Thoughts On Government Construction Procurement

Reverse auctions are nothing like sealed bids - they are apples and oranges. Reverse auction offers aren't sealed, they aren't firm, and they aren't fixed until the auction closes when all parties are finally exhausted. Sealed bids are signed, sealed, and delivered when submitted. The Rubicon has been crossed with one final and decisive judgment on what you will be committed to do the job for if you are the lowest responsive bidder. The discipline of submitting your one best sealed bid is nothing like putting in an opening marker in an auction.

The competitive dynamic of the auction process leads to mistakes - both in technical/administrative clerical assessments and in judgment as well. The latter are not a permissible basis for buyer's remorse to change your bid.

I could go on. I tried it once, and believe me, the MCAA [Mechanical Contractors Association of America] policy on this subject and the U.S. Army Corps of Engineers [USACE] report got it all right.

The U.S. Congress in 2002 asked the U.S. Army Corps of Engineers to test pilot the process on five construction projects. USACE did so and came back with a very detailed report last year that roundly condemned the use of reverse auctions for construction services with two very clear and well-supported conclusions.

1. Reverse auctions can be very beneficial for commodity purchasing and should be used for that purpose.

2. Reverse auctions are costly, inefficient, and inapt for construction service purchasing. Furthermore, low-bid auctions contradict the recent modern procurement trend of best-value selection that allows the taxpayers to get the best job for their money and not the most imprudent auction number.

Public purchasing policies reflect a great number of sound substantive distinctions between commodity purchasing and service purchasing. This is just the latest in a consistent line recognizing fundamental differences between the two.

The federal DOD [Department of Defense] authorization bill Murphy mentioned seeks to legislate these clear conclusions stemming from the USACE test pilot program. The corps' report stands on its own considerable merits; still, it should be mentioned that the U.S. Army Corps of Engineers has been in the construction business since the late 1780s or thereabouts.

MCAA has noted that Section 812 of the bill could be clearer in explicitly legislating both points 1 and 2 above, rather than just 1 and then excluding construction by definition from point 1. But, if lawmakers think that's sufficient direction to sometimes reluctant bureaucrats, then we will work with that to persuade the regulators to act appropriately in full compliance with both of the USACE conclusions for all procurement for construction services at whatever level of project cost.

Reverse auction proponents - Internet e-purchasing service providers perhaps chief among them - simply cannot overcome the USACE expertise on construction procurement. Rep. [Tom] Davis is doing merely what the Congress asked. They asked the corps to test the process, and they found it severely lacking in one respect. So, now in response, Congress is (will be, we hope) directing the regulators to implement the conclusions. There is good government at work, as we see it, on this issue; the taxpayers are well served.

Stan Berger
President
Mechanical Contractors Association of America

Charitable Efforts

John Mandyck
Vice President, Government & International Relations
Carrier Corporation
Farmington, Conn.

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Publication date: 08/15/2005