Best value vs. Best intetersts

Sandeep Verma has published another very useful discussion of procurement principles in the Indian Business Standard. In the article below, he distinguishes the concepts of "Competitive Negotiation" and "Competitive Dialogue". Indeed, as he points out, these are not abstract concepts but policy frameworks for, respectively, US federal procurement procedure and European Union procurement procedure.

Competitive negotiations in government procurement

Competitive Negotiations are practiced extensively in the United States covering almost 80-90% of its Federal procurement dollars, and provide for simultaneous one-to-one discussions between contracting officers—COs—and individual bidders/ offerors.

Bidders are allowed to make repeatedly improved offers, both technical and commercial, in as many rounds of negotiations as may be determined by the CO to be appropriate. These discussions eventually culminate in inviting Best and Final Offers (BAFOs) from all offerors in the last round, and the CO evaluates all BAFOs on a 2-axis matrix of price and quality, making subjective assessments such as “unacceptable quality”, “satisfactory price”, “excellent quality”, “poor on price”, etc.

In addition, the US Federal Acquisition Regulation allows a CO to accept the initial responsive offers for the purposes of bid comparison, without holding any negotiations at all: an option many COs exercise so as to avoid the practical risk of inadvertently holding unequal discussions with competing offerors—a situation that can seriously jeopardise the successful award of a procurement contract should a dissatisfied bidder challenge contract-award on grounds of unequal discussions.

A contract is awarded to a party whose offer is determined by the CO as representing Best Value for Money for the US Government; and this again is a subjective decision, without the CO being required to compute an objectively-weighted comparison based on price and quality assessments of competing offers.

These new, private sector-like methods of public procurement were introduced in the US in the 1990s under the leadership of academician-administrators Steve Kelman and Steven Schooner.

The system places a great degree of trust on COs who are barred from revealing details of one bidder’s technical or commercial offers to its competitors during various rounds of discussions; and this trust is effectively supplemented by strong law enforcement with respect to maintaining integrity of the procurement process.

On the other hand, Competitive Dialogue is a method of procurement practiced in the EU in the award of complex contracts, typically in cases where the Government lacks the capabilities to arrive at all technical and commercial/ legal details of procurement on its own at the start of the procurement process.

Extensive techno-commercial discussions are conducted with short-listed potential bidders, who are then all called upon to make responses to a RFP that evolves during these discussions.

In effect, it resembles a simplified version of Competitive Negotiations, and appears to be driven by EU’s core vision of an integrated European market, constrained as it is by the high degree of possible subjectivity in a fully-blown competitive negotiations method that could be abused by procuring entities to cherry-pick their own domestic bidders, leaving bidders from other EU member-states as hapless spectators in the procurement process.

The prime advantage in using these modern methods of procurement is their utility in achieving Best Value for Money for the Government through simultaneous negotiations, but use of these procedures requires that risks of unequal discussions and unauthorised transmission of bid information by COs are effectively contained through strong enforcement and contractual oversight.

It seems fair to surmise that both procuring entities and competing bidders may need to exercise a great degree of vigilance over inadvertent or deliberate miscarriage of bid information or unequal discussions under the new procurement procedures [proposed in India].

As Mr. Verma suggests, the very intrinsic subjectivity of the selection process in the "negotiation" or "dialogue" procedure presents a situation where the very appearance of prejudice is inescapable. Given the ever-present headline story of one and another bidding gone awry, it does little to shore up public confidence in government if there is any hint of hanky-panky in the selection process. Thus, it must be handled very carefully.

There are two foundations upon which such a system must rest. First, there must be a trained and professional (independent minded) procurement staff. Second, there must be a critical review process. It is one thing to give judicial review deference to procurement staff when they are well trained and independent of political and commercial influence, and when the selection criteria are objectively verifiable, and another to give such deference, thereby turning a purposefully blind eye, to subjective decisions easily masking favor or fortune or laxity.

I'd suggest as one prong to any determination of "best value", that there be a separate determination of how the selection is in the "best interests" of the government. Too often, I'd suggest, the evaluation of best value is made in the blinkered context of the particular solicitation, without taking into consideration the broader interests of the government in fostering competition, broadening the industrial base that the government depends on, or other such interests.

I am not suggesting that such interests dominate the selection process, but by at least having a nod in that direction might uncover the instances where, for instance, incumbency is intrenched or commercial interests of the vendors preferred.