By September 1997, the FAR Council completed a rewrite of FAR 15 which governs negotiated procurements. One of the stated goals was to create innovative techniques to encourage more dialog between government and contractors. The rewrite removed any mention of auction techniques and instead sought to prohibit revealing other offerors’ prices without their permission and thus allowing disclosure of price if an offeror authorizes it. The FAR continued to prohibit conduct that favored one offeror over another or that revealed an offeror’s technical solution or other innovations that would compromise an offeror’s intellectual property to prevent unfair competition while allowing experimentation with auction techniques.

The authors recommend that contractors

1. Understand the ground rules for each online auction and its relative importance in the evaluation scheme.

2. Should immediately request a debriefing from the agency if they do not receive an award to determine the basis for the award and to preserve their ability to bid protest.

3. Need to learn to avoid being "caught up" in the adrenaline of the bidding process by offering prices below cost.

Agencies should:

1. Ensure the solicitation outlines clearly how the auction results will be used in the evaluation scheme.

2. Take all reasonable steps to prevent offerors from obtaining unfair competitive advantage to preserve the integrity of the competitive bidding process. The technology used in online auctions that allow all offerors to see the same information "real-time" should meet this condition, absent technical difficulties.

3. Pay careful attention to the potential of contractors "buying in" or submitting mistaken bids. Agencies need to be wary of contractor "buy-ins" – submitting below cost bids with the expectation of increasing contract amount through excessive change orders or high priced follow-ons. Though protest allegations of buy-ins are rarely sustained, agencies need to take appropriate steps to minimize their effect.

4. Determine how the auction and disclosure of the participants’ prices will be treated in relationship to the "Certificate of Independent Price Determination" clause (FAR 52.20302). The clause requires that offerors must certify for buys exceeding $100,000 they have not disclosed their prices to other offerors for purposes of collusive bidding or other anti-competitive purposes.

Auction Software and Service Providers

The author indicates that in most cases vendors can take advantage of the more lenient rules covering commercial items in FAR Part 12 for pricing their auction software and services. Under the FAR 12 definition, a product qualifies as a "commercial item" if it has been sold or offered for sale to the general product. Even if not offered for sale, it will qualify if it will be available in the commercial marketplace in time to meet government requirements. The benefits of such pricing include (1) exemption from cost based pricing (2) providers can use the same software license with the government they use with commercial customers (3) take advantage of more streamlined procurements such as reduced federal clauses and substitution of limited commercial item clauses with opportunities for customized terms and conditions and (4) providers of commercial items and services can submit proposals for GSA MAS contracts.

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