House Small Business Subcommittee on Contracting and Workforce Chairman Rep. Richard Hanna (R-N.Y.) held a hearing on Wednesday that explored how reverse auction contracts affect competition and the cost of federal construction projects.
The joint hearing was held with the House Veterans’ Affairs Subcommittee on Oversight and Investigations to determine whether further guidance or legislation would improve the process.
Reverse auction contracts allow companies to continuously under-bid each other, typically through digital portals, until one company is awarded a contract.
“Having worked in the industry for 30 years, I know firsthand that small contractors are concerned that using reverse auctions for construction places them at a competitive disadvantage,” Hanna said.
Hanna cited a recent report from the comptroller general that concluded reverse auctions limit competition and drive up project costs.
“… This is a serious problem because small businesses have proven that they can perform a service or produce goods for the government cheaper and often quicker than their larger counterparts,” Hanna said. “Washington should do more to ensure a level competition process for small construction contractors. It should start by prohibiting the use of reverse auctions for bidding on construction contracts.”
The Army Corps of Engineers recently issued a policy to discontinue reverse auction contracts on construction projects because the process failed to deliver promised savings on project costs.
In July, Hanna introduced bipartisan legislation with House Small Business Committee Chairman Rep. Sam Grave (R-Mo.) and House Small Business Subcommittee on Contracting and Workforce Ranking Member Rep. Grace Meng (D-N.Y.) that aims to address the issue.
The Commonsense Contracting Act of 2013 would prohibit agencies from use the reverse auction process to bid on construction contracts that could be completed by small businesses.