Cancel culture

I suppose we could talk about the AI Executive Order, the draft AI procurement guidance, the draft FedRAMP guidance memorandum, and proposed cybersecurity FAR clauses and how the federal government appears to be experiencing a fair amount of cognitive dissonance around commercial cloud. That could be a good topic! Maybe next week.

Today, though, I want to talk about a topic that is sure to cause at least one proposal manager out there to flip their lid: cancellation of solicitations.

A few weeks ago, there was a big hullabaloo when the Air Force cancelled a $5 billion IDIQ because there were too many bidders! In that case, there were 250 bidders and, hilariously, the government's evaluation criteria indicated that all qualifying offerors would get an award! Can you imagine?! There would be so many unhappy Goldilockses if they proceeded to make awards.

And, of course, cancelling a solicitation creates many unhappy Goldilockses! From that article:

Greg Giddens, a former chief acquisition executive at the Department of Veterans Affairs and now a partner with Potomac Ridge Consulting, said cancelling a contract like this has negative impacts on both the agency and industry.

“It will make industry less inclined to invest in responding to future proposals and some in the government underestimate the expense that industry incurs to respond. For something like the acquisition, it could easily be in the millions for each company,” he said. “The biggest impact in cancelling an acquisition like this one where the requirements still exist is that the mission needs will not be met.”

It costs a lot of money and time and effort to bid. For the government to change its mind and cancel a solicitation can sure feel like a tough break.[1]

Despite the universal groans over cancellation, the federal government has a very liberal cancellation policy.[2] As GAO put it recently:

A contracting agency need only establish a reasonable basis to support a decision to cancel an RFQ. A reasonable basis to cancel exists when, for example, an agency determines that a solicitation does not accurately reflect its needs. An agency may properly cancel a solicitation no matter when the information supporting the cancellation first arises, even if it is after quotations have been submitted and evaluated, or even if it is discovered during the course of a protest.

All you need is a "reasonable basis." The government can cancel because it can have too many bids. The government can cancel because it has too few bids. The government might cancel because it decides it no longer wants the thing. The government might cancel because it wants to do the thing itself. And the government might cancel because it misunderstood what it wanted in the first place. Cancellation of solicitations is basically the Green Eggs and Ham of procurement.

Earlier this week, we saw a pretty standard illustration of liberal cancellation in practice in GAO's decision in QBE LLC. There, the Army wanted to acquire "management, technical, and non-technical skills adequate for modernizing and improving the security of digital infrastructure of countries allied with the United States."[3] At the time of the solicitation, the Army only knew of 3 countries that would likely be interested (Iraq, Montenegro, and Zambia), though it imagined more could be added to the list. During negotiations with QBE, though, the Army thought it would need support for 30 countries. Because 30 is greater than 3, the government decided it wanted to reopen bids and canceled the solicitation. QBE protested, and lost.

Ultimately, cancellation is just one of those risks of doing business with the government.

Still, maybe there's a silver lining about the liberal cancellation policy? Outside of government, the research seems to support that retailers can increase their sales by adopting lenient return policies! According to a report from the Harvard Business Review:

The good news from our research is that offering a lenient return policy can increase the number of items purchased more than it increases the number of items returned. **** We find that offering to refund the full price of the product (monetary leniency) or making returns easier (effort leniency) work best in getting consumers to purchase the product.

In other words, having a lenient return policy reduces the friction of buying things in the first place. You may be the Unhappy Goldilocks today, but the next time the government goes out to market, it might be Just Right.

So, I guess, the next time the government cancels your solicitation, take solace in the fact that the wide flexibility in cancellation really just means that there is always more purchasing to come!

[1] Fortunately, enlightened readers of this newsletter will immediately recognize that complaining about cancelled solicitations is a silly manifestation of the sunk-cost fallacy. If anything, I am going to wildly speculate that the number of bids typically increases in a competition following a cancellation because of commitment bias.

[2] For the nitpickers out there, there are slightly more restrictive rules around cancelling sealed bids.

[3] The contracting office in this case was the Air Force on behalf of the Army. One day, we'll talk about that pattern. But not today!

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