VA’s decision to stop using reverse auctions is surprising . . . right? Not if self-preservation is their main objective

Posted on March 8, 2012


Breaking News Update: Bloomberg’s Kathleen Miller reported earlier this week that VA Probes $42 Million in Awards Questioned by Congress.  One of the issues is that “an agency employee processed more than 1,500 awards just under a monetary threshold that would require public disclosure of the contracts.”

Now I am not suggesting that the use of Reverse Auctions is the answer.  I am merely referring to this post as a means of demonstrating that the acquisition process currently in place does not work and that efforts have to be made to ensure that the VA’s procurement practice is overhauled.

“Based on the memo, which was sent out Saturday afternoon, Frye wrote he was concerned about over-reliance on FedBid. He has anecdotal evidence that contracting officers are turning the process over to FedBid without the appropriate oversight.”

from March 7th, 2012 Federal Computer Week article “VA halts reverse auctions, citing ‘violations’ of contract hierarchy” by Matthew Weigelt

As someone who through funding from the government’s Scientific Research and Experimental Development or SRED program perfected an algorithm-based reverse auction tool that was used to drive significant savings year-over-year for the Department of National Defence, I understand Frye’s concern about an abdication of oversight of the bid process.

In fact, and while some will point to the dissatisfaction of suppliers as a key driver behind the VA’s decision to suspend the use of reverse auctions, it is in fact this declining level of active involvement through the assimilation into the provider’s solution-driven process that poses the greatest threat.

The question is to whom?

Therein of course rests the key to this developing story.

Back in 1998 when my company was contracted to at first assist in the acquisition process by the now defunct SHL Systemhouse which later became part of both MCI and EDS, the organization was struggling to meet the requirements of a sizable contract with the Defence Department.

Within a very short period of time, and through the introduction of technology based on the reverse auction model, service levels improved dramatically as did the savings in terms of lowered expenditures – although the degree of savings was greatly augmented by inefficient purchasing practices in the years prior to the start of our relationship with the DND.  Or to put it another way, the acquisition process was so poor within the government department that there was nowhere else to go but up.

Based on substantially improved service levels and declining costs resulting in increased savings, as time progressed an ever expanding number of transactions was processed through the system, and why not?  After all, with the new system working so well, the day in, day out pressure points on front line buyers diminished significantly, leading one senior DND buyer to lament that a monkey could now do his job.

Here of course is where the contradictory rub comes into play in that when a system consistently works well, it creates an over dependence on the vendor that for all intents and purposes renders the end user client somewhat expendable.  It’s like the analogy of a rich kid who hates the parents but loves the perks of the wealth they provide.  In essence they become increasingly trapped until they reach a crossroads which is where the VA is today.

As someone who has extensive knowledge of the VA procurement practice over the years including everything from the unique structure of the VISN hierarchy to the 7 year, $650 million debacle that were the failed JD Edwards and Oracle initiatives, ultimately resulting in the congressional hearings centered around the Bay Pines facility in Florida, the only surprise is that it took the VA this long to reach the present crisis point.

What is important to reiterate is that the real issue has little to do with the suggested supplier backlash, as supplier disenchantment with pursuing public sector contracts has been universally known and well documented over the years.

Nor can the savings and benefits of the reverse auction platform be disputed as this is likely the first time that the VA has had any kind of a meaningful track record in which the outflow of wasted taxpayer dollars has been reversed.

No the real issue is that someone high up in the VA realized that with the continuing success of the current reverse auction vendor relationship, their empire was for the most part becoming increasingly redundant.  So much so that given the budgetary challenges faced by all levels of government in which for the first time since the Great Depression U.S. States and Municipalities may have to go the bankruptcy route, senior VA officials realized that  they could no longer justify the fat budgets for being little more than an order processing operation.

In a series of posts over the next week I will take you inside the VA like no one before, venturing down the hidden hallways of an organization that has established a track record for self-inflicted blunders that while burning through staggering amounts of  taxpayer dollars have jeopardized the level of health care service it provides to our nation’s veterans.

Here is the link to the next part in this series “With VA procurement the level of service and care veterans receive should be the primary focus . . .