Industry group complains about contracting method

An industry group has lodged the first official complaint against a new way of awarding contracts.

The Professional Services Council, an Arlington, Va.-based group that advocates on behalf of federal contractors, sent letters to the Health and Human Services Department and the Office of Management and Budget expressing opposition to cascading set-asides.

Under a cascade, an agency solicits bids from companies and opens the bids in order of legal preference, starting with small and disadvantaged businesses, and moving to larger and less protected companies only if the small companies don't offer adequate proposals.

If the agency finds satisfactory proposals from the smaller businesses, it doesn't open the remaining envelopes.

Stan Soloway, president of PSC, said cascades put an unfair cost onto businesses, because they spend money to participate in the bidding process on a proposal that may never even be considered. "It strikes us as a proxy for what the government is supposed to be doing - real market research," he said.

The biggest proponents for cascades appear to be agencies themselves. Before the use of the technique, which was developed by two federal executives in 1999, an agency that held a small business set-aside competition that failed to generate satisfactory bids would have to rewrite a new solicitation and hold a second full and open competition, which could cause months of delay.

"It was costing them time; it was costing them money," said Jose Gutierrez, acting director of the Office of Small and Disadvantaged Business Utilization at the Transportation Department, and one of the founding fathers of cascading.

Gutierrez and his partner Ed Girovasi, a procurement director at the Housing and Urban Development Department, respond to complaints about the fairness of cascades by saying that no one is ever guaranteed to win a competition. They add that the Bush administration has made it clear that it wants to help small businesses, which they said cascading does.

Girovasi and Gutierrez have traveled around the country explaining the approach to federal agencies, and their labors appear to be fruitful: A range of agencies now use cascades; the Agriculture Department, Veterans Affairs and the Air Force have solicitations specifying the approach on FedBizOpps.

The Federal Acquisition Institute, a training institute for federal contracting personnel overseen by OMB's Office of Federal Procurement Policy, has posted Girovasi's slides describing the technique on its Web site.

Soloway said he wants OFPP to issue a policy on the use of cascades. "There is virtual consensus in industry that cascading represents an unfair and costly procurement strategy. As such, we are seeking your help in sharply restricting its use," he wrote in his letter to OMB. He added that if agencies want to use a cascade, then perhaps they should be required to reimburse bidding contractors for their bid and proposal money.

OMB does not have an official policy on cascading set-asides, and OFFP officials declined to elaborate on their thoughts on the technique. However, David Safavian, OFFP's chief, has encouraged contracting officers to be creative in the use of new and different contracting techniques.