys over $150,000,23 and
cited savings of over $34 million since 2010 plus usage in
2012 alone to the tune of 400 reverse auction solicitations.
After more than a decade of implementation, reverse auction
proponents seem to have prevailed over their critics and
arguably made the reverse auction experience in federal
acquisition a successful one.
Comparing Commercial to Federal Practices:
Room for Improvement
Uses of reverse auctions have been widespread throughout the
U.S. economy, spanning nearly every conceivable type of item,
from industrial parts to legal services, and even electricity or
goats.24 Examples of commercial auction providers include
eBay, EMEX, Priceline, and uShip. In most cases, the
practical mechanics of the auction process are equivalent to
the federal model, but there are important differences.
An episode of the Shipping Wars television show illustrates a
significant contrast in how reverse auctions operate in the
private sector compared to the U.S. government. The
television program features real-life independent trucking
contractors competing in reverse auctions for business from
buyers seeking to ship unusual items. The contractors often
express concern about their past performance ratings, and
the rating system has affected whether a given contractor
makes a sale. One shipment was auctioned on uShip.com
and the low bidder did not receive the contract; instead, the
buyer was not shackled to the lowest price and instead
selected the second lowest bidder, who had a much better
past performance rating. While the lowest bidder was
surprised and disappointed, he accepted his fate, and there
was no protest process available. The uShip website features
the following question and answer: “Q. How do I use uShip?
A. Choose a carrier based on feedback and bids.”25 The
seamless integration of price and past performance in source
selection is a vital element of this commercial reverse auction
tool and others like eBay.
low bid t yranny, past performance, and reverse auctions
The concept of using an easily understood rating system based
on buyer input is commonplace in the private sector. For past
performance, a star-based rating or numeric percentage
scoring system is typically employed (scale from poor to
outstanding of one to five stars, or zero to 100 percent). This
allows the purchaser to take into account a seller’s performance reviews from prior purchases by other buyers before
completing an acquisition. The federal government lacks such
a streamlined system. Although the actual auction procedure
may be similar (Internet-based, sellers can view the prices
submitted by other bidders, etc.), the evaluation process is not.
Contractor past performance cannot be evaluated in the same
manner, because the FAR (at 42.1503) requires one to resort
to an external database like the Contractor Performance
Assessment Reporting System (CPARS, a component of the
Past Performance Information Retrieval System (PPIRS)).
In addition, the current federal system has led to bid protests
and litigation in court or at boards of contract appeals by
contractors displeased with their ratings.26 The FAR procedures governing the conduct and review of assessments are so
unpopular, unwieldy, and inefficient that they have even
attracted the attention of a critical Congress.27 The complaints have reached the point where legislation has been
introduced in the Senate to simplify the process by eliminating contractors’ right to appeal evaluations.28
The FAR-mandated process, which requires government
assessing officials to log on to a separate system with cumbersome features, has been criticized for its lack of use and
unnecessary complexity. Not surprisingly, the Department of
Defense has repeatedly admitted that obtaining past performance reports has been problematic, and even as recently as
fiscal year 2012, the majority of defense contracting activities
have consistently been less than 70-percent compliant with
the FAR reporting requirement on past performance.29
Clearly, the time has come to take a different approach to
evaluating past performance. Exhortation by regulation and
memo alone will not suffice; a more user-friendly and
business-like system is demanded.
Alternatives for the Enlightened
Federal acquisition has long been plagued by the general question of how to avoid the low bidder who poses too much risk
of successful performance after award.30 The following
discussion outlines several practical approaches available to
mitigate this concern without seeking to launch an unfamiliar approach to doing business.
Solicitation Method
The success of a reverse auction is necessarily tied to the
method of solicitation used to reach a contract. The most
common medium for reverse auctions for federal agencies is
FedBid, whose website states that solicitations issued using
FedBid are not sealed-bid solicitations under FAR Part 14.31
Within the U.S. government’s current model of reverse
auctions, FedBizOpps postings from September 2012 reveal
that the vast majority of FedBid solicitations state that they
are, in fact, issued as invitations for bids (IFBs), but generally
are publicized on the FedBizOpps website as a combined
synopsis/solicitation for commercial items under FAR 12.6.
These IFBs encompass a wide range of federal agencies, such
U.S. Customs and Border Protection (solicitation numbers
PR20068291 for night vision equipment and PR20068139
for weapons cabinets), the Department of Justice (solicitation
number 12ASEP00402A for a crime forecasting model), the
VA (solicitation numbers VA247-12-Q-0654_01 for phones
and VA245-12-Q-0326 for refrigerators), and the Bureau of
Land Management (solicitation number L12PS01437 for
microfilm scanning).
FedBid’s standard terms and conditions reflect this hybrid
nature of federal reverse auction solicitations. For example,
under “Bidding Requirements,” they state in “Evaluation
Criteria/Basis of Award” that “Buyers may use criteria other
than price to evaluate offers,” and award will be “on the basis
of price, technical capability, delivery, and past performance.”32 Under “Award Criteria,” the solicitation states:
[A]ward will be made to the responsive offeror (who submits
all required submissions on time) whose past performance
does not pose a risk to the government, and whose offer is the
lowest price technically acceptable.
All of these statements serve to place the solicitation method
squarely in the FAR Part 13 or 15 arenas, and not the
traditional domain of the IFB.
In reality, the solicitation format now commonly used for
reverse auctions is a combination of types, borrowing
concepts from three different FAR parts. It has previously
been noted that FAR Part 14 alone is insufficient for reverse
auctions.33 As a related matter, the U.S. Navy refers to FAR
15.306(e) as part of its authority for disclosure of prices during
reverse auctions.34 Reverse auction solicitations can be
regarded as authorized under the rubric of the commercial
item regulations at FAR 12.102(b)–(c), which allow the use of
FAR Parts 13 or 15 procedures as appropriate.
Journal of Contract Management / Summer 2013
9
low bid t yranny, past performance, and reverse auctions
There are advantages to avoiding the IFB as a reverse auction
solicitation type. Apart from the rigid rules and the incongruence of FAR 14.401(a) on receipt and storing of bids, sealed
bidding under FAR Part 14 does not provide for explicit
evaluation of past performance in the award decision as a
determining factor. The procedures in FAR Parts 13 and 15
are more suitable for this purpose and specifically envision
past performance as an evaluation factor in source selection.35
With a FAR Part 14 IFB comes a variety of generally inflexible sealed bidding processes; however, for buys of $150,000
or less, a different type of solicitation could be used: specifically, a request for quotations (RFQ) governed by the much
more flexible simplified acquisition rules of FAR Part 13, as
has been proposed before.36 This was the method used in the
GAO bid protest decision previously cited that approved the
use of reverse auctions. This approach was also available for
acquisitions above $150,000 until the test program for
commercial items expired on January 1, 2012, so a request for
proposals (RFP) under FAR Part 15 would now be needed for
larger buys. Reducing reliance on price alone can be readily
accomplished by leveraging FAR Part 13 or 15 solicitation
procedures and including evaluation factors other than price.
The U.S. Army has even reported some success with pricetechnical tradeoffs in the reverse auction arena.37 The upshot
of this discussion is that traditional sealed bidding is not the
preferred approach.
The problem of the solicitation method for reverse auctions is
not an academic one. A federal agency recently lost a bid
protest at GAO when the protester successfully argued that a
FedBid solicitation did not indicate whether it was an IFB or
an RFQ.38 GAO noted that the agency’s approach resembled
a negotiated acquisition, but elsewhere the solicitation stated
that sealed bidding was being employed. The time has come
to admit consistently that reverse auction solicitations,
regardless of how they are characterized, are not really IFBs at
all. An adequate basis exists in two other FAR parts for the
method now used, and either set of rules can be tapped to
avoid being held hostage to price.
Vickrey Auction
Even if one chose to remain within a FAR Part 14 sealed
bidding framework, a different technique could be tried to
address the problem of unrealistically low bids. In a “Vickrey
auction,” as adapted to a reverse auction setting, the lowest
bidder wins the auction but only has to perform at the price
of the second lowest bidder or slightly less.39 This potentially
reduces the risk inherent in a bidding war during a reverse
auction in which the buyer is compelled to live with an
10 Summer 2013 / Journal of Contract Management
extremely low bid. Instead, sellers are more likely to submit
their genuine best pricing.40 This auction variation is not new
and has its advantages as well as disadvantages,41 yet it offers a
possible method to deal with the persistent accusations of
underpricing. The only change required to the current federal
acquisition process would be to state in the solicitation that
award will be made in this manner.
The FAR’s sealed bidding process has always allowed some
consideration of non-price matters; for example, while not
stated as a formal offer evaluation factor, attributes other than
price can be reviewed in a pre-award survey conducted as part
of a contractor responsibility determination under FAR
9.104–105. Furthermore, the FAR provision governing award
of sealed-bid contracts (52.214-10(b)(2)) already explicitly
permits the government to award to other than the lowest
bidder, and there is no prohibition against Vickrey auctions in
the FAR. Consequently, even if the recommendation to
switch from IFBs to RFQs or RFPs is not accepted, the
Vickrey auction is still an available alternative to current
practice to deal with underpricing problems.
Past Performance
A familiar adage warns that “past performance is no guarantee of future success.” Also, one would expect most contracting offices to prefer good present or future contractor
performance rather than to devote substantial resources exclusively to collecting data on contracts above an arbitrary dollar
threshold from years gone by; such data may no longer be
relevant, as programs and contractor personnel change over
time. Despite these drawbacks, evaluating contractor past
performance continues to be a priority for federal agencies
based on overarching direction from the Office of Federal
Procurement Policy.42 The means for accomplishing this task
could be significantly improved.
The topic of how to evaluate contractor past performance in
an easy manner for reverse auctions has been discussed before
in fairly general terms.43 Lacking has been a specific proposal
for implementation within the existing regulatory structure.
Instead of the current system, which depends on external
sources (PPIRS components like CPARS) or asking other
buyers for feedback by e-mailing questionnaires, something
better is needed. A recent issue of Contract Management
contained an article on reverse auctions and another article on
past performance evaluations, but the two were never
connected.44 The following alternatives build on work45 aimed
to provide this “missing link” as a key ingredient for an
evolving federal acquisition system, and could be implemented without a great deal of difficulty.
low bid t yranny, past performance, and reverse auctions
Evaluating Alerts
In cases where past performance has been a concern, the
FedBid.com reverse auction system allows the buyer for a
problem purchase to enter an “Alert” into the FedBid system
regarding a specific contractor that will be viewable by other
buyers.46 Although these alerts are only a warning system
(simply identifying that a given contractor has had a problem
in the past, about which one may contact the buying agency
for more details), rather than a complete past performance
system, they can be used in their current form to promote
better buying decisions in a more structured manner. The
following techniques for making the alert system more
systematic for the purpose of past performance evaluation
might be implemented.
It is possible to convert the number of alerts in the FedBid
system for a given contractor to an evaluation factor by
adding 1 percent (as an illustration) to the contractor’s price
for each alert. In this way, a contractor that otherwise would
be the low bidder would have less opportunity for winning
due to its performance problems. Obviously, the solicitation
would need to explain that this technique will be used so that
competitors are aware of it.
Each bidder could be required to have a past performance
rating. The reverse auction platform might convert alerts to a
percentage positive feedback or five-star rating system. Under
a percentage system (comparable to what eBay uses), each
alert could result in a 5-percent reduction in rating, for
illustrative purposes, so that a bidder with five alerts could be
rated as 75 percent positive instead of 100 percent. Alternatively, in a five-star system, a factor could be deducted based
on the number of alerts. For example, a rating of “5” could
apply to an experienced contractor with no alerts, “4” for a
contractor with one or two alerts, and so on.
Ratings as an Evaluation Factor
As previously noted, the current FedBid terms and conditions
already anticipate evaluation of past performance. These
could be revised to state explicitly how the new process would
work, namely that the contracting officer may award to a
higher-rated company even if it is not the lowest-priced
competitor, such as whenever prices are similar and past
performance is critical to program success. Sample wording
that might be added to the standard FedBid terms and
conditions could include: “If the lowest-priced offerors are
similar in price, award may be made to the offeror with the
highest past performance rating”; or “Past performance
ratings may be the determining factor in the award decision.”
A seller with no past performance could be shown in the
system as a new contractor, much the way Amazon.com does,
so that the required neutralizing effect would occur. As for
how to record and collect the necessary evaluations into the
system, the reverse auction medium could require buyers to
answer simply “yes” or “no” to the question “Was your
experience with this seller positive or negative?” at time of
closeout, to make the process as simple as possible.
If deemed necessary to enforce compliance, one reverse
auction system control could be to require that buyers would
not be able to award any new acquisitions using a reverse
auction without rating the most recent completed reverse
auction purchase, or something similar. By only requiring a
single, binary question to be answered (with space for
optional narrative comments, or a Facebook-style “like”
feature), this approach would eliminate the charge that
evaluating contractor past performance is too difficult.
Advantages of the percentage or star-based rating proposal are
immediate access to past performance information in one
place (the reverse auction platform itself), easily understood
ratings recognizable in the private sector as well, and reduced
administrative burdens on the buyer.
The PPIRS is far more rigid and inflexible than it needs to be
for effective contractor past performance evaluation. For
example, the Construction Contractor Appraisal Support
System module requires the past performance evaluator to
complete no fewer than 33 elements for a construction
contract. The CPARS is somewhat less complex, but still
overly complicated, which seems particularly at odds with the
dynamic setting of reverse auctions.
A class deviation would be needed from FAR 42.1503(b)–(c)
to pursue the initiatives previously described, solely because
the regulations make use of PPIRS and its convoluted appeals
system mandatory. This should not be viewed as an insurmountable task; class deviations concerning FAR past
performance regulations have been granted on multiple
occasions in the past, over the course of many years.47 The
simplest approach would be to authorize a class deviation
from the FAR for reverse auctions that are conducted on a
platform that includes past performance information, instead
of requiring the use of any PPIRS components. The percentage or star-based rating system is an efficient,
user-friendly approach that is more recognizable in validity
than the current practice of contacting other agencies on an
ad hoc basis or trying to rely on the PPIRS. In fact, CPARS
asks the contracting officer, at the conclusion of a contractor
Journal of Contract Management / Summer 2013
11
low bid t yranny, past performance, and reverse auctions
evaluation, to rate the usefulness of the CPARS itself (on a
scale of 1 to 10). Unfortunately, the system itself never
connects directly with contract award decisions.
In addition to the lack of integration of past performance
evaluation in U.S. government reverse auctions, the current
regulatory regime ignores a key principle of human-centered
design,48 which is that a system must take into account the
environment in which it is used if it is to be effective. Until
this gap in federal acquisition is addressed, little improvement
can be expected in the past performance arena.
Protests: The Achilles Heel?
No matter how appealing in theory and practical in form the
proposed expansion of past performance evaluation in reverse
auction source selections may be, prospects for success are
dim at best without a corresponding reform of the bid protest
system. Bid protests are widely regarded as “poison in the
well” of federal acquisition,49 are reported in the media as
increasing in recent years,50 and in fact have risen in number
at GAO every year from 2007 to 2012, comprising more than
a 75-percent jump for that period.51 In stark distinction, the
volume of private-sector contract litigation has undergone a
long and substantial decline.52
Past performance evaluation in particular has been a major
cause of protests in recent years. As of March 2012, for the
period 1999–2012, issues of past performance evaluation at
both GAO and the Court of Federal Claims accounted for
160 protests.53 Some have even gone so far as to wonder
whether, as bid protests again become de rigueur, they should
be considered “just one more milestone in the federal
procurement process.”54 The subject simply cannot be ignored
by policymakers or practitioners.
In a recent protest case, the Court of Federal Claims ruled
that the forum handling the vast majority of bid protests,
GAO, was “irrational,”55 yet GAO decisions continue to
govern the conduct of the acquisition workforce. Protest
concerns are such a prominent source of delays, wasteful
activity, and defensive behavior that there has recently been a
renewed call for elimination or substantial limitation of
contractors’ ability to file protests.56 This would require a
statutory waiver, but since 1994, federal law57 has provided
that the Office of Federal Procurement Policy (OFPP) may
allow U.S. government agencies to test innovative acquisition
methods. The authority originated in the Federal Acquisition
Streamlining Act and gives OFPP the ability “to waive the
application of any provision of law” subject to congressional
12 Summer 2013 / Journal of Contract Management
notification. Protest reform proposals could well use this test
authority. Though rarely used, this authority has offered
beneficial results in the past, such as the test by the Nuclear
Regulatory Commission of “focused source selection.”58 The
issues raised here are significant enough to justify the use of
the authority where needed.
At least four alternatives to the current system could be
considered:
• Eliminate the right to protest entirely;
• Follow a recent recommendation59 to limit the right
to protest to major system acquisitions;
• Require protesters to post a bond, which would be
subject to forfeit if the protest is unsuccessful60; or
• Adopt the “English Rule” regarding protest costs.61
Anything that would more appropriately allocate the costs of
the bid protest system would be beneficial. A recent empirical
study catalogs a host of illegitimate bases for protest admitted
by protesters, such as “[h]urt the winner by delaying the
award” and “[d]emonstrate resolve to board members or
senior executives.”62 The rule against frivolous protests in court
(such as Rule 11 of the Federal Rules of Civil Procedure63 for
bid protests to federal courts) has failed to deter such litigation.
It should be noted that GAO has no such rule, which can be
regarded as a contributing factor to the overabundance of
protests at that forum, now numbering in the thousands every
year. GAO itself has admitted that protests are a significant
burden to its own operations, and has proposed an (admittedly small) filing fee to help offset its costs.64
When contractors have nearly unfettered ability to stop the
U.S. government in its tracks at essentially no cost,65 neither a
reverse auction nor any other solicitation method is likely to
find uniform success. Nevertheless, reverse auctions in general
have thus far produced fewer protests, probably because they
have typically relied solely on an objective basis for source
selection: price. If past performance were added to the mix,
though, the relative paucity of reverse auction protests would
be unlikely to continue.
Adding an integrated, simplified past performance aspect to
reverse auctions will likely spawn a considerable amount of
protest activity. For such reforms to be effective, however,
legislative change on bid protests is needed. Prospects for
integrating past performance into reverse auctions would be
significantly brighter if bid protests did not stand in the way.
low bid t yranny, past performance, and reverse auctions
Conclusion
Tyranny, like hell, is not easily conquered; yet we have this
consolation with us, that the harder the conflict, the more
glorious the triumph. What we obtain too cheap, we esteem
too lightly; it is dearness only that gives every thing its value.
~Thomas Paine, 177666
All indications are that reverse auctions in federal acquisition
are here to stay, if for no other reason than that the current
budget climate is conducive to contracting tools like reverse
auctions that offer potential savings. At the same time,
evaluation of contractor past performance remains a key facet
of source selection, and caution abounds concerning the
hazard of letting price overshadow other factors. We stand
today at the confluence of these trends.
If contractor past performance evaluation is to have significant meaning for today’s acquisition, it should encompass
reverse auctions in an easily manageable way. This article has
presented practical approaches that would enhance our ability
to do so. It has been nearly two decades since the Federal
Acquisition Streamlining Act of 199467 launched the ecommerce initiative and the renewed emphasis on reporting
and evaluating contractor past performance. The federal
acquisition system’s guiding principles are themselves aptly
stated in terms of performance standards, which include
balancing the goals of cost, quality, and timeliness.68 Pursuing the alternatives presented here would help fulfill this
fundamental mandate of U.S. government contracting. JCM
Endnotes
1. Defense Acquisition University, Reverse Auctioning (Continuous
Learning Course 031) (2012), available at www.dau.mil.
2. See Sue Arrowsmith, “Electronic Reverse Auctions Under the
New EC Procurement Directives,” Public Procurement Law
Review 14(4) (2005): 203–237.
3.B-295463, MTB Group, Inc. (February 23, 2005); affirmed
in MTB Group, Inc. v. U.S., 65 Fed. Cl. 516 (2005).
4.B-405688, Encompass Group LLC (December 9, 2011).
5. See Shawn Tully, “Going, Going, Gone!: The B2B Tool That
Really Is Changing the World,” Fortune 141(6) (March 20,
2000): 132–145.
6. Defense Acquisition University, see note 1.
7. See Jacob Ruytenbeek, “Reverse Auctions: Turning Winners
into Losers,” Contract Management (October 2012), 40–45;
and David C. Wyld, “Procuring Dollar and Cost Savings: A
Case Study of the Implementation of Reverse Auctions in
the Federal Government,” International Journal of Managing
Value and Supply Chains 1:2 (December 2010): 1–25.
8. See Olivia Korostelina, “Online Reverse Auctions: A Cost-Saving
Inspiration for Businesses,” Dartmouth Business Journal
(2012), available at http://dartmouthbusinessjournal.com;
General Services Administration, “Local Energy Initiative
Saves Millions at Federal Facilities” (2012), available at www.
gsa.gov/portal/content/137511; Sarah Chacko, “Agencies
Realize Cost Savings Through Reverse Auctions,” Federal
Times (June 25, 2012), available at www.federaltimes.com;
Fedbid.com, “Buyer Frequently Asked Questions,” available
at www.fedbid.com/buyers/government/faq/; Robert
Brodsky, “Study Hails Use of Online Reverse Auctions,”
Government Executive (January 2011), available at www.
govexec.com; Whitney E. Brown and Lana D. Ray, “Electronic
Reverse Auctions in the Federal Government” (2007), Naval
Postgraduate School MBA Professional Report, available
at www.dtic.mil/cgi-bin/GetTRDoc?AD=AD475963;
and Defense Acquisition University, see note 1.
9. See Defense Logistics Agency, “Reverse Auctions Become
Mandatory for Competitive, High Cost Contracts” (2012),
available at www.dla.mil/DLA_Media_Center/Pages/
newsarticle20120911049.aspx; Defense Logistics Agency,
“DLA Troop Support Subsistence Saves $5 Million on FirstStrike Rations Buy” (2012), available at www.dla.mil/
DLA_Media_Center/Pages/newsarticle201208270851.
aspx; General Services Administration, “Local Energy
Initiative Saves Millions at Federal Facilities” (2012), available
at www.gsa.gov/portal/content/137511; and General
Services Administration, “DFAS Gets ‘Best Buy’ Through
Government’s Largest Ever On-Line Reverse Auction” (2000),
available at www.gsa.gov/portal/content/100610.
10. See Moshe E. Shalev and Stee Asbjornsen, “Electronic
Reverse Auctions and the Public Sector: Factors
of Success,” Journal of Public Procurement 10:3
(2010): 428-452; and Brown and Ray, see note 8.
11. See Stephen P. Gennett, “Reverse Auction Bidding Can Bite
Back,” Carolinas AG (2012), available at www.cagc.org.
12. See Wyld, note 7; and Brown and Ray, note 8.
13. See Chacko, note 8.
14. See Associated General Contractors of America,
“Oppose Reverse Auctions to Procure Construction
Services” (2012), available at www.agc.org.
15. See Steve Kelman, “VA and Reverse Auctions: What’s
Up?” Federal Computer Week (March 13, 2012),
available at www.fcw.com; Michael O’Connell, “Reverse
Auctions Not All a Bed of Roses, One Expert Says,”
Federal News Radio (June 20, 2012), available at www.
federalnewsradio.com; and Ruytenbeek, see note 7.
16. See Defense Logistics Agency (September 22, 2012),
note 9.
17.Elena Katok and Achim Wambach, “Collusion in
Dynamic Buyer-Determined Reverse Auctions,” article
submitted to Management Science, manuscript
no. MS-00699-2008, available at www.utdallas.
edu/~emk120030/collusion_post.pdf.
18. See Gennett, note 11.
19. See Matthew Weigelt, “VA Halts Reverse Auctions, Citing
‘Violations’ of Contract Hierarchy,” Federal Computer
Week (March 7, 2012), available at ww w.fcw.com.
Journal of Contract Management / Summer 2013
13
low bid t yranny, past performance, and reverse auctions
20. See Brown and Ray, note 8.
21.See Small Business Administration, “Impact of Reverse
Auctions on Small Businesses” (January 21, 2012),
available at www.sba.gov/advocacy/816/42071.
22. See Matthew Weigelt and Camille Tutti, “VA Resumes Reverse
Auctions, but Questions Linger,” Federal Computer Week
(May 1, 2012), available at www.fcw.com; and Department
of Veterans Affairs, “Updated Policy and Procedures for
Using Reverse Auctions (VAIQ 7220215)” (April 3, 2012),
available at www.va.gov/oal/pps/flash12-14.asp.
23. See Defense Logistics Agency (September 12, 2012), note 9.
24. See Phyllis Anzalone, “Sealed-Bid vs. Reverse Auction:
Purchasing Electricity,” NBIZ Magazine (Spring 2007),
available at www.nbizmag.com; Susan L. Turley, “Wielding
the Virtual Gavel—DOD Moves Forward with Reverse
Auctions,” Military Law Review 173 (September
2002): 1–67; and Korostelina, see note 8.
25. uShip, “Learn More,” available at www.uship.com.
26. See Jack Horan and John Ziegler, “Fair Performance
Evaluations Revisited,” Contract Management (October
2012: 84–88; and Kara M. Sacilotto, “Challenging Past
Performance Evaluations: FAR Processes and Claims before
the Court of Federal Claims and the Boards of Contract
Appeals,” Briefing Papers 11-10 (2011). For some recent bid
protests on past performance evaluation, see B-406894,
NSR Solutions (September 20, 2012), and B-407061,
LOGMET LLC (October 17, 2012), available at www.gao.gov.
27. See Matthew Weigelt, “Bill Strips Contractor Reviews from Past
Performance Evaluations,” Washington Technology (March
1, 2012), available at www.washingtontechnology.com.
28.Senate Bill S.2139, “The Comprehensive Contingency
Contracting Reform Act of 2012,” Section 224.
29. Department of Defense, “Contractor Past Performance
Reporting—4th Quarter 2012,” Director, Defense Procurement
and Acquisition Policy, Memorandum (October 11, 2012),
available at www.acq.osd.mil/dpap/; Department of Defense,
“Contractor Past Performance Reporting—3rd Quarter 2012,”
Director, Defense Procurement and Acquisition Policy,
Memorandum (July 11, 2012), available at www.acq.osd.mil/
dpap/; Department of Defense, “Contractor Past Performance
Reporting—2nd Quarter 2012,” Director, Defense Procurement
and Acquisition Policy, Memorandum (April 26, 2012), available
at www.acq.osd.mil/dpap/; Department of Defense, “Improving
Contractor Past Performance Assessments,” Director,
Defense Procurement and Acquisition Policy, Memorandum
(February 24, 2011), available at www.acq.osd.mil/dpap/.
30.See Stan Soloway, “Doing the Low-Price Limbo?” Washington
Technology (October 1, 2012), available at www.
washingtontechnology.com; and Daniel P. Dwyer, “Who is the
Lowest Responsible Bidder?” Litigation (2010), available at
www.utbf.com/litigation/page/2/; see also Ruytenbeek, note 7.
31.See FedBid, note 8.
32. DHS/CBP solicitation number PR20068291.
33.Turley, see note 24.
34.Naval Supply Systems Command, “Reverse Auctions—
Frequently Asked Questions” (2012), available at
14 Summer 2013 / Journal of Contract Management
www.navsup.navy.mil/navsup/ourteam/
navsupwss/business_opps/auctions/faq.
35.At FAR 13.106-2(b)(3) and 15.304(c)(3).
36.See discussion in Turley, note 24, at 60.
37. See Brown and Ray, note 8.
38.B-406966.3, Kingdomware Technologies (November 27, 2012).
39.See Robert E. Lloyd, “Acquisition Reform Using the Vickrey
Auction Technique,” Proceedings of the 1997 Acquisition
Research Symposium (Washington, DC: DSMC/NCMA, 1997):
337–344; David Lucking-Reiley, “Vickrey Auctions in Practice:
From Nineteenth-Century Philately to Twenty-First Century
E-Commerce,” Journal of Economic Perspectives 14:3 (2000):
183–192; and Defense Acquisition University, note 1.
40. See Brown and Ray, note 8.
41. See Lucking-Reiley, op. cit.; and Michael H. Rothkopf, “Thirteen
Reasons Why the Vickrey-Clarke-Graves Process is not
Practical,” Operations Research 55:2 (2007): 191–197.
42. Office of Federal Procurement Policy, “Improving Contractor
Past Performance Assessments: Summary of the Office
of Federal Procurement Policy’s Review, and Strategies
for Improvement” (January 21, 2011), available at www.
whitehouse.gov/omb/procurement_index_memo/.
43.See Steve Kelman, “How to Make Reverse Auctions
Even Better,” Federal Computer Week (April 8, 2011),
available at www.fcw.com; and Luther D. Tupponce, “The
Missing Link in Federal Procurement Evolution: Online
Commercial Seller Rating Systems for Commodity
Buys,” Contract Management (2006): 51–57.
44. See Ruytenbeek, note 7; and Horan and Ziegler, note 26.
45. Tupponce, note 43.
46. Ibid.
47. See Department of Defense, “Class Deviation—Performance
Reporting Thresholds,” Director, Defense Procurement
and Acquisition Policy (September 13, 2012), available
at www.acq.osd.mil/dpap/; and Department of Defense,
“Class Deviation—Past Performance,” Director, Defense
Procurement (January 29, 1999), available at www.acq.
osd.mil/dpap/dars/classdev/deviations/99o0002.pdf.
48. See David Travis, “ISO 13407 is Dead. Long Live
ISO 9241-210” (2011), available at www.userfocus.
co.uk/articles/iso-13407-is-dead.html.
49. See Steve Kelman, “The Return of the Protest,” Federal
Computer Week (April 2, 2007), available at www.fcw.com.
50.See Kathleen Miller, “As U.S. Government Contracts Dwindle,
Losers Protest More,” Washington Post (April 29, 2012),
available at www.washingtonpost.com; and Jason Miller,
“Analysis: Friction Increasing Between Agencies, Vendors,”
Federal News Radio (December 5, 2011), available at www.
federalnewsradio.com/index.php?nid=851&sid=2657365.
51.GAO, B-158766, “Bid Protest Statistics for Fiscal Years
2008-2012” (November 13, 2012), available at www.
gao.gov; “Bid Protest Statistics for Fiscal Years 20072011” (November 11, 2011), available at www.gao.gov.
low bid t yranny, past performance, and reverse auctions
52.See Stewart Macaulay, “Freedom from Contract:
Solutions in Search of a Problem?” Wisconsin
Law Review, (2004): 777–820.
53.Wifcon (Where in Federal Contracting), “FAR 15.305(a)
(2)(ii) Past Performance/Experience—Comptroller
General—Key Excerpts” (2012), available at
www.wifcon.com/pd15305a2ii.htm.
54.Bob Lohfeld, “How to Avoid a Contract Protest,”
Washington Technology (March 22, 2012), available
at www.washingtontechnology.com.
55.Turner Construction Co. v. U.S., 94 Fed. Cl. 561, 581
(2010); affirmed, 645 F. 3d 1377 (Fed. Cir. 2011).
56.See Gregory A. Garrett, Shaw H. Cohe, and Robert
A. Burton; “U.S. Federal Government Procurement:
Common-Sense Improvements to Save Taxpayer Dollars”;
Contract Management (March 2012): 12–15.
57. 41 U.S.C. 413.
58.OFPP, “Test Plan of Nuclear Regulatory Commission
Pursuant to Federal Acquisition Streamlining Act of
1994,” 64 Federal Register 13823 (March 22, 1999).
59.Garrett et al., see note 56.
60.See Steven M. Maser, Vladimir Subbotin, and Fred
Thompson; “The Bid-Protest Mechanism: Effectiveness
and Fairness in Defense Acquisitions?” (2012); available
at www.willamette.edu/~smaser/The%Bid-Protest%20
Mechanism.pdf. To be effective, the bond would have to
be substantial, above and beyond the minimal filing fee
recently proposed by GAO. For a discussion of the problem
of self interest by protesters, see Robert E. Lloyd, “Efficiency,
Justice, and Rent Seeking in Federal Contract Dispute
Resolution,” Conflict Resolution and Public Policy, Miriam K.
Mills (ed.) (New York: Greenwood Press, 1990): 101–114.
61.In England and many other countries, the loser in
litigation pays the costs of the winner. See Walter
Olson, “Loser Pays,” Point of Law (2004), available at
www.pointoflaw.com/loserpays/overview.php.
62.Maser et al., note 60, at 10.
63.Available at www.uscourts.gov/uscourts/RulesAndPolicies/
rules/2010%20Rules/Civil%20Procedure.pdf.
64.See Nick Taborek, “Pay-Up-or-Shut-Up Fee Proposed
for Federal Contracting Protests,” Bloomberg
(November 19, 2012), available at www.
bloomberg.com/news/print/2012-11-19/.
65.FAR 33.103(f), 33.104(b), and 33.104(c) prevent or
suspend contract awards when bid protests occur.
66.Thomas Paine, The Crisis (Chehalis, WA: Big
Fish Publishing, 2010 (1776)): 1.
67. 41 U.S.C. 401.
68.See FAR 1.102-2.
Journal of Contract Management / Summer 2013
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