[Senate Report 115-231]
[From the U.S. Government Publishing Office]
Calendar No. 382
115th Congress} { Report
SENATE
2d Session } { 115-231
======================================================================
CONSTRUCTION CONSENSUS PROCUREMENT IMPROVEMENT ACT OF 2017
__________
R E P O R T
OF THE
COMMITTEE ON HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
to accompany
S. 2113
TO AMEND TITLE 41, UNITED STATES CODE, TO IMPROVE THE
MANNER IN WHICH FEDERAL CONTRACTS FOR DESIGN AND
CONSTRUCTION SERVICES ARE AWARDED, TO PROHIBIT THE
USE OF REVERSE AUCTIONS FOR DESIGN AND CONSTRUCTION
SERVICES PROCUREMENTS, AND FOR OTHER PURPOSES
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
April 18, 2018.--Ordered to be printed
__________
U.S. GOVERNMENT PUBLISHING OFFICE
WASHINGTON : 2018
COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
RON JOHNSON, Wisconsin, Chairman
JOHN McCAIN, Arizona CLAIRE McCASKILL, Missouri
ROB PORTMAN, Ohio THOMAS R. CARPER, Delaware
RAND PAUL, Kentucky HEIDI HEITKAMP, North Dakota
JAMES LANKFORD, Oklahoma GARY C. PETERS, Michigan
MICHAEL B. ENZI, Wyoming MAGGIE HASSAN, New Hampshire
JOHN HOEVEN, North Dakota KAMALA D. HARRIS, California
STEVE DAINES, Montana DOUG JONES, Alabama
Christopher R. Hixon, Staff Director
Gabrielle D'Adamo Singer, Chief Counsel
Patrick J. Bailey, Chief Counsel for Governmental Affairs
Margaret E. Daum, Minority Staff Director
Stacia M. Cardille, Minority Chief Counsel
Charles A. Moskowitz, Minority Senior Legislative Counsel
Thomas J.R. Richards, Minority Professional Staff Member
Laura W. Kilbride, Chief Clerk
Calendar No. 382
115th Congress} { Report
SENATE
2d Session } { 115-231
======================================================================
CONSTRUCTION CONSENSUS PROCUREMENT IMPROVEMENT ACT OF 2017
_______
April 18, 2018.--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. 2113]
[Including cost estimate of the Congressional Budget Office]
The Committee on Homeland Security and Governmental
Affairs, to which was referred the bill (S. 2113) to amend
title 41, United States Code, to improve the manner in which
Federal contracts for design and construction services are
awarded, 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..............................................4
IV. Section-by-Section Analysis......................................4
V. Evaluation of Regulatory Impact..................................5
VI. Congressional Budget Office Cost Estimate........................5
VII. Changes in Existing Law Made by the Bill, as Reported............6
I. Purpose and Summary
S. 2113, the Construction Consensus Procurement Improvement
Act of 2017, seeks to improve the procedure that civilian
agencies use to select construction companies to perform design
and construction projects. The bill reduces Federal Government
documentation requirements, reduces costs for construction
companies bidding on Federal contracts, and ensures that the
Government does not use a reverse auction to establish a fair
and reasonable price for certain construction contracts.\1\
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\1\On February 10, 2016, the Committee approved S. 1526, the
Construction Consensus Improvement Act of 2015. That bill is
substantially similar to S. 2113. Accordingly, this report is in large
part a reproduction of Chairman Johnson's committee report for S. 1526,
S. Rep. No. 114-366 (2016).
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II. Background and the Need for Legislation
Currently, many Federal construction contracts are awarded
using a two-phase ``design-build'' procedure.\2\ The first
phase begins with an agency soliciting general design and
background information from construction companies.\3\ The
agency then reviews the information and selects a subset of the
companies to participate in the second phase of the selection
process.\4\
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\2\Joseph C. Kovars, Barbara R. Gadbois and John R. Heisse, Turning
a Battleship: Design-build on Federal Construction Projects, Ober-Kaler
(2011), http://www.ober.com/publications/1172-turning-battleship-
design-build-federal-construction-projects.
\3\Virginia E. Mitchell, Two-Phase Design/Build Selection Process
Speeds Contract Review, U.S. Army AL&T Magazine (June 2011), http://
www.army.mil/article/58694/
Two_Phase_Design_Build_Selection_Procedure_Speeds_Contract_Review/.
\4\Id.
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In the second phase, the agency requests detailed design
and cost information from the selected companies, evaluates
that information, determines a fair and reasonable price, and
awards the contract to the company that will provide the best
value to the Government.\5\
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\5\Id.
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While this two-phase design-build procedure is generally
useful, it has several downsides. First, for smaller projects,
the requirement that the contracting officer confirm that ten
criteria were reviewed and satisfied before beginning the two-
phase procedure can be onerous both for the Government and the
contractors.\6\
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\6\FAR 36.301, Use of two-phase design build selection procedures
(1997).
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Second, the contracting officer must consider not less than
five bidders in the second phase of the procedure.\7\ Some
estimate that it costs a company between $50,000 and $100,000
to submit the full design documentation required at this stage
of the procedure.\8\ When a contracting officer includes
bidders in the second phase of the process that do not have a
reasonable chance of winning the contract, it wastes their time
and money.
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\7\FAR 36.303-1(a)(4) (1997).
\8\Virginia E. Mitchell, Two-Phase Design/Build Selection Process
Speeds Contract Review, U.S. Army AL&T Magazine (June 2011), http://
www.army.mil/article/58694/Two_Phase_
Design_Build_Selection_Procedure_Speeds_Contract_Review/.
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Finally, the design-build procedure outlined in statute and
detailed in the Federal Acquisition Regulation (FAR) lacks
guidance on how to determine a fair and reasonable price.
Without this guidance, a contracting officer could use a
reverse auction to determine a fair and reasonable cost to the
Government.\9\ 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.\10\ To win the auction, in most cases the
company must be the low bidder at the end of the auction.\11\
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.\12\ Therefore, reverse
auctions are not appropriate for design-build contracts that
require design concepts, key personnel, and technical
solutions.\13\
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\9\FAR 36.303-2(b) (1997).
\10\Reverse Auctions, What are Reverse Auctions?, (2008), http://
reverseauctions.com/index.html.
\11\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.
\12\Id.
\13\FAR 36.30-2(a) (1997).
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The Government Accountability Office (GAO) recommended that
the Director of the Office of Management and Budget (OMB) issue
guidance on the appropriate use of reverse auctions in a 2013
report.\14\ 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.\15\ 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.\16\
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\14\ Gov't Accountability Office, GAO-14-108, Guidance Is Needed to
Maximize Competition and Achieve Cost Savings, http://www.gao.gov/
products/GAO-14-108.
\15\ 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.
\16\ 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.
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According to a study commissioned by the Department of
Transportation, the use of the design-build procurement process
has been steadily increasing in the United States public
building sector for more than ten years.\17\ Most of the design
build contracts surveyed used the two-phase selection procedure
because it assessed qualitative factors rather than relying
solely on the low-cost bid.\18\ A 2013 report by Reed
Construction Data corroborated this finding when it reported
that more than 80 percent of the Department of Defense's
construction projects were awarded using the design-build
procedure.\19\ The report also found that slightly more than 30
percent of all government construction projects used the
design-build procedure in 2012.\20\ Based on the body of
support for two-phase design-build procurements, it is
important to address the flaws that may keep civilian agencies
from using this procurement process for most of their
construction contracts.
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\17\ U.S. Dep't of Transp. Fed. Highway Admin. Office of Int'l
Programs, Design-Build, http://international.fhwa.dot.gov/
contractadmin/04.cfm (last visited Mar. 8, 2018).
\18\ Id.
\19\ Tim Duggan & Darshan Patel, Design-Build Project Delivery
Market Share and Market Size Report (May 2013), http://www.dbia.org/
resource-center/Documents/rsmeansreport _2013rev.pdf.
\20\ Id.
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S. 2113 addresses the flaws in the current design-build
process to expand its use to award civilian construction
contracts. First, the bill requires the use of the two-phase
process for all construction projects that are $3,000,000 or
greater. Second, the bill discourages the contracting officer
from including more than five construction companies in the
second phase by requiring the agency to report to Congress all
design-build procurements that allow more than five firms to
participate in the second phase of the design-build procedure.
Third, S. 2113 prohibits reverse auctions that are part of the
two-phase design-build selection procedure. This prevents
agency contracting officers from experimenting with
inappropriate methods to determine a fair and reasonable price.
The bill is not intended to prohibit the use of reverse
auctions in acquisitions other than those services defined in
the section.
III. Legislative History
S. 2113, the Construction Consensus Procurement Improvement
Act of 2017, was introduced on November 9, 2017, 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. 2113 at a business meeting on
February 14, 2018. The Committee approved the bill en bloc by
voice vote. Members present for the vote were: Johnson,
Portman, Paul, Lankford, Enzi, Hoeven, Daines, McCaskill,
Carper, Heitkamp, Peters, Hassan, Harris, and Jones.
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 2017.''
Section 2. Congressional findings
This section makes six findings: (1) acquisition procedures
that are often used effectively for the procurement of other
products and services are not always appropriate for design and
construction services; (2) the Federal Government often
effectively adopts contracting techniques from the private
sector to procure products and services; (3) the design-build
technique is a private sector practice adopted by the
Government that works well for design and construction
services; (4) the current statutory framework for design-build
could benefit from legislative refinement; (5) reverse auctions
are another private sector procurement technique that Federal
officials have adopted and used successfully to award contracts
for the purchase of products that are commercially equivalent
to commodities; and (6) reverse auctions are generally
inappropriate for procurement of design and construction
services.
Section 3. Design-build construction process improvement
This section replaces the current requirements in 41 U.S.C.
Sec. 3309(b) with a requirement that the two-phase selection
procedure be used for design and construction of a public
building, facility, or work valued at or above $3,000,000. For
smaller projects, having a value of less than $3,000,000, it
retains the requirement that the contracting officer perform an
analysis of the project's complexity before using the two-phase
selection procedure.
This section also requires the head of each agency to
create and publically post information regarding the procedures
used to award design and construction contracts in fiscal years
2017 through 2022. Each agency must state the number of times
that more than five bidders are included in the second phase of
the two-phase procedure, as well as the number of design and
construction contracts awarded using a procedure other than the
two-phase selection procedure. The OMB Director shall
facilitate public access to these reports. Finally, the section
directs GAO to perform a one-time compliance review of this
section within 270 days after enactment.
Section 4. Prohibition on the use of a reverse auction for the award of
a contract for design and construction services
This section requires the Federal Acquisition Regulatory
Council to prohibit the use of reverse auctions as part of the
two-phase selection 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. The
section includes a definition of a reverse auction that the
Federal Acquisition Regulatory Council is directed to include
in the regulation so there is a clear and consistent
understanding of the term and procedure across all Federal
agencies.
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 bill and determined
that the bill 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, February 23, 2018.
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. 2113, the
Construction Consensus Procurement Improvement Act of 2017.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Matthew
Pickford.
Sincerely,
Keith Hall,
Director.
Enclosure.
S. 2113--Construction Consensus Procurement Improvement Act of 2017
S. 2113 would modify the federal government's procedures
for awarding design and construction contracts for federal
facilities and would prohibit the use of reverse auctions for
such awards. Specifically, the legislation would require the
selection process for designing and constructing any federal
facility with a cost of more than $3 million to occur in two
phases. In phase one, potential contractors would provide basic
information on their experience and past performance. Agencies
would then select several contractors and invite them to submit
more detailed proposals in phase two.
CBO reviewed information on the process of awarding
contracts used by the Army Corps of Engineers (Corps) and the
General Services Administration (GSA), two agencies that
oversee construction of many federal facilities. Those agencies
often use a two-phase selection process but also use other
acquisition strategies to award contracts. Using information
from those agencies, CBO estimates that implementing S. 2113
would cost about $600,000 a year and $3 million over the 2018-
2022 period, primarily for the Corps, which would incur
somewhat higher costs to evaluate two rounds of proposals
before selecting a contractor for each construction project.
Such spending would be subject to the availability of
appropriated funds.
CBO found that the Corps and GSA generally do not use
reverse auctions for complex procurements because such auctions
do not consistently result in costs that are lower than those
from sealed bids or negotiated procurements. On the basis of
that information, CBO estimates that implementing S. 2113 would
not result in a significant changes in bidding practices for
federal construction projects and thus would not have a
significant effect on the federal budget.
Because enacting the bill could affect direct spending by
agencies not funded through annual appropriations, pay-as-you-
go procedures apply. CBO estimates, however, that any net
change in spending by those agencies would be negligible.
Enacting the bill would not affect revenues.
CBO estimates that enacting S. 2113 would not increase net
direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2028.
S. 2113 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
On February 16, 2017, CBO transmitted a cost estimate for
H.R. 679, the Construction Consensus Procurement Improvement
Act of 2017, as ordered reported by the House Committee on
Oversight and Government Reform on February 2, 2017. The two
bills are similar and CBO's estimates of their budgetary
effects are the same.
The CBO staff contacts for this estimate are Matthew
Pickford and Aurora Swanson. This estimate was approved by H.
Samuel Papenfuss, Deputy Assistant Director for Budget
Analysis.
VI. Changes in Existing Law Made by the Bill, as Reported
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
the bill, as reported, are shown as follows: (existing law
proposed to be omitted is enclosed in brackets, new matter is
printed in italic, and existing law in which no change is
proposed is shown in roman):
UNITED STATES CODE
* * * * * * *
TITLE 41--PUBLIC CONTRACTS
* * * * * * *
Subtitle I--Federal Procurement Policy
* * * * * * *
DIVISION C--PROCUREMENT
* * * * * * *
CHAPTER 33--PLANNING AND SOLICITATION
* * * * * * *
SEC. 3309. DESIGN BUILD SELECTION PROCEDURES
(a) * * *
[(b) Criteria for Use.--A contracting officer shall make a
determination whether two-phase selection procedures are
appropriate for use for entering into a contract for the design
and construction of a public building, facility, or work when--
[(1) the contracting officer anticipates that 3 or
more offers will be received for the contract;
[(2) design work must be performed before an offeror
can develop a price or cost proposal for the contract;
[(3) the offeror will incur a substantial amount of
expense in preparing the offer; and
[(4) the contracting officer has considered
information such as the following:
[(A) The extent to which the project
requirements have been adequately defined.
[(B) The time constraints for delivery of the
project.
[(C) The capability and experience of
potential contractors.
[(D) The suitability of the project for use
of the two-phase selection procedures.
[(E) The capability of the agency to manage
the two-phase selection procedure.
[(F) Other criteria established by the
agency.]
(b) Criteria for Use.--
(1) Contracts with a value of at least $3,000,000.--
Two-phase selection procedures shall be used for
entering into a contract for the design and
construction of a public building, facility, or work
when a contracting officer determines that the project
has a value of $3,000,000 or greater.
(2) Contracts with a value less than $3,000,000.--For
projects that a contracting officer determines have a
value of less than $3,000,000, the contracting officer
shall make a determination whether two-phase selection
procedures are appropriate for use for entering into a
contract for the design and construction of a public
building, facility, or work if--
(A) the contracting officer anticipates that
three or more offers will be received for the
contract;
(B) design work must be performed before an
offeror can develop a price or cost proposal
for the contract;
(C) the offeror will incur a substantial
amount of expense in preparing the offer; and
(D) the contracting officer has considered
information such as--
(i) the extent to which the project
requirements have been adequately
defined;
(ii) the time constraints for
delivery of the project;
(iii) the capability and experience
of potential contractors;
(iv) the suitability of the project
for use of the two-phase selection
procedures;
(v) the capability of the agency to
manage the two-phase selection
procedure; and
(vi) other criteria established by
the agency.
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