The Lectern

Steve Kelman


By Steve Kelman

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VA and reverse auctions: what's up?

Last Thursday, reported that the Veterans Affairs department's headquarters procurement shop had ordered a temporary halt to use of reverse auctions by the Veterans Health Administration (VHA), which runs the VA hospital system and is responsible for the vast bulk of VA purchasing. For several days, an unusually long time for an article, the news was on the top-five read and emailed articles on the Federal Computer Week site.

Clearly, this bolt from the blue has attracted a lot of interest outside the VA, given the rapid spread of reverse auctions as a money-saving tool in this time of tight budgets;  indeed, only last summer, OFPP Administrator Dan Gordon had highlighted the VHA's use of reverse auctions as a best practice for government.

I have been on the Board of Advisors to Fedbid -- the reverse auction provider that runs the VHA auctions -- for a number of years, and firmly believe the company's business model is aligned with the interests of taxpayers and agencies in saving money, an important priority, especially when budgets are as tight as they are now. Whenever I write about reverse auctions, I note my association with Fedbid, and I will confess to being slightly uneasy about weighing in on the VA headquarters bombshell, because some blog readers may think I'm biased.

I will also add that I am an admirer of a lot of what VA headquarters procurement management has been doing over the past few years, including sponsorship of the magnificent VA Acquisition Academy and efforts to improve both IT and supply acquisition at the VA. That admiration adds to my hesitation to write (and maybe creates a potential bias of a different sort).

But whatever biases I may have -- and I've spoken to some people inside the VA about this to confirm my impressions  -- it is hard to avoid the conclusion that there is something strange about the behavior of headquarters in this situation. As a friend of improved VA procurement, I very much hope that it will be reversed.

The VA has had ongoing problems over the years with vendors located near VA hospitals selling overpriced medical equipment and other commodities to the hospitals with little competition. Furthermore, for more than 70 percent of the dollars VHA spends buying medical equipment off the multiple-award schedules (managed by the VA for GSA) there has been no competition among schedule holders. That means the VHA has presumably been paying multiple-award schedule retail prices, without getting the kinds of discounts that it is (rightly) government policy to encourage. These are situations that none of the procurement leadership at the VA has condoned.

VHA began about a year ago to begin using reverse auctions to increase competition and lower prices on schedule and open-market buys. Reverse auctions are a way to implement the idea of a second stage of competition to schedule buys, in line with government policy. In the view of VHA procurement leadership -- and in former OFPP Administrator Dan Gordon's view -- this policy has been a success. What is strange to me is why headquarters leadership is not cheering this on, because this is moving exactly in the direction of getting a better deal for taxpayers and veterans that headquarters has embraced.

There are losers from the reverse auctions VHA has introduced -- overpriced vendors selling to VA hospitals without competition -- and there are reports that when the suspension of reverse auctions was announced at a vendor conference, the audience broke into cheers. Because I trust the good faith and public spirit of the headquarters leadership, I don't want to believe that these voices have overridden the interests of taxpayers and veterans. But I will confess that the bureaucratese in the memo from headquarters suspending reverse auctions gave no even vaguely convincing arguments for why they did what they did.

It's time for reason and cool heads to prevail here. If headquarters has concerns that need to be examined -- although there was nothing in the suspension memo to suggest what these concerns in fact might be -- let them be examined. But meanwhile, I urge the dedicated procurement professionals in headquarters to allow the VHA to exercise its judgment in embracing reverse auctions as a pro-taxpayer, pro-veteran procurement tool.

Posted on Mar 13, 2012 at 7:27 PM16 comments

Free expression in China: Opportunities and limits

One of my favorite sources for Chinese news has become a monthly magazine, published in China but oriented for a Western audience. It's called NewsChina, and is an English-language version of a newsweekly in China called Zhongguo xinwen zhoukan (China Newsweek).

What is amazing to me about the magazine is how critical it often is about today's Chinese society. Every month they run a series of quotes under the rubric, "What They Say," which is filled with amazingly frank statements that Chinese academics, critics, writers, etc. make about China. So the March issue, for example, quotes the novelist Ge Fei as saying, "It is sickening to write of beauty in this filthy society, so I rewrote my first draft." Last month they quoted somebody else saying that the evening TV news broadcast on the government-run CCTV network was like a constant "re-run." I would estimate that in a typical month's issue, probably 90 percent of the articles are critical in one way or another of something going on in China.

I have shown the magazine to a number of American friends, and they are inevitably absolutely amazed that this can be published in China.  It is really far away from the image many Americans have of a totalitarian society.

While in Beijing for a few days on my way to Singapore, I had lunch with two young reporters from NewsChina to talk about the magazine. It is generally known that English-language publications in China are freer than Chinese-language ones, for several reasons. For one thing, senior government officials generally can't read English well enough to put pressure on censors. Also, few Chinese people read these publications. And some Americans think it's an effort to create a misleading impression for foreigners about the degree of freedom in China. I asked the two journalists to bring along copies of the Chinese edition of the magazine, so we could compare.

Here's what I learned:

The English edition is separately developed from the Chinese one, by a separate staff, though about 30 percent of the content of the English edition is adapted (translated, with changes/explanations for a non-native Chinese audience) from the Chinese edition. The English edition is not for sale in China. The English edition is less heavily scrutinized by the government -- occasionally the editors of the Chinese edition get phone calls from censors, after an article is published, complaining about the article (there is no pre-censorship, though there is some self-censorship), but these journalists believed this had never happened with the English edition. However, they noted that they took the critical quotes such as those I presented above from statements that had been somewhere in the Chinese media or in a Chinese micro-blog. And they also noted that editors at the Chinese edition of the magazine were constantly trying to push the envelope for what they could get away with saying -- they would try something, and if they didn't get slapped for it, they would do something similar again, and then try something even a little more bold.

I raised this same issue with a university professor, to whom I also showed the quotes from NewsChina. He had heard of most of the people quoted (some of whom he described as "well-known loudmouths"). He said you could say anything you want in China, as long as you follow two rules: 1)  you can say just about anything is really bad, but you can't explicitly blame the Communist Party for it being bad, and 2) you can say a lot as an individual, but you can't organize a group to say the same thing as a group.

What does this add up to? A society that doesn't come close to the stereotype of a ruthless dictatorship suppressing all dissent that many Americans believe, and also one full of contradictions and ambiguities about how far the government will let free debate go. Stay tuned (and meanwhile, if you are interested in following developments in China, I urge you to subscribe to NewsChina, only $27.99 a year).

Posted on Mar 08, 2012 at 7:27 PM3 comments

Should contractors keep the right to respond to past-performance reviews?

There’s some buzz around a provision in the newly introduced Comprehensive Contingency Contracting Reform Act that would eliminate the ability established in the Federal Acquisition Regulation for a contractor unhappy with their past-performance evaluation to enter their own version of events in the file and to appeal the original past-performance evaluation to one level higher in the organization from where the original evaluation was done.

Matthew Weigelt wrote about the provision recently on, with a moderately incendiary headline saying the provision would “stifle” contractor responses to past-performance reports. Matthew’s article was a top-five read and emailed article on the FCW site, so the issue is attracting attention.

With a small tweak, this could actually be a really good change. But the tweak is necessary, and I hope the bill’s authors will make it.

The big problem with the current FAR language is that it allows a contractor to appeal a past-performance rating one level above where it was made. In my view, this appeal right has been devastating for the honesty of past-performance ratings, and therefore for the ability of past-performance to be a differentiator in contract awards. For past-performance to work in choosing contractors, the government needs to be able to observe differentiation between better performers, who should be rewarded with new contracts, and poorer ones, who shouldn’t.

The serious shortcomings in the government’s past-performance rating system in turn is really too bad, because judgments, formal and informal, of the past performance of those with whom we do business are an absolutely crucial part of the ability of a market system to work in improving results. If we like the haircut a barber gave us, we go back, and if we didn’t, we don’t – this really provides an incentive for barbers to do a good job.

I was the person, as OFPP administrator, who authorized the current FAR language when the past-performance evaluation system began in the ‘90s. I was concerned at the time that this appeal provision was a mistake, and I believe that subsequent results have confirmed my worries. Contracting officers believe that a bad rating is an invitation to spend countless hours having to defend their judgments, and the easy response, especially with staff shortages and not enough time, is simply to go light on bad comments.

So as the person responsible for the original language, I vote for its repeal.

However, the bill’s provisions go a bit too far. There is no reason to eliminate the ability of the contractor to give their version of events and have it put in the contract file. That just seems like elementary fairness, so others using the past-performance report get to see a different version of what happened, if there is one. I think that at least enlightened elements in the contractor community could support elimination of the dysfunctional appeal process, which undermines the ability of the past-performance system to work at all. But elimination of even the right to comment is sure to arouse the ire of all contractors, as Weigelt’s article seems to show.

Can the bill authors tweak their language so it can help create a real improvement in the government’s past-performance rating system?

Posted on Mar 05, 2012 at 7:27 PM6 comments

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