Written Testimony of Joseph G. Jordan, CEO, FedBid, Inc. for

Written Testimony of Joseph G. Jordan, CEO, FedBid, Inc.
for submission to the
House Committee on Small Business
Subcommittee on Contracting and Workforce
for the hearing
“Contracting and the Industrial Base Part III: Reverse Auctions, Verification and The SBA's
Role in Rulemaking”
Thursday, March 19, 2015
Chairman Hanna, Ranking Member Meng and Members of the committee, thank you for the
opportunity to provide written testimony on the topic of reverse auction use within the federal
government, including its effectiveness as a tool to strengthen opportunities and access for small
businesses.
I.
INTRODUCTION – FEDERAL CONTRACTING IS A CRITICAL
ECONOMIC OPPORTUNITY FOR SMALL BUSINESS
Certainly, this topic is of keen interest to me, not only because of my current position, but also
given that I spent much of the five years prior to my joining FedBid in January 2014 working on
these very issues.
As Associate Administrator for Government Contracting and Business Development at the U.S.
Small Business Administration from 2009 to 2011, we saw the federal government’s largest twoyear improvement in small business contracting, prioritized the implementation of the Women1
owned Small Business Contracting program, and worked with Congress on key enhancements to
government contracting regulations and programs for small businesses that were included in the
Small Business Jobs Act of 2010.
Then as Administrator of the Office of Federal Procurement Policy from 2011 to 2013, I made
small business one of my top priorities including within my first month on the job issuing a joint
memo with then-SBA Administrator Karen Mills on strengthening accountability for small
business goal achievement and maximizing opportunities for small business contractors.
Needless to say, federal contracts present a critical economic opportunity for small businesses. In
fact, the statutory goal of 23 percent of federal prime contracting dollars going to small
businesses likely represents the single largest federal program aimed at the success of America’s
small businesses and entrepreneurs – to the tune of nearly $100 billion each year.
Why is that significant? As the members of this committee know, our nation’s economy and our
competitiveness in the global market depend on a vibrant, thriving small business sector. Small
businesses are our nation’s job creators – responsible for two-thirds of the net new jobs across
the country. Small businesses drive innovation – producing up to 16 times more patents per
employee than large patenting firms, according to the SBA Office of Advocacy. And, small
businesses are the heart and soul of our cities and towns – where Main Street businesses and
their owners are pillars in their communities, providing not only jobs, but also leadership in areas
including philanthropy, education and government.
2
Small businesses have proven many times over, if given the chance, they will deliver.
Specifically, when we are talking about federal contracting, they deliver in the form of
innovation, efficiency, nimbleness to adapt to the unique needs of a government agency, and
high-quality services and products. But the federal marketplace is a complex one, and for small
businesses, those complexities are often a barrier that is insurmountable due to limited time and
resources.
It’s with that perspective and insight that I approach any assessment of the impact and value
reverse auctions offer small businesses in federal contracting. Certainly, we need to ask whether
reverse auctions provide savings for taxpayers in the form of lower costs and efficiency? Yes,
they do. But if our goal is also to maximize the opportunity for small businesses, then just as
important is the question: Do reverse auctions provide greater chances for small businesses to
compete and win federal contracts? And, the answer to that is, yes they do.
II.
REVERSE AUCTIONS INCREASE ACCESS FOR SMALL BUSINESSES
As the CEO of the largest commercial marketplace for reverse auctions conducted by federal
agencies, it is likely no surprise to the Members of the committee that I believe reverse auctions
are a useful tool for expanding opportunities for small businesses. But, in fact, my decision to
join FedBid was actually because of my interest in continuing to support small businesses, not
the other way around. Reverse auctions, when used appropriately, can be a highly-effective and
powerful tool for small businesses – and for government buyers, as well.
3
A December 2013 report by the Government Accountability Office found that reverse auctions
provide a “high rate of awards to small businesses.” In fact, that report looked at FY2012
acquisition data, and found that about 86 percent of contract awards through reverse auctions
went to small businesses. Those acquisitions accounted for $661 million – 80 percent – of the
dollar value of all reverse auction awards.
FedBid’s own more recent data reinforces this point. In FY2014, of the nearly 31,000 contracts
awarded by federal agencies through FedBid’s marketplace, 86 percent – 26,494 contract awards
– went to small businesses, including many thousand minority-owned, women-owned and
veteran-owned small firms.
Looking at dollar value, in FY2014 federal agencies awarded more than $1.5 billion in contracts
through FedBid’s reverse auction marketplace. More than 75 percent of these dollars – $1.19
billion – went to small businesses, including:

$226 million to veteran-owned small businesses;

$176 million to service disabled veteran-owned small businesses; and,

$268 million to women-owned small businesses.
Importantly, these results are not just specific to contracts directed by federal agencies for small
business set-aside awards. On the FedBid marketplace in 2014, small businesses won 64 percent
of all “non set-aside” awards.
4
These results have been remarkably consistent year-over-year for the past decade. We attribute
this to three primary characteristics of the marketplace and opportunities offered through reverse
auctions:
i)
Relatively low dollar size of the buys – which means the contract opportunities
are more approachable for small businesses;
ii)
Ease of access – the opportunities are readily available and simply aggregated
without access costs; and,
iii)
III.
Ease of use – the marketplace is relatively simple and efficient to use.
REVERSE AUCTIONS DRIVE COMPETITION AND EFFICIENCY FOR
BOTH BUYERS AND SELLERS
This data also points to the advantage reverse auctions deliver to government buyers. Reverse
auctions help them meet the challenge of finding and engaging small businesses, by providing, in
the case of FedBid, instant access to thousands of small businesses across every socio-economic,
product and service category. This access translates into increased competition, as is noted in
August 2014 guidance from Undersecretary of Defense Frank Kendall on creating and
maintaining a competitive environment for supplies and services in the Department of Defense.
FedBid’s reverse auction marketplace provides a central location for sellers to filter, search and
bid on tens of thousands of solicitations from federal, state and local and commercial buyers.
5
Federal buyers are able to automatically post combined synopsis/solicitations to FedBizOpps, as
required by regulation, and FedBid proactively contacts sellers when opportunities arise to
communicate complete, detailed information for each procurement. This approach minimizes the
resources required by sellers to pursue each opportunity and compete for contracts, which
increases opportunity awareness while lowering sales costs. In addition, because the services are
web-based, there is no software to load, and sellers need only Internet access and a browser to
participate. Automated bidding and other time-saving features enable sellers to compete on
multiple simultaneous opportunities with fewer resources and fewer costs.
IV.
CONCLUSION – REVERSE AUCTIONS LEVEL THE PLAYING FIELD,
OPEN DOORS FOR SMALL BUSINESSES
As this committee considers the impact reverse auctions can have in providing greater
opportunity for small businesses, the compelling result of leveling the playing field is significant.
Small businesses do in fact face limited resources, when compared to larger firms, which they
can devote to breaking into the complex market that is federal procurement. Reverse auctions are
an equalizer on that front, in multiple ways – from ease of use and awareness of contracting
opportunities to allowing bids from a small business to be considered on their merits, side-byside with those of their competitors.
As a result, reverse auctions do provide a critical gateway to small businesses looking to break
into the federal contracting marketplace. With regards to awards through FedBid’s reverse
6
auction marketplace, in FY2014, 94 percent of the companies that won their first-ever federal
contract were small businesses.
At FedBid, the growth we continue to see in our seller community – now topping more than
75,000 companies – is being fueled by small businesses that see these results of increased access
and competitive opportunity, and because of that view reverse auctions as an increasinglyeffective tool to help them achieve their goals for growing their businesses, and just as
importantly, creating good paying jobs as they do.
Thank you again for the opportunity to share my perspective on the impact and opportunity
reverse auctions provide to small business in the federal procurement marketplace.
Respectfully submitted,
Joseph G. Jordan
Chief Executive Officer
FedBid, Inc.
8500 Leesburg Pike, Suite 602
Vienna, VA 22182
7