For many years the Federal Acquisition Regulation prohibited the use of "auction techniques" in negotiated procurements. Prohibited conduct included (1) indicating the cost or price it must meet to obtain further consideration (2) advising offerors of their relative standing to another or (3) otherwise divulging information about another’s price. Despite the FAR prohibition, the General Accounting Office ruled in protest decisions there was "nothing inherently illegal" in conducting an auction in negotiated procurements. Over time, there was a softening of the prohibition against auctions and when the GAO did find a violation of the prohibition on auctions it was when such action allowed an offeror to gain an unfair competitive advantage due to disclosing information about another’s bid. Outside of protests, the US Court of Appeals held that when a contractor alleged the government engaged in auctioneering techniques in formation of a contract, the FAR violation allowed the contractor to reform the contract. The rationale was that every bidder and potential contractor needs to operate with equal knowledge of its competitor’s position.

Thus the GAO and Federal Circuit decisions indicate the rationale against auctions were (1) auction techniques can place undue emphasis on price in relation to other evaluation factors and (2) can dilute competition by depriving an offeror with the lowest cost or price of a competitive disadvantage. In addition, the decisions have recognized auctions may, but not always do, undermine the integrity of the competitive bidding process, particularly when a bidder has information about its price standing and others do not. It appears that the concerns against auctions were not so much against the techniques in themselves but a violation of a more fundamental principle – full and open competition. The lesson for federal agencies that may want to use auctions is they may be used as long as the integrity of competitive bidding is maintained.

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