GAO finds agencies need guidance on use of reverse auctions

In a study released on December 11, 2013, the Government Accountability Office (GAO) found that the potential benefits of reverse auctions–competition and savings–have not been maximized by federal agencies.

Key findings include:


  • Over one-third of fiscal year 2012 reverse auctions had no interactive bidding, where vendors bid against each other to drive prices lower.
  • Almost half of the reverse auctions were used to obtain items from pre-existing contracts that in some cases resulted in agencies paying two fees–one to use the contract and one to use the reverse auction contractor’s services.
  • There is a lack of comprehensive government-wide guidance and the Federal Acquisition Regulation (FAR), which is the primary document for publishing uniform policies and procedures related to federal acquisitions, does not specifically address reverse auctions. As a result, confusion exists about their use and agencies may be limited in their ability to maximize the potential benefits of reverse auctions.

The Departments of the Army, Homeland Security, the Interior, and Veterans Affairs used reverse auctions to acquire predominantly commercial items and services–primarily for information technology products and medical equipment and supplies–although the mix of products and services varied among agencies. Most–but not all–of the auctions resulted in contracts with relatively small dollar value awards–typically $150,000 or less–and a high rate of awards to small businesses. The four agencies steadily increased their use of reverse auctions from fiscal years 2008 through 2012, with about $828 million in contract awards in 2012 alone. GAO was not able to analyze data from a fifth agency, the Defense Logistics Agency (DLA), because it collected only summary level information during fiscal year 2012. DLA guidance states that the reverse auction pricing tool should be used for all competitive purchases over $150,000.

Four agencies used the same commercial service provider to conduct their reverse auctions and paid a variable fee for this service, which was no more than 3 percent of the winning bid amount. DLA conducts its own auctions through a purchased license. Regardless of the method used, according to agency officials, contracting officers are still responsible for following established contracting procedures when using reverse auctions.

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VA contracts with non-VA medical providers lacked performance requirements, GAO says

Some Veterans Affairs Department contracts with non-VA medical providers didn’t contain specific performance requirements and contracting officer  representatives didn’t have time to monitor the contracts due to other duties,  an Oct. 31 Government Accountability Office report says.

Of the 12 contracts GAO reviewed from the four VA medical centers, 10 lacked specific performance requirements in  one or more of six categories: type of provider or care; credentialing and  privileging; clinical practice standards; medical record documentation; business  processes; and access to care.

In one case, a VA medical center cardiothoracic contract didn’t contain a  statement describing the contract provider’s responsibilities for reporting and responding to adverse events and patient complaints.

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LPTA contracts gaining favor among agencies, but give vendors less incentive to innovate, study says

Lowest price technically acceptable procurements have been gaining favor  among agencies, but that gives vendors less incentive to be innovative if the  approach costs more, an Oct. 24 Market Connections and Centurion Research study says.

Under LPTA, agencies focus more on price than on past performance as long as  the vendor meets minimal job requirements. So if a vendor comes to an agency  with a unique solution that costs more than a competitor who comes with a more  basic solution, the agency is more likely to choose the cheaper solution as long  as it meets the minimum requirements.

The practice has been utilized by the Defense Department through its Better  Buying Initiative, the study says, but has proliferated through other agencies  as well.

The study showed that of the $27 billion in procurements it analyzed, the  Veterans Affairs Department was the biggest user of LPTA outside of the DoD.

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VA awards $275 million contract to track supplies at hospitals

The Veterans Affairs Department awarded Shipcom Wireless of Houston a four-year contract with a maximum value of $275 million to help manage the supply chain in its 152 hospitals at the “point of use” — wards, operating or emergency rooms.

VA’s current supply chain system “is outdated, underutilized and often accomplished manually,” said the department, which wanted to “build a world class advanced supply chain to serve as a benchmark for the overall healthcare logistics industry.”

VA wanted to acquire a point-of-use system that uses automated supply stations to streamline the supply chain for timely delivery of required supplies to the point where those supplies are consumed throughout a hospital.

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How agencies bury noncompetitive procurements

I get a daily FedBizOpps feed of widget and gadget procurements and awards, and have spent literally hours the past two days poring through year-end sole source contract awards.

These are taxpayer dollars expended in an end-of-fiscal-year “use it or lose it” frenzy, but eyeballing these sole source awards is a manual process that requires opening multiple windows to divine what agencies bought and how much they spent.

In many cases agencies don’t disclose what they spent on the sole source contracts, which raises my reporter antenna.

The justification for these non-competitive awards all contain standard boiler plate language — only Vendor X can supply the gadget, software or service and if the contract is not extended or the gizmo acquired, vital operations will cease, often with a threat to national security.

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VHA could save $24M with wider use of purchase cards

Wider use of purchase cards could save the Veterans Health Administration $24  million annually, a report from the Veterans Affairs Department office of  inspector general says.

Using purchase cards saves money because writing  purchase orders is more time-consuming and complex. The banks that provide  purchase cards also offer rebates, around 2 percent, for money spent on the  cards, says the OIG report, dated Aug. 9. The VHA spent about $3 billion on purchases worth $3,000 or less  in fiscal 2012, earning it more than $65 million in rebates.

From April  2011 through March 2012, VA medical facilities did not use purchase cards for $432 million worth of purchases under $3,000. For $244 million of that spending,  the OIG found they had acceptable reasons not to use the cards. Some vendors  don’t accept purchase cards, and the VA can’t use them to pay veterans for  pharmacy copayments or tort claims.

For the remaining $188 million, spent on medical supplies, office equipment, patient transportation, employee  training and more, the VA could have used purchase cards, the report says.  The  OIG estimated that it could’ve saved $20 million in processing costs and  could’ve earned about $4 million in rebates.

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GAO: Government could save $50 billion through strategic sourcing

The Government Accountability Office released a report today detailing how the government is leaving at least $50 billion on the table annually by not taking advantage of strategic sourcing — “a process that moves an organization away from numerous individual procurements to a broader aggregate approach,” according to the report.

The federal government spends roughly $537 billion on federal procurement spending each year, yet just a small fraction of that is managed with strategic sourcing efforts. Four agencies — Defense, Homeland Security, Energy and Veterans Affairs — manage 80 percent of the overall procurement budget, but only 5 percent of their spending is managed with strategic sourcing, the report found.

“While strategic sourcing makes good sense and holds the potential to achieve significant savings, federal agencies have been slow to embrace it, even in a time of great fiscal pressure,” the report reads.

The basic idea behind the Federal Strategic Sourcing Initiative — launched in 2005 — is collaboration among the agencies: collaboration to bargain for the best price on contracts and collaboration to share best purchasing practices. But the initiative was only applied to a small amount of federal procurement spending in 2011, according to the report.

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Unraveling the facts about GWACs

Obama administration officials say there are too many IT procurement vehicles, and they want agencies to consolidate their buying around existing interagency contracts rather than launch new ones. There is even a strong case to cut back on current contracts, which officials say are often duplicative in what they provide for buyers.

Where does that leave governmentwide acquisition contracts (GWACs)?

In early 2012, the Office of Federal Procurement Policy (OFPP) issued rules requiring agencies that wanted to award their own multi-agency contracts (MACs) to submit a business case arguing why those contracts were necessary — something agencies that wanted to award GWACs have had to do for years.

“Agencies are required to balance the value of creating a new contract against the benefit of using an existing one, and whether the expected return on investment is worth the taxpayer resources,” said Dan Gordon, who was OFPP administrator at the time.

Following the 1996 Clinger-Cohen Act that authorized their creation, GWACs became a poster child of sorts for that kind of contract inflation. Many agencies were looking to create their own contracts as testimony to their procurement mojo in an era of huge growth in government IT acquisition. For vendors, GWACs were seen as a hunting license to pursue lucrative government IT business.

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Pentagon says 20 vendors can meet its electronic health record needs

The Defense Department has found 20 commercial software vendors capable of modernizing its electronic health record system, Frank Kendall, undersecretary of Defense for acquisition, technology and logistics, told reporters at the Pentagon today.

Yesterday, Defense Secretary Chuck Hagel backed the use of commercial software in a memo to Kendall. Hagel said he supported competitive procurements for undefined “core” EHR commercial software systems. Kendall said these procurements will provide a modernized Defense health record to replace the department’s existing Armed Forces Health Longitudinal Technology Application system, known as AHLTA.

Kendall said the department’s market research identified three out of the 20 commercial vendors who could provide versions of the Veterans Affairs Department’s electronic health record, the Veterans Health Information Systems and Technology Architecture, known as VistA. While acknowledging VistA could be a candidate for the Defense EHR, Kendall emphasized throughout his briefing the Pentagon wants a modern, “smart” commercial EHR that meets its needs.

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Federal acquisition executives grapple with retirement wave

As the government’s largest buyer, the Defense Department is building up expertise in its acquisition workforce, with perhaps with greater success than some other agencies in this era of contract austerity, the exception likely coming at the most senior executive level.

So said Shay Assad, director of defense pricing, defense procurement and acquisition policy, on Wednesday (Apr. 17, 2013) speaking before an Arlington, Va., audience of contractors in the Coalition for Government Procurement. His own section of the Pentagon, despite the pay freeze and likely furloughs, he said, “has done remarkably well” in retaining talent, with employees who’ve moved on “only in the single digits, mostly because either they decided we weren’t right for them or they weren’t right for us.”

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