[Senate Report 116-100]
[From the U.S. Government Publishing Office]


                                                       Calendar No. 203

116th Congress }                                             { Report
                                 SENATE
 1st Session   }                                             { 116-100           
                                                                
_______________________________________________________________________


       CONSTRUCTION CONSENSUS PROCUREMENT IMPROVEMENT ACT OF 2019

                               __________

                              R E P O R T

                                 OF THE

                   COMMITTEE ON HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                               TO ACCOMPANY

                                S. 1434

         TO PROHIBIT THE USE OF REVERSE AUCTIONS FOR DESIGN AND
       CONSTRUCTION SERVICES PROCUREMENTS, AND FOR OTHER PURPOSES


               [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


               September 10, 2019.--Ordered to be printed
               
                                  ________
                       

                       U.S. GOVERNMENT PUBLISHING OFFICE
                
89-010                       WASHINGTON: 2019
_____________________________________________________________________________            
               
               
               
               
        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin, Chairman
ROB PORTMAN, Ohio                    GARY C. PETERS, Michigan
RAND PAUL, Kentucky                  THOMAS R. CARPER, Delaware
JAMES LANKFORD, Oklahoma             MAGGIE HASSAN, New Hampshire
MITT ROMNEY, Utah                    KAMALA D. HARRIS, California
RICK SCOTT, Florida                  KYRSTEN SINEMA, Arizona
MICHAEL B. ENZI, Wyoming             JACKY ROSEN, Nevada
JOSH HAWLEY, Missouri

                Gabrielle D'Adamo Singer, Staff Director
                   Joseph C. Folio III, Chief Counsel
       Patrick J. Bailey, Chief Counsel for Governmental Affairs
               David M. Weinberg, Minority Staff Director
               Zachary I. Schram, Minority Chief Counsel
              Michelle M. Benecke, Minority Senior Counsel
          Jackson G. Voss, Minority Professional Staff Member
                     Laura W. Kilbride, Chief Clerk




                                                   Calendar No. 203
116th Congress }                                         { Report
                                 SENATE
 1st Session   }                                         { 116-100

======================================================================

 
       CONSTRUCTION CONSENSUS PROCUREMENT IMPROVEMENT ACT OF 2019

                                _______
                                

               September 10, 2019.--Ordered to be printed

                                _______
                                

 Mr. Johnson, from the Committee on Homeland Security and Governmental 
                    Affairs, submitted the following

                              R E P O R T

                         [To accompany S. 1434]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Homeland Security and Governmental 
Affairs, to which was referred the bill (S. 1434) to prohibit 
the use of reverse auctions for design and construction 
services procurements, and for other purposes, having 
considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
  I. Purpose and Summary..............................................1
 II. Background and Need for the Legislation..........................2
III. Legislative History..............................................3
 IV. Section-by-Section Analysis......................................3
  V. Evaluation of Regulatory Impact..................................3
 VI. Congressional Budget Office Cost Estimate........................3
VII. Changes in Existing Law Made by the Bill, as Reported............5

                         I. PURPOSE AND SUMMARY

    S. 1434, the Construction Consensus Procurement Improvement 
Act of 2015, amends the Federal Acquisition Regulation (FAR) to 
prohibit Federal agencies from the use of reverse auctions for 
awarding design and construction services.\1\
---------------------------------------------------------------------------
    \1\On November 9, 2017, the Committee approved S. 2113, the 
Construction Consensus Improvement Act of 2017. S. 1434 is identical to 
section 4 of that legislation. Accordingly, this report is in large 
part a reproduction of the information relevant to section 4 in 
Chairman Johnson's committee report for S. 2113, S. Rep. No. 115-231 
(2018).
---------------------------------------------------------------------------

              II. BACKGROUND AND THE NEED FOR LEGISLATION

    The procedures outlined in statute and detailed in the FAR 
related to the award of design and construction services by 
Federal agencies lack guidance on how to determine a fair and 
reasonable price. Without this guidance, contracting officers 
may utilize a reverse auction to determine a fair and 
reasonable cost to the Government.\2\ In a reverse auction, the 
sellers continually lower their prices in order to win the 
award, as opposed to a regular auction where buyers raise their 
offers until they win the item for sale.\3\ To win the auction, 
in most cases the company must be the low bidder at the end of 
the auction.\4\ While this procedure generally results in a low 
price for the item, the quality of the product, delivery terms, 
and other important features may be lacking.\5\ Therefore, 
reverse auctions are not appropriate for design-build contracts 
that require design concepts, key personnel, and technical 
solutions.\6\
---------------------------------------------------------------------------
    \2\FAR 36.303-2(b) (1997).
    \3\Reverse Auctions, What are Reverse Auctions?, (2008), http://
reverseauctions.com/index.html.
    \4\Gov't Accountability Office, GAO-14-108, Guidance is Needed to 
Maximize Competition and Achieve Cost Savings 3 (2013), http://gao.gov/
assets/660/659530.pdf.
    \5\Id.
    \6\FAR 36.303-2(a) (1997).
---------------------------------------------------------------------------
    In 2013, the Government Accountability Office (GAO) 
recommended that the Director of the Office of Management and 
Budget issue guidance on the appropriate use of reverse 
auctions.\7\ In 2015, the Office of Federal Procurement Policy 
(OFPP) issued a memorandum mentioning reverse auction guidance; 
however, OFPP has failed to include reverse auction policy 
within the FAR.\8\ Without a FAR provision, agencies may use 
reverse auctions to set prices for design-build contracts or to 
contract for building materials using the reverse auction 
process. For example, concerns with the use of reverse auctions 
were highlighted when the United States Army Corps of Engineers 
issued a policy to stop using reverse auctions for construction 
contracts after finding that the reverse-auction methodology 
did not work for construction contracts due to their high 
degree of variability, and that they did not deliver promised 
savings.\9\
---------------------------------------------------------------------------
    \7\GAO-14-108, supra note 4.
    \8\Office of Federal Procurement Policy, Memorandum on Effective 
Use of Reverse Auctions (June 1, 2015), https://www.whitehouse.gov/
sites/default/files/omb/procurement/memo/effective-use-of-reverse-
auctions.pdf.
    \9\Press Release, Joint-Hearing Finds The Use Of Reverse Auction 
Contracts Limits Competition, Increases Costs For Taxpayer, H. Comm. on 
Small Business, Subcomm. On Contracting & Workforce (Dec. 11, 2013), 
http://smallbusiness.house.gov/news/documentsingle.aspx?Document 
ID=364146.
---------------------------------------------------------------------------
    S. 1434 simply requires the FAR to be amended to prohibit 
the use of reverse auctions for design and construction 
services. The legislation defines design and construction 
services and site planning, landscape design, architectural and 
engineering services, interior design, construction work for 
facility, infrastructure, and environmental restoration 
projects, deliver of construction materials, or construction or 
substantial alteration to public buildings or works. It defines 
the term reverse auction as a real-time auction through an 
electronic medium among two or more offerors who compete by 
submitting bids, with the ability to submit lower bids at any 
time before the closing of the auction.

                        III. LEGISLATIVE HISTORY

    S. 1434, the Construction Consensus Procurement Improvement 
Act of 2019, was introduced on May 13, 2019, by Senators Rob 
Portman (R-OH) and Mazie Hirono (D-HI). The bill was referred 
to the Committee on Homeland Security and Governmental Affairs.
    The Committee considered S. 1434 at a business meeting on 
May 15, 2019. The Committee approved the bill en bloc by voice 
vote. Senators present for the vote were: Johnson, Paul, 
Lankford, Scott, Peters, Carper, Hassan, and Rosen.

       III. SECTION-BY-SECTION ANALYSIS OF THE BILL, AS REPORTED

Section 1. Short title

    This section establishes the short title of the bill as the 
``Construction Consensus Procurement Improvement Act of 2019.''

Section 2. Prohibition on the use of a reverse auction for the award of 
        a contract for design and construction services

    In this section, Congress finds that in a reverse auction, 
sellers bid down the price, in contrast to a traditional 
auction where buyers bid up the price.
    This section also requires the FAR to be amended to 
prohibit the use of reverse auctions as part of procedure for 
awarding contracts for construction and design services. The 
section includes a definition of design and a construction 
service that is consistent and broadly covers all contracts for 
design and construction of a public building, facility, or 
work. This section also includes a definition for reverse 
auction.

                  IV. EVALUATION OF REGULATORY IMPACT

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee has 
considered the regulatory impact of this act and determined 
that the act will have no regulatory impact within the meaning 
of the rules. The Committee agrees with the Congressional 
Budget Office's statement that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act and would not affect the budgets 
of state, local, or tribal governments.

              V. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 30, 2019.
Hon. Ron Johnson,
Chairman, Committee on Homeland Security and Governmental Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1434, the 
Construction Consensus Procurement Improvement Act of 2019.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Aurora 
Swanson and Matthew Pickford.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    S. 1434 would prohibit federal agencies from purchasing 
design or construction services using a specific type of 
reverse auction. Unlike a traditional auction where a buyer 
with the highest bid wins the right to purchase a good or 
service, in a reverse action a buyer seeking a good or service 
solicits bids, multiple sellers offer bids, and the seller with 
the lowest bid wins the competition. The legislation would 
prohibit federal agencies from using a specific type of reverse 
auction that allows sellers to submit revised bids during the 
auction.
    CBO reviewed available information on the use of reverse 
auctions in government procurement contracts for the Army Corps 
of Engineers and the General Services Administration. In 
addition, CBO reviewed studies prepared by the Government 
Accountability Office on the use of reverse auctions. In 
general, reverse auctions have not been suitable for complex 
contracts like design and construction services because they do 
not consistently result in procurement costs that are lower 
than what would result from other contracting methods such as 
sealed bids or negotiated procurements. CBO estimates that 
implementing S. 1434 would not require agencies to 
significantly change their typical contracting process and thus 
would not have a significant effect on the federal budget.
    Enacting S. 1434 could affect direct spending by some 
agencies (such as Tennessee Valley Authority) that are 
authorized to spend receipts from fees, the sale of goods, and 
other collections to cover their operating costs. Because most 
of those agencies can adjust the amounts they collect as 
operating costs change, CBO estimates that any net change on 
direct spending by those agencies would be negligible.
    The CBO staff contacts for this estimate are Aurora Swanson 
and Matthew Pickford. The estimate was reviewed by H. Samuel 
Papenfuss, Deputy Assistant Director for Budget Analysis.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    Because S. 1434 would not repeal or amend any provision of 
current law, it would make no changes in existing law within 
the meaning of clauses (a) and (b) of paragraph XXVI of the 
Standing Rules of the Senate.