January 21, 2012
Office of Federal Procurement Policy
New Executive Office Building Washington, DC 20501
Re: Impact of Reverse Auctions on Small Businesses
Dear Administrator Field:
The Office of Advocacy (Advocacy) of the U.S. Small Business Administration submits this request for a review of current acquisition policies and practices regarding the acquisition tool of reverse auctions and the impact of such policies and practices on small businesses.
Office of Advocacy
Advocacy was established pursuant to Pub. L. 94-3051 to represent the views of small entities before federal agencies and Congress. Advocacy is an independent office within the U.S. Small Business Administration (SBA), so the views expressed by Advocacy do not necessarily reflect the views of the SBA or the Administration.
In 1997, the Federal Acquisition Regulations (FAR) were changed to allow for reverse auctions in the acquisition process. In Fiscal Year 2006, the National Defense Authorization Act required the Office of Management and Budget to study and develop a report on all types of commercially available online procurement services, including reverse auctions. In response to this request from Congress, the Office ofFederal Procurement Policy established an inter-agency working group to review regulations, policies, and business considerations related to the use of online procurement services. The Office of Advocacy participated in many of the discussions of the working group.
On February 27, 2008, the Office of Advocacy submitted to Administrator Dennett of the Office of Federal Procurement Policy a recommendation from small business stakeholders regarding the need for better policies and/or regulations on the use of reverse auctions. This recommendation for action came as a result of this office seeking input from small business stakeholders across the country on regulations and policies that were negatively impacting their ability to obtain a level playing field in Federal acquisitions. A copy of the letter to Administrator Dennett is Attachment 1.
On July 15, 2010 former OFPP Administrator Daniel Gordon testified before the Committee on the Budget of the United States Senate that reverse auctions have had some positive impacts on improving the Federal acquisition process and in this regard, some small businesses have been beneficiaries of multi-million dollar awards. We commend these results.
Notwithstanding these successful uses of reverse auctions, the Office of Advocacy continues to receive concerns from small business stakeholders regarding the lack of clarity in the application of reverse auctions from agency to agency. In this regard there is a current protest before GAO in which the small business alleges that the Army used the reverse auction acquisition tool but did not comply with the Small Business Act, (15 USC644). This case is: GAO PROTEST B-406329. SBA has filed a letter in support of the small business. A copy of the SBA letter is Attachment 2.
We believe this case raises concerns that some Federal agencies using reverse auctions may not be complying with the simplified acquisition threshold requirements for contracts to be reserved for small businesses. The Small Business Act (15 USC 644) states, "simplified acquisitions shall be reserved exclusively for small business concerns."
Small businesses have stated that because of a lack of uniform clarity in policy or regulations they find an uneven hand in the application of reverse auctions to micro purchases. We recommend:
- That the Office of Procurement Policy at a minimum provide a clear policy statement to the acquisition community that reverse auctions must comply with the requirements that contracts within the simplified acquisition threshold are to be reserved exclusively for small businesses.
- That the Office of Federal Procurement Policy make a clear policy statement that reverse auctions are best when used for commodity acquisitions and not for service contracts.
We commend the efforts of the Federal acquisition community in its commitment of a level playing field for small businesses. We believe that the type of clarity being requested above will be of tremendous assistance to the federal acquisition workforce as it continues to meet the acquisition mission of their agencies. Thank you for your prompt consideration of this request.
Please contact me or my Assistant Chief Counsel Major Clark at 202-205-7150 should you have any questions.
Chief Counsel for Advocacy
Major Clark III
Assistant Chief Counsel for Advocacy
Cc: The Honorable Cass Sunstein, Administrator, Office of Information and Regulatory
1. 5 U.S.C.§ 601 et seq.
Attachment 1: Letter of Chief Counsel for Advocacy Thomas M. Sullivan to The Hon. Paul A. Dennett, February 27, 2008
Attachment 2: Letter of SBA Associate General Counsel John W. Klein to Pedro Briones, Esq., January 5, 2012