Overview
FAR Subpart 17.8 establishes the policies and procedures for conducting reverse auctions and utilizing third-party reverse auction service providers. It outlines the criteria for when a reverse auction is appropriate—typically for well-defined, less complex requirements in competitive markets—and ensures that these auctions comply with standard acquisition regulations and data protection requirements.
Key Rules
- Suitability Criteria: Reverse auctions are appropriate only when market research indicates a competitive marketplace, multiple offerors exist, and requirements are clearly defined (encouraging iterative bidding).
- Prohibited Acquisitions: Reverse auctions cannot be used for:
- Design-build construction contracts.
- Architect-Engineer services (subject to 40 U.S.C. chapter 11).
- Sealed bidding procedures (FAR Part 14).
- Personal Protective Equipment (PPE) as defined by specific NDAA statutes.
- Anonymity: The identity of offerors must remain confidential during the auction; only the successive lowest prices may be visible to participants.
- Provider Neutrality: Reverse auction service providers are strictly prohibited from participating as offerors in any auction they host and cannot claim they have the power to "obtain" a contract for a participant.
- Fee Transparency: If a provider uses an indirect fee structure (adding a fee to the successful offer), that fee must be clearly detailed in the contract and validated by the Government.
- Single Offeror Rule: If only one offeror participates, the Contracting Officer (CO) must either cancel the auction or determine the price to be fair and reasonable before awarding.
Responsibilities
- Contracting Officers (CO):
- Conduct market research to select and evaluate reverse auction service providers.
- Document the contract file to prove the use of a provider is cost-effective.
- Maintain exclusive authority to exclude offerors, determine the awardee, and make responsibility determinations.
- Verify that any provider fees included in the final price align with the agreed-upon fee structure.
- Ensure proper solicitation provisions (52.217-10, 11, or 12) are included.
- Reverse Auction Service Providers:
- Allow offerors to register at no cost.
- Provide a platform that allows for downward price revisions and bidder anonymity.
- Protect proprietary data and provide all auction documentation to the Government upon completion.
- Assert no rights or licenses to the data generated during the auction.
Practical Implications
- Commercial Integration: This subpart formalizes the relationship between the government and commercial platforms (like FedBid/Unison), shifting the burden of platform maintenance to the private sector while maintaining government oversight.
- Shift to Commodity Buying: Because the subpart emphasizes "less complex requirements," reverse auctions will continue to be a primary tool for "commodity" buys (IT hardware, office supplies) rather than complex services.
- Data Security Focus: There is a heavy emphasis on "Government-related data." Contractors providing these platforms must have robust data disposition procedures that align with NARA (National Archives) standards, preventing "vendor lock-in" regarding historical pricing data.
- Price Validation: For contractors, the "indirect payment method" means their "bid" is not just their price, but their price plus the platform fee. Contractors must be diligent in understanding how these fees impact their competitive standing.