FedBid is splitting off its federal sector from its commercial sector business. It has named Joe Jordan as the CEO of the new public sector organization.

FedBid’s founder and former CEO Ali Saadat will head up the other organization, focused on the private sector, and remain chairman of the board.

FedBid’s move comes three months after a scathing report by the Veterans Affairs Department inspector general about the conduct of some of its senior executives, including Saadat.

In a report released in September, the IG found that a senior VA procurement executive and some FedBid executives acted improperly. Auditors say Saadat and others allegedly took “significant measures to disrupt and deprive VA’s right to transact official business honestly and impartially, free from improper and undue influence.”

But Jordan said the decisions to split FedBid’s federal and commercial businesses and have him become CEO have nothing to do with the VA scandal.

“The discussion around creating a new company focused on our commercial businesses has been taking place for some time, including when I joined FedBid a year ago,” Jordan said in an email to Federal News Radio. “That planning among the leadership was on creating a new venture focused on the business-to-business market, and those discussions have always included Ali taking an initial leadership role in that new entity.”

Jordan said it takes time to create a new venture and Saadat has been focused on moving into the business-to-business market for some time.

Third-party audit

Since the VA IG’s findings, Jordan said FedBid has taken several steps to ensure there are no future problems and review the company’s interactions with VA as detailed in the report.

“We brought in an outside law firm, Arnold and Porter, to do a comprehensive independent review. They confirmed that no laws had been broken by the company, but we did take seriously the recommendations they offered related to the culture portrayed in that report and how members of the FedBid team handle relationships with federal agencies, sellers and others,” Jordan said.

“As a result, we have implemented a stronger ethics and compliance program, including appointing a chief compliance officer. Additionally, in my first two weeks as CEO, ALL of our employees have signed the revised code of business ethics that is a part of that program, and going forward all of our board members, advisors and any consultants we hire will also go through that training.”

Additionally, Jordan said, transparency and integrity are his top priorities for FedBid and the services it provides the government.

Since the release of the IG report, no one has been punished as a result of the scandal. The VA procurement official at the center of the scandal, Susan Taylor, retired before the agency could terminate her employment.

As for FedBid, VA hasn’t taken action to suspend or debar the company, but the agency also hasn’t reinstated the use of the company’s reverse auction services. VA has approved contracting officers to use reverse auction services provided by the General Services Administration.

FedBid received 25 contracts in fiscal 2014, according to USASpending.gov. The departments of Defense, Justice, State and Interior have used its reverse auction services over the past year to save or avoid spending more than $100 million, the company stated in a press release.

Uncertainty remains about savings

Despite FedBid’s claims, there are plenty of skeptics who question the ultimate benefits of reverse auctions.

The Government Accountability Office found in December 2013 that agencies were not realizing the savings promised by reverse auctions and, in some cases, were paying two fees for the use of this tool, which further reduced potential savings.

Additionally, the VA IG, in a separate report from September 2014, found that the Veterans Health Administration’s use of reverse auctions had documentation and savings calculations problems.

The IG wrote, “claimed savings, computed by subtracting the final award price from the target price, was not reliable in determining the success of using reverse auctions for several reasons. First, although the target price set by the contracting officer should be equal to the Independent Government Estimate (IGE) as stated in VA policy and the implementing VHA standard operating procedures, we found that the target price was not always equal to the IGE, and that the basis for the target price was often not documented within the contract file. Second, we found that the award price represented funds obligated at award and that many buys were not fully funded at the time of award, thereby inflating the reported savings. Lastly, we found that the target price could be changed by the CO during an active RA via a reposting of the invitation for bid (IFB). Such changes were not always documented and justified within the eCMS contract file.”

Two senior House lawmakers, Reps. Jeff Miller (R-Fla.) and Sam Graves (R-Mo.), last month called on Anne Rung, the Office of Federal Procurement Policy administrator, to issue guidance for agencies on how best to use reverse auctions. GAO, in its 2013 report, recommended OFPP issue guidance and the lawmakers want an update on the status of implementing that recommendation.

RELATED STORIES:

VA IG unwinds tale of procurement fraud, abuse involving senior agency officials, FedBid

VA exec at center of FedBid procurement scandal retires

OFPP’s Jordan leaving for the private sector

Savings from reverse auctions not being maximized

House lawmakers call for OFPP to issue reverse auction guidance

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