What to make of GSA's reverse auction play

As FCW has reported, GSA launched a reverse auction site last week. As many blog readers are aware, I sit on the Board of Advisors of FedBid, the commercial company that has introduced reverse auctions to many government agencies and is the leading reverse auction services provider in this market. I have been asked, not surprisingly, what my reaction is to GSA’s new site, which appears to have been developed to compete with FedBid and other commercial reverse auction providers. (Let me note that I speak only for myself here, not FedBid.)

As a general matter, competition is a good thing for any market, including the market for reverse auction services. Like any other market, as demand for reverse auctioning in government grows, it will inevitably create more and stronger competition. On the other hand, there could be intellectual property issues with GSA’s tool (I claim no expertise in IP law), and there also is a philosophical issue about whether it is appropriate to use government funds to develop an application that is already commercially available, which will then compete with private companies while charging government customers nothing.

The bottom line, I think, is that from the perspective of government agencies, competition for reverse auction services is good, just as it is for other products or services. It is a good thing for two reasons. First, the GSA imprimatur adds a new level of legitimacy and visibility to reverse auctions as one of the techniques, in these tight budget times, for government to save money.

If reverse auctioning is a good thing at all, anything that helps it spread beyond where it is used now is good for agencies and taxpayers alike. It is very possible that an expansion of reverse auctioning as a technique will expand the market for commercial reverse auction providers as well as for GSA. I also expect that the presence of another significant player in the federal reverse auction market will encourage further improvement and innovation in the industry. That’s a good thing.

There is a source of worry, however. GSA plans to limit its reverse auction vendor base to GSA Schedule contract holders. I am somewhat concerned that GSA may favor its own site as a place for schedule vendors to participate in reverse auctions or, in the extreme, forbid schedule holders to use any other site. It is even possible that GSA might seek to require agencies to get approval from them before using any other than GSA’s reverse auction site.

These are not far-fetched possibilities: GSA unfortunately has a history of efforts to establish itself as the monopoly source of supply, including in the recent past trying to strangle inside-the-government competing GWAC contracts. This should be the last thing that agencies will want, since the danger would be to make them dependent on an inferior government supplier for reverse auction services. Hopefully, GSA will take this opportunity publicly to make it crystal-clear that reverse auction competition will occur on a level playing field.