Auction tactics cast buying ethics in hazy light

Few things are more enjoyable than a good auction. The atmosphere of competition,
the sing-song of an experienced auctioneer, the chance to pick up a bargain, even the
ability to drop out of a competition unexpectedly—they all appeal to me. But now,
auctions of a different sort are turning up with increasing frequency in federal
contracting. And I find those auctions to be troubling.


Although previous versions of the Federal Acquisition Regulation had specific language
prohibiting auction techniques for agency business, the current version lacks such
language. The new regulations permit a contracting officer to inform a bidder if its
prices are too high or too low—whatever that means. They also permit a buyer to
provide a bidder the price the government has found to be reasonable if developed as a
result of price analysis.


So long as the contracting officer does not provide a bidder with another bidder’s
price—which is a felony violation—the contracting officer is allowed to tell the
other bidders if their prices are too high or too low. They must do so, however, in such a
way as to prevent the information from favoring one over another.


Before the current rewrite, the FAR contained language that specifically prohibited
auction techniques, such as:


The current FAR limits the exchanges that may occur after vendors have submitted their
proposals but prior to contract award. It restricts government personnel involved in an
acquisition from certain conduct:


But the contracting officer may inform an offerer that its price is considered by the
government to be too high or too low. It is also permissible, at the government’s
discretion, to indicate to all bidders the cost or price that the government’s
analysis has identified as reasonable.


The FAR now instructs contracting officers to “indicate to, or discuss with, each
offerer still being considered for award, significant weaknesses, deficiencies, and other
aspects of its proposal [such as cost, price ...] that could, in the opinion of the
contracting officer, be altered or explained to enhance materially the proposal’s
potential for award. The scope and extent of discussions are a matter of contracting
officer’s judgment.”


Lest it be forgotten, the procurement integrity statute imposes criminal and civil
penalties on a person who “knowingly discloses contractor bid or proposal information
or source selection information before the award of a federal agency procurement contract
to which the information relates.”


I believe a dynamic tension exists between procurement integrity and the type of
disclosure allowed by the FAR. The line, however thin, that a contracting officer may not
cross with regard to the type of information the contracting officer is allowed to convey
to other bidders hasn’t disappeared.


In some cases, the misuse of auctioning techniques may bring the contracting officer
and a bidder perilously close to stepping over that line. The blurring of the line is
chronic, at least judging from the anecdotal evidence I see in my legal practice.


Auction techniques are occasionally being used to assist a single vendor that is
favored by the government. This is not kosher, but a casual reading of the FAR may lead
some to conclude that auctioning techniques permit such manipulation. There is an
appropriate balance between giving real feedback and abusing the process. At many
agencies, legitimate and fair feedback is given honestly to get a better deal.


Guard against a lax reading of the FAR and loose use of auctioning that results in
merely passing around price data. After all, vendors, if also illegally, can do the same
thing among themselves.


What kind of deal would the government get then?  


Stephen M. Ryan is a partner in the Washington law firm of Brand, Lowell &
Ryan. He has long experience in information technology issues. E-mail him at smr@blrlaw.com.



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