Reverse Auctions

I would suggest that the answer depends. How to tell? What were the solicitation provisions based on FAR Part 12, FAR Part 13, FAR Part 14 and/or 15? If the solicitation confused the issue and did a mix, and it were me, I would error on the side of what FAR Part was used to provided the primary approach to evaluation.

H2H,

I say it's negotiated based on FAR 15.000, which states: "A contract awarded using other than sealed bidding procedures is a negotiated contract (see 14.101)." I interpret that to mean that if you did not use the procedures in FAR part 14 to award the contract, then it's a negotiated contract. Actual negotiation need not take place.

Don, fair enough. Thanks for the information.

It helps!

Not directly on point to the question raised but providing these further links regarding reverse auction.

http://www.gao.gov/decisions/bidpro/295463.htm

http://www.uscfc.uscourts.gov/sites/default/files/CMILLER.MTB.pdf

What do y'all think? Is a contract awarded via Reverse Auction a negotiated procurement? If not, where can I find support for that position in the FAR?

Thanks!

H2H"

A FAR Search through the Hill AFB FAR Site revealed that, for Defense Logistic Agnecy, Army and DoD, Reverse Auctions are considered to be a form of price discussions under 15.4.

Don - While I agree that specific to H2H's example (non-commercial and implied over $150,000) your response is appropriate I do question whether your cite of FAR 15.000 would apply all the time. Example - What if a commercial item at $6.2 million done under FAR 13, what is it then?

Historically, "small purchases" (the name we formerly used for what we now call simplified acquisitions) were considered to be a form of negotiated procurement, regardless of the process used to make the award, because competition was limited to a certain class of business firms. That categorization goes back a long way. But when the Competition in Contracting Act was passed, in 1984, that categorization was dropped, because it was no longer needed. Now, simplified acquisition is usually treated as a category of its own.

June 16, 2013 edit: Before CICA, small purchases ($25,000 or less) were a form of negotiated procurement, regardless of the process used, because the CO was not required to get "full and free" competition. Small business set-asides were also considered negotiated procurements regardless of process, also because competition was not "full and free," but limited to a certain class of businesses.

Historically, "small purchases" (the name we formerly used for what we now call simplified acquisitions) were considered to be a form of negotiated procurement, regardless of the process used to make the award, because competition was limited to a certain class of business firms. That categorization goes back a long way. But when the Competition in Contracting Act was passed, in 1984, that categorization was dropped, because it was no longer needed. Now, simplified acquisition is usually treated as a category of its own.

Vern,

Were set-asides over the small purchase threshold considered "negotiated" pre-1984, even if sealed bidding was used?

Also, check your answer to "What is negotiation?" in The Source Selection Answer Book (2000 edition).

Don - Have you considered FAR 2.0 and this definition -

“Simplified acquisition procedures” means the methods prescribed in Part 13 for making purchases of supplies or services."

So would not a full read of the FAR provide that as defined by the FAR you have "simplified acquisition procedures", "sealed bidding procedures" and "negotiated procedures" which then leads to a "simplified acquisition", or a "sealed bid acquisition" or a "negotiated acquisition".

Vern,

Were set-asides over the small purchase threshold considered "negotiated" pre-1984, even if sealed bidding was used?

Also, check your answer to "What is negotiation?" in The Source Selection Answer Book (2000 edition).

Don,

I checked my answer in The Source Selection Answer Book. I wouldn't write the same thing today. It is clear that simplified acquisition is now considered distinct from negotiated acquisition. See, e.g., M3 Corp., GAO Decision B-278906, 98-1 CPD para. 95, Apr. 1, 1998:

[T]he protester has confused the requirements applicable to negotiated procurements with those applicable to procurements using simplified acquisition procedures.

See also Dubinsky v. U.S., 43 Fed. Cl. 243, Mar. 31, 1999:

[T]he court finds that this procurement was not conducted under simplified acquisition procedures; rather, as represented by the agency to GAO, the procurement was conducted pursuant to standard negotiated procurement regulations in Part 15 of the FAR.

Speaking historically, in 1984 10 U.S.C. 2302(2) (1984) defined negotiate as "make without formal advertising." Defense Acquisition Regulation 1-201.11 said:

Negotiate and negotiation, when applied to the making of purchases and contracts, refer to making purchases and contracts without formal advertising.

The earliest version of the FAR said, at 15.101:

"Negotiation" means contracting without formal advertising. Any contract awarded without the use of formal advertising procedures is a negotiated contract (see 14.101).

Before CICA, COs had to use formal advertising unless one of 17 specific statutory exceptions permitted them to use negotiation. The keys to the distinction between formal advertising and negotiation were that (1) formal advertising required "full and free" competition, but negotiation did not, and (2) formal advertising required award to the low, responsive, responsible bidder, but negotiation did not.

Before CICA, Federal statutes and the Armed Services Procurement Regulation -- later called the Defense Acquisition Regulation -- specified the circumstances in which agencies could contract by negotiation:

One circumstance, 10 U.S.C. 2304(a)(1) (1984), 32 C.F.R. 3-201 (1984), was the "national emergency" exception to the requirement for formal advertising, which covered small business set-asides, regardless of dollar value. See 32 C.F.R. 3-201.2( b )(ii) (1984).

The other circumstance/exception, 10 U.S.C. 2304(a)(3) (1984), 32 C.F.R. 3-203 (1984), covered purchases valued at not more than $25,000. This was called the "small purchase" exception. The Federal Acquisition Streamlining Act of 1994 renamed it "simplified acquisition" and raised the threshold to $100,000. It is presently $150,000, $300,000, or $1,000,000, depending on the circumstances.)

The same rules applied to most civilian agencies, but pursuant to 41 U.S.C. 252( c ) and the old Federal Procurement Regulation.

The distinction between formal advertising and negotiation was based on competition rules. When using formal advertising, the CO had to solicit bids from all qualified sources, obtain "full and free" competition, and award to the low responsive, responsible bidder. However, there was no requirement for full and free competition or award to the low bidder when a CO conducted a negotiated procurement, and COs could limit competition in a number of ways for a number of reasons. But any limitation on competition had to be authorized by statute.

My recollection is that when making a set-aside agencies reported the procurement as negotiated, even when formal advertising procedures were used and regardless of dollar value, because competition was limited to small businesses. I think we had to do that to get credit for a set-aside. However, I haven't yet found anything to verify my recollection and I don't entirely trust my memory. (Maybe one of the other old timers can recall.) When making a small purchase agencies could, like now, use any kind of procedure, including formal advertising. Other negotiated procurements had to include discussions with offerors within a competitive range, unless award without discussions was permissible under certain circumstances.

CICA eliminated the competition-based distinction between what we now call "sealed bidding" and "contracting by negotiation," and we now use a strictly process-based distinction. You can use sealed bidding or negotiation, but must get full and open competition using either process unless an exception applies. For a full discussion of the pre-FAR, pre-CICA rules, see Cibinic and Nash, Federal Procurement Law, 3d ed., Volume I (1977).

As to the original question, I think that a reverse auction, like any other acquisition, could be either a simplified acquisition or a negotiated procurement, depending on the specific procedure used to make the award. I doubt that a reverse auction could be considered sealed bidding under any circumstances, because offers are not sealed.

Thanks for the history lesson, Vern.

My recollection is that when making a set-aside agencies reported the procurement as negotiated, even when formal advertising procedures were used and regardless of dollar value, because competition was limited to small businesses. I think we had to do that to get credit for a set-aside. However, I haven't yet found anything to verify my recollection and I don't entirely trust my memory.

I think I qualify as an old-timer. From 1980-1984 I was an Army instructor for the basic procurement course at ALMC (Fort Lee, VA). My memory is the same as Vern's. Small business set-asides were considered negotiated acquistions under exception 2, even when formal advertising (I think the term was small business restricted advertising) was used. I also remember that several of the 17 exceptions required a Secretarial D&F, and the perhaps apocryphal story of the contracting officer who did not know what that meant had had his secretary sign the D&F.

Thanks, wvanpup! It's good to know I'm not the only old f*** around here and that I'm not (yet) delusional. "Small business restricted advertising" is the right term. The following is from the 1980 DAR:

1-706.2 Contract Authority. Contracts for total (including combined small business/LSA) or partial set-asides entered into by conventional negotiation (see 1-706.5(6) and 1-706.6(d) or by "Small Business Restricted Advertising" (see 1-706.5(6)) are negotiated acquisitions and shall cite as authority 10 U.S.C. 2304(a)(1) in the case of a unilateral determination (see 3-201.2( b )(ii) or 10 U.S.C. 2304(a)(17) and Section 15 of the Small Business Act in the case of a joint determination.

I hope that story about the secretary is true.

I hope that story about the secretary is true.

So do I, particularly with the number of times I have told the story as if it were true.

My memory is the same as Vern's. Small business set-asides were considered negotiated acquistions under exception 2, even when formal advertising (I think the term was small business restricted advertising) was used.

Now I am embarrassed. Exception 2 was for urgency. I should have remembered because our school building was hit by lightning, and it knocked out our air conditioning. We had an emergency contract to get a new air conditioning system (teaching in windowless rooms in Virginia during July and August was no fun), and I always used that as an example of when to use exception 2. I also remember the story because I was staff duty officer the evening it happened. The fire alarm was triggered and I went around the building to make sure it was evacuated (the building was used for college courses in the evening). Sure enough, some major was teaching a class. When I told him that it was not a drill, he said he knew that and thought it was just a mistake, so he continued his class. He was a bit confused when I, a young JAG Captain, told him he had to take the class outside, but he complied.

Yes, the correct exception for set-asides was 1, for national emergencies, which was the justification for set-asides in those days. No need to be embarrassed. You remember the restricted advertising practice.