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Don Mansfield's Blog

Savvy or Unethical? Should the Federal Government be a Phantom Bidder in Reverse Auctions?

Posted by Don Mansfield, 13 January 2012 · 5,876 views

I recently heard from a contractor regarding an experience he had with reverse auctions.  A federal agency was conducting a reverse auction using FedBid and he decided to compete (FedBid, Inc., provides a service whereby federal agencies can conduct reverse auctions).  Although he submitted several bids, he ultimately lost the reverse auction.  When he checked to see who had won, he was surprised to see that the federal agency that was in need of the required items was the low bidder.  In other words, the federal agency was submitting bogus bids in an effort to get the contractor to reduce his bid price.  The federal agency then contacted him and offered to purchase the items from the contractor at his lowest bid price.  Feeling that he had been duped, he told them to get lost.The tactic employed by the federal agency, called phantom bidding, is not new.  Many view the practice as unethical while others see it as a legitimate tactic.  In regular auctions, the legality of seller participation in bidding varies from state to state.  For those states that allow it, sellers typically must disclose that they reserve the right to participate in the bidding. In any case, should the Federal Government be allowed to place phantom bids in reverse auctions?  Would your answer be different if the disclosure of the practice was required prior to the reverse auction?

Small Business Programs Decision Table

Posted by Don Mansfield, 08 June 2011 · 3,426 views

NOTICE: The table originally posted contained an error in Step 4 of the HUBZone Program Decision Table.  The entries for "Yes" and "No" were reversed, which implied that a HUBZone sole source was only permitted below the simplified acquisition threshold.  In fact, the opposite is true.  This has been corrected.I created a Small Business Decision Table to help navigate the new small business rules contained in the FAR. Note that there is a lack of clarity on some issues in the interim rule on Socioeconomic Parity (implemented at FAR 19.203) and, as a result, I had to make some assumptions until these issues are clarified (hopefully) in the final rule. Specifically, I assumed that when the FAR says that the contracting officer "shall consider" course of action A before proceeding with course of action B, that means that course of action A would be required if the conditions permitting both course of action A and B were present. For example, FAR 19.203( c ) states:QUOTE Above the simplified acquisition threshold. The contracting officer shall first consider an acquisition for the 8(a), HUBZone, SDVOSB, or WOSB programs before using a small business set-aside (see 19.502-2( b )).I interpret that to mean that if a contracting officer can satisfy a requirement using the 8(a), HUBZone, SDVOSB, or WOSB Programs, then she must do so?she has no discretion to bypass these programs and proceed with a small business set-aside because she thinks doing so would be in the best interests of the Government.In public comments submitted to the FAR Councils, the Professional Service Council criticized the use of "shall first consider" at FAR 19.203( c ) as follows:QUOTE Section 19.203( c ) mandates that contracting officers "shall first consider" socioeconomic programs, in effect creating a disparity within the small business set-aside programs. However, the regulation fails to define what constitutes adequate consideration, or how the contracting officer is to demonstrate it?...In the absence of a clear standard for "consideration," it is possible for contracting officers to construe this coverage as a mandate to use socioeconomic program acquisition programs ahead of and to the exclusion of other business categories. By removing the statutory preference for HUBZone awards, we do not believe that Congress intended to create another set of preferences through regulation.I would prefer that the FAR Councils not attempt to define "adequate consideration," but instead cut to the chase. If the intent is to require use of the 8(a), HUBZone, SDVOSB, and WOSB Programs if possible, then state the rule using unambiguous language. For example, FAR 19.203(d) states:QUOTE Small business set-asides have priority over acquisitions using full and open competition.Nobody is going to argue over what that means.Lastly, there is an error in FAR 19.203 in that it implies that the SBA rule that once a requirement is in the 8(a) Program it must stay in the 8(a) Program only applies over the simplified acquisition threshold. That's wrong?it applies regardless of dollar value. The SBA regulations make no such distinction regarding dollar value. I'm told that this will be corrected in the final rule.

Sometimes Bigger is Better

Posted by Don Mansfield, 07 April 2011 · 2,329 views

An interesting aspect of the new socioeconomic parity rules issued in Federal Acquisition Circular 2005-50 (see 76 FR 14566) is that we now have some scenarios where a contractor is better off not being a small business concern.  The Discussion and Analysis section of the Federal Register notice contains the following statement:QUOTE For acquisitions exceeding the simplified acquisition threshold, the contracting officer must consider a set-aside or sole source acquisition to a small business under the 8(a), HUBZone, or SDVOSB programs before the contracting officer proceeds with a small business set-aside. See FAR 19.203( c ) and 19.502-2(B).This policy is implemented at the new FAR 19.203( c ).  Further, the new FAR 19.203(d) states the following:QUOTE Small business set-asides have priority over acquisitions using full and open competition.Thus, for acquisitions over the simplified acquisition threshold (SAT), an agency must first consider the 8(a), HUBZone, SDVOSB, and WOSB programs (the latter recently being added by FAC 2005-51).  If a requirement can be satisfied under one of these programs, the agency must use one of these programs.  The agency is free to choose which of the four programs to use.  If a requirement cannot be satisfied under one of these four programs, then the agency must consider a small business set-aside.  If the requirement cannot be met by means of a small business set-aside, then the agency may solicit offers on an unrestricted basis.Let?s assume the following scenario.  There?s a requirement over the SAT and under the threshold for a HUBZone sole source (currently $6.5 million for manufacturing and $4 million for other acquisitions) that can be satisfied by three potential offerors.  We?ll call them Offerors A, B, and C.  Offeror A is a HUBZone small business concern and Offerors B and C are plain old small business concerns.  Pursuant to FAR 19.203( c ), the agency would be required to proceed with a HUBZone sole source, since the HUBZone program takes precedence over small business set-asides.  Offerors B and C would not have a chance to compete for the requirement.Now let?s assume the same scenario, except Offerors B and C are large businesses.  In this case, the agency would not be required to proceed with a HUBZone sole source.  Offerors B and C would have an opportunity to compete for the requirement, if the agency chose not to proceed with a HUBZone sole source.  FAR 19.203 gives priority to HUBZone sole source over small business set-asides, but is silent on the relationship between a HUBZone sole source and full and open competition (ditto for 8(a) sole source and SDVOSB sole source).  FAR 19.1306 simply states:QUOTE A contracting officer may award contracts to HUBZone small business concerns on a sole source basis (see 6.302-5(B)(5)) before considering small business set-asides (see 19.203 and subpart 19.5), provided none of the exclusions at 19.1304 apply; and? (1) The contracting officer does not have a reasonable expectation that offers would be received from two or more HUBZone small business concerns; (2) The anticipated price of the contract, including options, will not exceed? (i) $6.5 million for a requirement within the North American Industry Classification System (NAICS) codes for manufacturing; or (ii) $4 million for a requirement within all other NAICS codes; (3) The requirement is not currently being performed by an 8(a) participant under the provisions of Subpart 19.8 or has been accepted as a requirement by SBA under Subpart 19.8; (4) The acquisition is greater than the simplified acquisition threshold (see Part 13); (5) The HUBZone small business concern has been determined to be a responsible contractor with respect to performance; and (6) Award can be made at a fair and reasonable price.[Bold added].According to FAR 2.101, ?may denotes the permissive.?  ?May? is also used at FAR 19.1406 regarding SDVOSB sole source awards.It would be reasonable to infer that competitive 8(a), HUBZone set-asides, and SDVOSB set-asides take precedence over full and open competition, because the conditions permitting any of these would imply that the conditions for a small business set-aside were present.  However, the same cannot be said for HUBZone or SDVOSB sole source.  The conditions permitting either a HUBZone or SDVOSB sole source do not imply that the conditions requiring a small business set-aside exist.So there you go.  Sometimes you?re better off being large.  It will be interesting to see if the FAR Council will leave things as they are when the rule becomes final.  If they do, we can expect this to be the next great debate in small business program policy.

DAR Council Interprets ?Contract? to Include Task and Delivery Orders

Posted by Don Mansfield, 10 March 2011 · 6,632 views

In one of my earlier blog entries, I inferred that the FAR Councils interpreted the definition of ?contract? at FAR 2.101 to include task and delivery orders based on their answer to a question about the applicability of TINA to task and delivery orders (see ?Commonly Understood?  I Think Not).  Well, there is no reason to draw any inferences anymore.  In...

An Easily Misunderstood Decision

Posted by Don Mansfield, 02 March 2011 · 2,144 views

In B&B Medical Services, Inc.; Rotech Healthcare, Inc.; B-404241, B-404241.2, (January 19, 2011), the Comptroller General held that the statutory nonmanufacturer rule does not apply to procurements set aside for Historically Underutilized Business Zone (HUBZone) small business concerns.  The decision contains the following analysis:QUOTE The statutory...

Describing Contract Type: Watch What You Say

Posted by Don Mansfield, 22 December 2010 · 7,317 views

Consider the following exchange between two people:  QUOTE Speaker 1 (asking Speaker 2): What type of car do you drive, foreign or domestic?Speaker 2: I drive a red car.Obviously, Speaker 2?s answer is not responsive to Speaker 1?s question.  Speaker 1 wanted to know about a particular aspect of Speaker 2?s car?its origin.  Speaker 2 described a different...

"Commonly Understood"? I Think Not.

Posted by Don Mansfield, 20 May 2010 · 4,588 views

I was recently perusing some of the recent final rules issued by the FAR Council when I came across a statement that I found interesting. In responding to a comment concerning the applicability of TINA to task and delivery orders, the FAR Councils stated that TINA applicability is to be determined when negotiating a basic IDIQ contract, as well as when ne...

COs: Follow OMB?s Guidance at Your Peril

Posted by Don Mansfield, 30 November 2009 · 1,856 views

There has been a considerable amount of controversy over the last year or so in the area of small business programs. In International Program Group, Inc., (B?400278, B?400308, 19 September 2008) the Government Accountability Office (GAO) held that HUBZone set-asides took priority over service-disabled veteran-owned small business (SDVOSB) set-asides and S...

Calculating Cost Impacts on CPAF Contracts: A Reasonable Assumption?

Posted by Don Mansfield, 07 September 2009 · 3,466 views

When taking a class on the Cost Accounting Standards (CAS) last year, I came across a DCAA rule that made perfect sense to the auditors, but left some of the contracting officers scratching their heads. The rule deals with how to calculate the cost impact of a CAS noncompliance or accounting change on a cost-plus-award-fee (CPAF) contract. Chapter 8 of th...

Magnetic Properties of Metals with Partially Filled 4f Electron Subshells

Posted by Don Mansfield, 20 August 2009 · 1,886 views

Did you ever wonder about the type of debate that goes on before an acquisition rule becomes final and is incorporated into the Federal Acquisition Regulation System? This information can be found in the Background section of the final rule when it appears in the Federal Register. I make a point of reading this section whenever a new rule comes out becaus...