Fair and Open Competition, commercial practice

1. Background: Government issues ID/IQ MAC contract for fixed price COTS equipment. The government specifies by performance criteria the types, quantities of equipment, and incidental support services, if any. Equipment descriptions are in terms of performance based specifications, brand name or equal, or brand name only requirements. The contract does not contain an OCI clause.

· Deal Registration. Based on an Industry practice called “deal registration,” awardees on this ID/IQ MAC can "lock in" lowest pricing with a vendor before RFQ release as/if they gain knowledge of the requirement. The registration by its nature is very specific and is registered pre-RFQ. It guarantees the lowest price for that RFQ regardless of any existing agreement (e.g., reseller agreement).

Information on the internet abounds on this industry practice. Provided below is one general description found at: http://searchitchannel.techtarget.com/definition/deal-registration

"Deal registration is a feature of some vendors' channel programs in which a channel partner, often a VAR (value-added reseller) or SI (systems integrator), informs the vendor about a lead and is given priority for it. Once a lead is registered with a vendor, the partner usually has a set period of time to close the deal. During this time other channel members, or even the vendor's own sales team, are not allowed to negotiate a similar deal with that lead. Not all vendors offer deal registration, and some vendors offer it only to certain channel partners.

Deal registration is usually put in place to lower the chance of channel conflict -- a situation in which channel partners have to compete against one another or the vendor's internal sales department. With a deal registration program in place, partners can work with a client without having to worry about another company trying to offer the same product at a lower price. Some vendors also offer to help partners in the selling cycle, and deal registration lowers the chance of the vendor stealing the lead once the partner has brought them into the discussion."

Dell’s published deal registration criteria includes the following:

"Deal Registration criteria for Dell includes the following: The deal is not the subject of an RFP, or similar tender process, that has been published; provided, however, that before such RFP, or similar tender process, has been published, the Partner shall be eligible to register the deal." http://partnerdirect.dell.com/sites/channel/Documents/DealRegistrationOfficialGuidelines.pdf

· Scenario 1. Government issues RFQ for 100 quantities of Dell Laptop Model XX. MSRP is $2000 each. There are 5 MAC awardees. Company ABC registers the deal for 100 quantities of Dell Laptop Model XX and therefore locks in guaranteed lowest pricing from the OEM. RFQ is released. Dell’s quote to Company ABC is $1000/laptop; Dell’s response to the other 4 MAC offerers is that the deal has been registered and therefore will not offer a quote.

· Scenario 2. Same as Scenario 1. The 4 offerers (who have various reseller agreements) request a quote from Dell. Dell does not inform the 4 offerors that the deal has been registered with Company ABC and provides quotes consistent with those agreements, which will at all times be higher than Company ABC's registered price of $1000.

· Scenario 3. Same as Scenario 1. Because the deal is registered, Dell does not bother with the paperwork and does not offer quote. No explanations provided.

2. Issue: Although the contract does not contain an OCI clause, the Contracting Officer has cautioned awardees with regard to OCI issues given the competitive nature of this under an ID/IQ MAC. These deal registrations defeats the intent of a MAC. The very nature of deal registration means a prime must somehow have prior pre-RFQ knowledge of the specifics, which calls into question potential procurement integrity and OCI issues. Further, when only one bid is received, the RFQ is re-released and any subsequent rounds of competition is likely to generate either no bids or higher bids, leaving the Government with a false sense of competition. The Government ultimately receives lowest pricing regardless, but it was based on an offeror having an unfair competitive advantage. In order to afford fair opportunity, the government would have to prohibit deal registration, which would be a challnege to enforce since it is an industry practice.

3. Question: We plan to discuss this with the Contracting Officer, but wanted to get the experts to weigh in with any comments. In particular, does anyone believe this is an acceptable practice that should be allowed to continue, possibly in recognition of the fact that pohibition of this industry practice would be diffcult to enforce?