Public Works pulls plug on reverse auction plan

Canadian technology providers and vendors were in a celebratory mood Friday following a decision by Public Works and Government Services Canada to scrap its planned use of reverse auctions as a vehicle for procurement reform.

In a statement released late Thursday, PWGSC Minister Michael Fortier said the government’s change of heart was an effort to understand the concerns of industry, members of which said they were outraged by a plan that would do away with the multiple national master standing offers (NMSOs) that are used to designate who gets government business and issue only two per category. Instead as part of its “The Way Forward” strategy, PWGCS said vendors of record would be determined by the use of an electronic reverse auction, where firms would have a limited amount of time to submit the most cost-effective bid for government work. Reverse e-auctions have been used by the U.K. government among others.

“After further consideration, I have asked my officials to take off the table the use of reverse auctions as part of our procurement strategy for all categories of commonly purchased goods and services. This procurement reform can be achieved without the use of reverse auctions,” Fortier’s statement said. 

Instead, PWGSC has asked the Conference Board of Canada to act as a go-between with industry groups, who will be consulted prior to issuing requests for standing offers.

Procurement reform has attracted considerable lobbying from IT industry associations and resellers, who worried the PWGSC plan would severely limit the opportunity for small businesses to compete on government contracts. Earlier this year, a group of Ottawa-based VARs formed a new association, the Canadian Information Technology Providers Association, to tackle the procurement issue head-on.

“It’s absolutely outstanding. We’re incredibly encouraged by the minister’s willingness to communicate with the industry,” said Chris Coates, an association spokesman. “Obviously this was a huge irritant, not only to our group but to firms involved in professional services, furniture and several other commodities.”

Bernard Courtois, president of the Information Technology Assocation of Canada (ITAC) agreed that Fortier was doing the right thing, but he warned that the issue is much broader than simply the use of reverse electronic auctions.

“As a technology industry, it’s pretty hard for us to be against using technology for procurement, but there was a communications issue, and how they would use the auctions,” he said. “Every time a buyer tries to do something to save money, if you’re a supplier it’s a change, it’s a disruption.”

Spokespeople for the Canadian Advanced Technology Alliance (CATA), which has also been openly critical of the proposals, did not return calls at press time. In a recent interview with ITBusiness.ca, however, newly appointed CATA government relations executive Peter Thomas said the reverse e-auction idea came from A.T. Kearny which had been hired by the government to develop a procurement strategy as part of a $1.75-million contract last November that ended up costing $24 million in less than a year.

“They involved this American consulting company, which has a lot of experience in these kind of reverse auctions. They wanted to be seen as saving money,” he said. “This came as a blindside to people had been in the consultations.”

PWGSC is still obligated to save $2.5 billion in spending over the next five years, though it has not indicated what other methods it might use.

“They still want to reform procurement, they still want to save the money,” Coates said. “But now the message we’re offering is, work with us and we’ll get you there.”

Courtois said the government already enjoys deep volume discounts on many pieces of IT equipment, but fails to take into account the lifecycle management and cost of ownership issues.

“The Canadian government is getting truly world-beating prices on all the pieces that it buys, but if it focuses only on buying pieces instead of solutions . . . it’s not going to get the savings it wants,” he said.

Comment: info@itbusiness.ca

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