In a reverse auction, a bid filed literally at the last second was excluded as late, perhaps because the reverse auction system did not process the bid until a few seconds after the deadline.
As a recent GAO protest demonstrates, reverse auctions–by their very nature–encourage last-second bids, but it is the prospective contractor that may pay the price if the reverse auction system does not immediately process a bid.
The GAO’s decision in C2G Ltd. Co., B-411131 (May 12, 2015) involved a Defense Logistics Agency solicitation for maintenance services on government-owned equipment. The procurement was conducted using a a third-party reverse auction system, operated by Procurex, Inc.
The reverse auction began at 9:00 a.m. Eastern Standard Time on February 6, 2015. The reverse auction was scheduled to end at 9:30 a.m. EST.
At 9:04:34 a.m., C2G Ltd. Co. placed a bid of $1,335,687 and became the “lead” bidder. C2G’s “lead” bid was visible to other offerors. C2G remained in the “lead” position until 9:28:55 a.m., when a competitor placed a bid of $1,294,725 and became the “lead” bidder.
According to C2G, at 9:29:59–with only one second left in the competition–C2G attempted to place a bid lower than the bid submitted by its competitor. However, C2G’s bid was not accepted. Instead, C2G received an error message reading “Failure of Bid Place Button – Event has ended.”
C2G filed a GAO bid protest challenging the DLA’s refusal to accept its bid. C2G argued that the Procurex system must have malfunctioned, and that it was improper for the DLA to reject a bid that had been submitted before 9:30 a.m. EST.
A Procurex official provided a statement in response to the protest. According to Procurex, its system had not malfunctioned, and had not registered C2G’s last second bid. Another Procurex official contacted by C2G stated that there is a “lag time” of up to fifteen seconds between when a bidder clicks the “place bid” button and when Procurex processes the bid. This “lag time” was not disclosed to bidders on the DLA procurement.
The GAO wrote that “[i]t is an offeror’s responsibility, when transmitting its proposal electronically, to ensure the proposal’s timely delivery by transmitting the proposal sufficiently in advance of the time set for receipt of proposals to allow for timely receipt by the agency.” The GAO continued, “[p]roposals that are received in the designated government office after the exact time specified are “late,” and generally may not be considered for award.”
In this case, the GAO held that C2G had not presented any evidence that its bid was actually received by the 9:30 a.m. deadline. With respect to the “lag time,” the GAO held that it is “common knowledge . . . that some delay is to be expected when data is transmitted across the internet and must be processed by a receiving database.” The GAO rejected C2G’s assertion that the DLA was required to notify offerors of the lag time, stating “an agency is not required to advise offerors of every conceivable risk or obstacle that they could face in submitting their proposals.” The GAO denied C2G’s protest.
The strict rules governing the timeliness of proposals have been around for a long time, and exist for an important purpose. As the GAO stated in the C2G decision, a strict timeliness requirement “alleviates confusion, ensures equal treatment of all offerors, and prevents one offeror from obtaining a competitive advantage that may accrue where an offeror is permitted to submit a proposal later than the deadline set for all competitors.”
However, these timeliness rules were developed in the context of “ordinary” bids and proposals. In an ordinary procurement, there is usually no disadvantage associated with submitting a bid or proposal several days before the deadline. In fact, in an ordinary procurement, when a proposal arrives late, it is often the offeror’s own procrastination that is at least partially to blame.
But reverse auctions are different. In a reverse auction, the very structure of the procurement encourages offerors to submit their final bids as close to the deadline as possible. In my view, when the government adopts a procurement structure that encourages last-second bids, it is worth considering whether the longstanding “late is late” rule should be modified to account for circumstances like the “lag time” at issue in the C2G case.
Perhaps in the future the GAO or Court of Federal Claims will reconsider the application of the standard timeliness rules to reverse auctions. For now, though, the C2G decision is an important warning to contractors participating in reverse auctions: if a last-second proposal is “received” after the deadline, it will likely be excluded as late.