This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In a report released in March 2006, the U.S. Government Accountability Office, known as the GAO, provided highlights from its October 2005 Managing the Supplier Base in the 21st Century forum. The report included a call to modernize the procurement function of federal government agencies, with an emphasis on focusing on workforce skills development and promoting a culture of change.
In a section entitled “Changing Current Workforce Culture Is Difficult”, the report noted the need to evolve beyond a risk-averse “lowest bid wins” rule towards an approach that focuses on best overall quality and value:
Given the rule-bound culture surrounding federal government acquisitions, forum participants warned that reform would not be easy. According to participants, the combination of penalties for acquisition failures along with defining program success as not failing has contributed to a risk averse culture that is less focused on outcomes. The danger, participants pointed out, is that risk aversion leads to distorted economic reasoning, causing acquisition officials to seek the lowest profit providers even if they do not provide the lowest cost commensurate with quality. Participants added that with years of operating in a risk-averse environment, program managers and government acquisition officials do not feel empowered to take risks and are resistant to change.
Some participants suggested that DOD’s risk-averse culture has been molded by out-of-date acquisition training. Currently, acquisition officers and enlisted personnel are taught to identify and avoid risk. Moreover, acquisition workforce numbers have been reduced with a trade-off occurring between technical and labor experts. Together, these factors create significant challenges in creating an environment that encourages innovation.
As the report noted, evolving beyond traditional procurement approaches creates new challenges and risks. The transition from low bid awards to awards based on best value presents difficulties for institutions as they attempt to incorporate more complex evaluation mechanisms while meeting the standards of transparency and defensibility in their contract award decisions. As numerous cases have shown, straying from the lowest bid rule can give rise to significant legal exposures if non-price-related criteria are inappropriately factored into the evaluation process.
