Dear ASA Members,
I hope that many of you are beginning to feel as I do that we finally have two feet planted firmly in 2021. With the turn of every year there is always excitement for what is on the horizon, and now I am pleased to see that all of our enthusiasm wasn’t unwarranted. There are incredible things happening here at ASA, and I am thrilled to share just a few of them with you.
All of us at ASA recognize that SUBExcel was cancelled this year, which is why we are going out of our way to offer additional webinars, both live and recorded, this year, as well as podcasts to meet all of your educational needs. Make sure that you are unlocking all the value of your membership by reading ASAToday, checking the members-only area of the website called the Info Hub, and subscribing to our social media channels. Making sure that you are getting the most out of your ASA membership is incredibly important to everyone at ASA National, and I highly encourage you to take advantage of everything this organization has to offer.
There has also been exciting news on the advocacy front. On February 5, 2021, I am very pleased to report that ASA, along with 13 construction industry trade and professional organizations, sent comments to the Federal Acquisition Regulation (FAR) Council regarding their proposed rule to amend the FAR to provide guidance on the use of reverse auctions. Collectively, our comments represented tens of thousands of firms and individuals engaged in architecture, engineering, construction program and project management, surveying and mapping, prime contracting, subcontracting, specialty trade contracting, supplying, and surety bond producing. As such, these organizations have a unique knowledge concerning reverse auctions and federal procurement.
It was our recommendation that FAR Subpart 17.803 be amended to comply with the recently enacted law (Public Law No: 116-260), which ASA drafted and advocated for during the 116th Congress, directing the FAR Council to prohibit the use of reverse auctions in the procurement of construction services.
Per the letter, please see below:
Reverse Auctions are an Inappropriate Method of Procurement for
Design and Construction Services
Reverse auctions are inappropriate platforms for procurement of construction services. Due to the complexities of design and construction projects, the procurement of these services using the reverse auction method fails to take into account the unique mix of services and systems tailored to individual owner needs and budgets, site conditions and requirements, and the changing composition of the project team, unlike products and commodities which are manufactured with little or no variability. The reverse auction procurement method often favors businesses offering the lowest price, rather than those that are most qualified, which will compromise quality, overlook small businesses, or even require a new bidding process down the road, eliminating any perceived initial savings.
Reverse auctions do not offer federal owners a good way to evaluate non-price factors nor do they guarantee any proven savings over competitive bidding. When price is not the sole determinant, owners increasingly rely on selection criteria such as past performance, qualifications and the capacity to meet the project’s unique needs. Reverse auctions do not promote this dynamic. Instead reverse auctions promote an approach in which parties focus only on price. Software vendors and other similar industries promoting reverse auctions have not proven that reverse auctions generate savings in the procurement of construction or provide benefits of “best value” comparable to currently recognized selection procedures. Unlike many products, for which the government awards contracts to the lowest bidder, or other services, which are awarded based on the “best value”, construction services have long been recognized as having a significant impact on public health, welfare and safety. Moreover, reverse auctions can put small businesses at a competitive disadvantage.
Reverse auctions ignore the protections of sealed bid procurement laws and regulations, and years of precedent that address critical factors and ensure the integrity of the process. Where price is the sole determinant, the sealed bid procurement process ensures integrity by assuring that the successful bidder is the most responsive and responsible competitor with the best price. The pressure and pace of the auction environment removes any assurance bids will be responsive and material to the owner’s needs. This encourages significant risk taking, which is not appropriate for construction services that potentially impacts life and property safety.
Proponents in support of utilizing reverse auctions might view this procurement method as practicable and economically advantageous for procuring simple off-the-shelf commodities; however, design and construction services are vastly different, far too complicated, and present a high risk of failure when procuring construction contracts using this procurement method. It is for this reason that qualified and sophisticated construction firms do not participate in federal reverse auctions as the process moves too rapidly in order for bidders to accurately assess their costs, which in turn has the potential to jeopardize their construction firm, as well as downstream parties, i.e., subcontractors, and suppliers. Furthermore, the surety industry responsible for furnishing surety bonds, which are mandated on federal construction contracts above $150,000 by the Miller Act (40 USC 3131, et, seq.) is opposed to reverse auctions for design and construction services due to high-risk and the potential for contract default.
These are just some of the many reasons reverse auctions are an inappropriate method of procurement for design and construction services.
I want to thank all of you for your continued dedication to the subcontracting community, and I look forward to the day when we will all be able to gather together again.
God Bless,
Brian Cooper
ASA President 2020-2021
