Federal procurement of construction services for federal buildings has been an important issue for the roofing industry for several decades. Because of the complexities of construction projects, the procurement of construction services using the reverse auction method has been particularly problematic. To address the issue, NRCA is working to support legislation that will eliminate the use of reverse auctions within federal procurement practices.
Reverse auction pitfalls
There is broad consensus the use of reverse auctions for federal construction procurement is detrimental to the roofing industry. During a traditional auction, a buyer with the highest bid wins the right to purchase a good or service. In a reverse auction, a buyer seeking a good or service solicits bids, multiple sellers offer bids and the seller with the lowest bid wins the job. Reverse auctions fail to account for the unique mix of services and systems construction projects entail that are tailored to individual owner needs and budgets, site requirements and the changing composition of a project team. Allowing reverse auctions in construction procurement is ineffective because they fail to properly allocate risk, make it more difficult for small and disadvantaged businesses to be awarded bids, and inhibit the competitive bidding process.
The shortcomings of reverse auctions for construction procurement are well-documented. The U.S. Army Corps of Engineers—the largest and most experienced federal construction agency with respect to procurement—has testified before Congress using reverse auctions to procure construction services does not ensure a fair and reasonable price and does not guarantee the selection of the most qualified contractor.
Moreover, the Congressional Budget Office found “reverse auctions have not been suitable for complex contracts like design and construction services because they do not consistently result in procurement costs that are lower than what would result from other contracting methods such as sealed bids or negotiated procurements.”
According to government studies, reverse auctions are an inappropriate method for procuring construction services. The U.S. Army Corps of Engineers conducted a year-long pilot program regarding the procurement of construction services using reverse auctions and found the acquisition of construction services cannot and should not be equated with the acquisition of commodities. The study also found no evidence of federal savings when reverse auctions were used compared with the sealed bid process, a common alternative system of procurement. Additionally, the study found no valid method of establishing real savings because government construction projects are highly diverse.
Given the overwhelming case against reverse auctions in the procurement of construction services, many federal agencies have already stopped using them. Moreover, there is broad support among associations in the construction and building design industries for a legislative solution to ensure reverse auctions are not used in the future by codifying current agency practices. Several attempts have been made during the past decade to secure congressional approval of legislation to prohibit reverse auctions in construction procurement, but all those efforts failed because of various legislative or budgetary obstacles.
NRCA takes action
In 2019, NRCA partnered with other construction industry associations to renew the effort to address the issue. These efforts culminated in the introduction of the Construction Consensus Procurement Improvement Act of 2019, legislation to reform federal procurement by prohibiting the use of reverse auctions for design and construction services.
The bipartisan legislation (S. 1434) was introduced in 2019 in the Senate by Sens. Rob Portman (R-Ohio) and Mazie Hirono (D-Hawaii). After consideration by the Senate Committee on Homeland Security and Governmental Affairs, the bill was unanimously approved by the full Senate in late December.
After the success of the bill in the Senate, companion legislation (H.R. 5644) was introduced in the House of Representatives in February by Reps. Ro Khanna (D-Calif.) and Mark Meadows (R-N.C.). The legislation currently is being considered by the House Committee on Oversight and Reform, which could take action on it during the spring or early summer though Congress’ diverted attention to deal with COVID-19 could slow future action. Assuming the legislation receives support from the committee, the chances for passage by the full House of Representatives later this year appear positive.
By prohibiting the use of reverse auctions in federal construction procurement, the Construction Consensus Procurement Improvement Act of 2019 will benefit construction companies, ensure the quality of procurements for federal construction projects and protect taxpayers. NRCA will continue working in support of the bipartisan legislation to get it approved by Congress and signed into law in 2020.
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