Preserving procurement integrity while getting the best value from suppliers.
A fundamental goal of any publicprocess is to obtain the "best value" for the public agency — in other words, to obtain high-quality commodities and services at a reasonable cost and under terms that meet a government entity's needs. When pursuing strategic sourcing, today's procurement professionals often depend on suppliers to identify and present creative solutions that meet state and local governments' needs and that require minimum upfront investment.
But do pre-solicitation meetings and discussions with vendors — critical to creative sourcing — have the "appearance of impropriety," or could they be seen as favoritism for a particular company? How do we promote such meetings while helping public officials maintain the integrity of the procurement process? Moreover, how do we protect public officials who are trying to do the right thing by striving to obtain best value? This article will seek to answer those questions and to suggest a simple metric for fair and open competition.
Current tough economic times present an even more urgent need to embrace strategic approaches. "The budget crisis is so severe that it's now possible to do some things that everyone knew were smart but couldn't get done because of political considerations," John Thomasian, director of the Center for Best Practices at the National Governors Association, told USA Today in March. Getting the most value from the supplier community while preserving procurement integrity is one such strategy.
The public trust
Just as important as the quest for best value is the need to protect the public trust and to fulfill public policy objectives.1 Because federal, state and local government procurements use public funds, they must be conducted with integrity, openness and fairness.2 Here is how this goal is articulated at the Federal level: "An essential consideration in every aspect of the [acquisition] System is maintaining the public's trust. Not only must the System have integrity, but the actions of each member of the [acquisition] Team must reflect integrity, fairness, and openness…Fairness and openness require open communication among Team members, internal and external customers, and the public."3
The "open" nature of procurement processes is a critical feature of public acquisition.4 Public entities throughout the United States have "freedom of information" and "public records" laws that provide access to government-held information, and these laws are routinely applied — particularly at the State level — to maximize public access to contract information.5 Public agencies also have an affirmative obligation to share information with potential vendors, prior to award, to ensure a fair procurement process. This obligation includes providing "clear, adequate, and sufficiently definite information about public needs to allow offerors to enter the public acquisition on an equal basis."6
Benefits of market research
For state and local governments, as for any sophisticated buyer, market research is a key component of communicating openly and clearly with potential vendors. All states and local governments strive to research technology alternatives and best practices thoroughly before issuing a solicitation. This research is particularly important when a state or local government is acquiring complex supplies or services. Unfortunately, public officials often have limited resources to conduct this research or, in some cases, lack the technical expertise needed to compare and discern the sometimes subtle differences among competing products and services.
As a result, communication with potential vendors is an essential part of the market research process. This communication often occurs through written exchanges of information (e.g., submission of marketing materials or responses to Requests for Information), but face-to-face meetings between public agencies and potential vendors are also common. Most state and local officials are comfortable with these exchanges of information, as they understand their critical importance to the procurement process.
But occasionally state and local officials decline one-on-one meetings with vendors, expressing concern about perceptions of unfair bias or conflicts of interest that may arise from such meetings. They question, for example, if a state official meets with vendor A, but not other vendors, does that mean the official is biased toward vendor A's solution? Similarly, if a local government official attends a demonstration of vendor B's technology while developing a Request for Proposal (RFP), is there a conflict of interest?
This concern can have a chilling effect on communication with vendors. In response to a request for a meeting prior to release of an RFP, one state official recently wrote: "If I meet with them even as an introductory meeting, then I assume they understand they will be precluded from bidding on any project we bid out the next six months." Is this level of concern by state and local officials warranted? We think clearly it is not.
Perception versus reality
It is ridiculous to think that government officials are so easily manipulated or influenced that a simple meeting with an industry representative could somehow hijack the entire competitive bid process. The issue is mostly one of perception, not reality. But as we all know, perception is reality where politics is concerned.
At the federal level, this issue was addressed during the 1996 revision of Federal Acquisition Regulation (FAR) Part 15, "Contracting by Negotiation." Balancing the dual goals of "openness" and "integrity" in the procurement process, the FAR drafters decided to specifically encourage pre-RFP meetings and exchanges of information between public officials and potential vendors (see Federal-level procurement guidelines sidebar, page 20).
In fact, the federal rule not only encourages early exchanges of information with vendors but also specifically identifies "one-on-one meetings" as an appropriate means of accomplishing these exchanges. There are important caveats in the rule to ensure fair treatment of all vendors and to make sure that procurement integrity rules are followed. There is also a helpful, bright-line test on when these open exchanges should stop (i.e., "After release of the solicitation, the contracting officer must be the focal point of any exchange with potential offerors" — emphasis added.)
Open dialogue needed
The National Institute of Governmental Purchasing (NIGP) also encourages an open dialogue with suppliers. "There is tremendous value to be gained when buyers and suppliers freely exchange information in support of an improved mutual understanding of the business challenge at hand and the solutions available to meet that challenge," says Chief Executive of the NIGP Rick Grimm. "Mitigating the risk of real or perceived 'undue influence' is a paramount consideration for every public procurement professional. A policy of equal access to information and a formal RFI help to ensure the integrity of the solicitation process in its early stages."
The National Association of State Procurement Officials (NASPO) has also recognized the value of getting appropriate vendor input prior to a procurement, stating: "[t]he central procurement office should develop guidelines for vendor input into the process of determining agencies' needs or preparing initial specifications or scopes of work, so that the agencies and the central procurement office may obtain the benefits of vendor expertise without creating unfair bias or a conflict of interest."7 NASPO further notes that "communications should never give vendors an opportunity to gain an unfair advantage, to acquire information their competitors do not have, or to unduly influence decisions at any stage of the procurement process"; and "[c]ommunication with vendors should be on an open, available-to-all basis."8
The overall message to public officials is clear: Feel free to exchange information openly and freely with vendors prior to a solicitation being issued; just be sure to treat all vendors fairly.
Balancing openness and integrity
Admittedly, discretion must be exercised to balance the objectives of "openness" and "integrity." We can all agree that a public official should not disclose a confidential government strategy. However, let's say a state official meets with vendors before issuing a solicitation to understand leading practices and innovative new solutions. The state official may also wish to gather benchmarking information such as what has worked in other states and how those approaches may apply in her state. These discussions require the procurement official to share her high-level goals for the program, what will define success on the project and what the state perceives as the largest barriers to success. All of these are legitimate objectives for a meeting and do not disclose a confidential government strategy.
However, unless the state official reads from the same script for every vendor meeting, and every vendor asks exactly the same questions, she may share information with one competitor that she does not share with another. Does this mean she has allowed one vendor to improperly acquire information that other competitors do not have?
The only reasonable answer to this question is no. The metric of providing "equal information" to all, if strictly construed, would be impossible to meet or enforce. Moreover, it would prevent the kind of discussions that lead to the best, most cost-effective solutions. The standard for a fair process is not "equal information" for all, but equal access for all. This concept is captured at the federal level as follows: "All contractors and prospective contractors shall be treated fairly and impartially but need not be treated the same."9
Providing equal access to potential vendors is also consistent with the goal of greater transparency. It is easier to monitor and document and, therefore, permits greater accountability. When access is the standard for fairness, the procurement official is not at risk of improperly meeting with a vendor regarding an upcoming procurement or of disclosing information that is not precisely the same to each vendor. Rather, as long as the procurement official treats all potential vendors impartially and provides equivalent access to all, the process is fair.
We recognize that smaller staff, greater workloads and compressed timeframes can make these meetings an additional burden for already strained resources. But we submit that the right kind of dialogue with industry is a cost-effective and even essential tool to good government.
An informed understanding of current industry capabilities and practices results in both better RFPs and better contracts. As Steven Kelman from Harvard's Kennedy School of Government recently wrote: "When government doesn't take advantage of [industry] knowledge before issuing an RFP, it loses. Failure to get early, honest feedback results in many misunderstandings in contract language, which bedevil contracts after they are signed and lead to disappointments or even litigation. In addition, lack of pre-RFP communication often leads to requirements that are unnecessarily expensive to meet but could have been made more economical with small changes."10
More communication with industry promotes more competition, better solutions and better pricing. Ambiguity in the final RFP translates to misaligned solutions or risk for a vendor who responds with higher pricing. The latest developments, especially in such complex fields as information technology, healthcare and environmental sciences, are difficult to harness unless you put industry competitors to work for you.
In addition, the FAR's bright-line test on when these open exchanges should stop — after release of the solicitation — is an excellent form of protection for procurement officials. If criticized for agreeing to meet with a particular vendor prior to the RFP, the explanation is greater transparency and accountability. A best practice would be to note in the contract file the date of the meeting and everyone who attended. In addition, include a copy of whatever studies or other materials were provided to the government official. This is easy to monitor and document and, therefore, permits greater transparency to protect the integrity of the process.
We realize that all the bright-line tests in the world will not always protect procurement officials or companies from baseless allegations. Competitive posturing and sensational journalism can produce allegations that cast pre-RFP discussions as improper. If anyone challenges the selection process, and it's determined that a procurement official met with the company before the RFP was released, there may be a suggestion, albeit pure speculation, that something improper occurred "behind closed doors."
Standard: Open access
But fear of these kinds of allegations should not limit the competitive process. In the final analysis, every public official has to strike a balance between "openness" and "integrity." They have to use whatever tools are reasonably available to ensure that they are issuing an RFP that will result in best value for their constituents. This article merely suggests a possible standard that they and their colleagues may choose to adopt.
We believe an "open access" policy fosters the most productive competitions and contracts between the public and private sector while providing a balanced approach to all vendors. It allows public officials to not just obtain the best value but also obtain the best value while preserving the integrity of the procurement.
- Read the "Federal-level procurement guidelines" sidebar to learn about FAR's implications for balancing the dual goals of "openess" and "integrity."
About the authors
Paul J. Campbell has public sector experience as a Federal Agent investigating contract fraud and as District Attorney and Chief Purchasing Officer for the State of Illinois.
Richard Rector chairs DLA Piper's Government Contracts practice and focuses his practice on federal, state and local procurement issues.
See, e.g., Federal Acquisition Regulation (FAR) 1.102 ("The vision for the Federal Acquisition System is to deliver on a timely basis the best value product or service to the customer, while maintaining the public's trust and fulfilling public policy objectives.")
See, e.g., FAR 1.102-2(c). See also American Bar Association (ABA) Section of Public Contract Law, Principles of Competition in Public Procurements, www.abanet.org/contract/admin/poc.html (setting forth 10 principles of competition in public procurement, including that "all parties involved in the acquisition process must participate fairly, honestly, and in good faith.")
ABA Section of Public Contract Law, Report to Accompany Principles for Resolving Controversies in Public Procurements, www.abanet.org/contract/admin/roc.html ("A hallmark of public acquisition is an 'open' contracting process in which the business of public entities and their contractors is conducted, to the maximum extent practicable, using processes that are subject to public scrutiny.")
See 5 U.S.C. § 552 et seq. (providing public access to information of the federal government, subject to certain exemptions and limitations); Model Procurement Code for State and Local Governments §1-401, cmt. 1 ("The purpose of this provision is to achieve maximum public access to procurement information consistent with appropriate consideration of safeguards for contractors and employees.") See also ABA, Principles of Competition in Public Procurements, note 3 supra (stating that public entities should provide "maximum public access to procurement information consistent with the protection of trade secrets, proprietary or confidential source selection information, and personal privacy rights.")
ABA, Principles of Competition in Public Procurements, note 3 supra.
NASPO State and Local Government Purchasing Principle and Practices, 2008.
NASPO State and Local Government Purchasing Principle and Practices, 1997.
Kelman, Steve, "Agencies Should Not Fear Talking To Contractors," Federal Computer Week, Feb. 17, 2010.