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Bias

How to Establish a Bias-Free Procurement Process

Any procurement process not protected from bias risks a bid protest.

Key points

  • Lack of understanding on the part of officials makes procurement contracting susceptible to biases.
  • Any procurement process not protected from bias risks a bid protest.
  • To protect the procurement process, officials need to learn about and address cognitive biases in procurement decision-making.

Bid protests against a procurement process often center around claims of bias that result in flawed selection decisions. For example, the Government Accountability Office (GAO) put out a report in 2017 that found that a “flawed selection decision” was one of the top 4 reasons for successful bid protests—and over 22 percent of bid protests succeeded that year.

As a result, it’s critically important for procurement officials to protect the procurement process from bias. Yet their efforts to do so often fall short, leaving them vulnerable to a bid protest. As an example, let’s consider a bid protest against a Medicaid management contract award of over $20 billion. I have personal knowledge of the case, as I had the privilege of participating as an expert witness on bias in procurement bid protests.

What Is Bias in the Procurement Process?

Let’s start by defining bias. Bias refers to using inappropriate criteria or information in decision-making that leads to irrational, arbitrary, and capricious decisions. That might mean deliberate bias, meaning a preconceived, prejudiced perspective intended to weigh for or against certain choices.

However, bias is often implicit. That’s where the decision-maker does not take steps to protect the process from bias, and then unwittingly makes biased judgments. In fact, they might be trying their best to make the most accurate possible decision. But, because they failed to take steps to protect the structure of the decision-making process from bias, the process leads to undeniably biased conclusions. To prevent bias, any process must be structured to address both deliberate and unintentional bias.

The specific patterns that lead to irrational decisions are called cognitive biases by behavioral and cognitive scientists like myself. As I describe in my books, cognitive biases refer to dangerous judgment errors that stem from our evolutionary background and the structure of our minds. Our brains are adapted for the savanna environment, not the modern environment, and thus our mental processes tend to make systematic errors in the modern world.

Fortunately, scientists have recently found effective techniques to overcome such biases using the practice of de-biasing. Any procurement process can be protected from bias by integrating such techniques.

Common Biases in a Procurement Process

You won’t be surprised that the first step to addressing bias in procurement involves learning about cognitive biases. After all, without knowing about the specific ways that our minds lead us astray, procurement officials will be unable to prevent biased decisions.

One of the biggest cognitive biases in procurement is known as the confirmation bias. This mental blindspot causes procurement officials to look for information about applicants that confirms their initial beliefs and assumptions, and ignore information that does not. The problem is obvious: The initial beliefs and assumptions might turn out to be wrong. If procurement officials could just rely on their initial intuitions, we wouldn’t need a procurement process at all.

A related mental blindspot is known as the belief bias, which causes us to evaluate arguments—or applicants—based on our pre-existing beliefs about their quality rather than the facts. Thus, a procurement official who likes an applicant—or dislikes an applicant—may award a contract based on that initial judgment without considering the details of the application.

Another dangerous judgment error, the anchoring bias, causes our minds to be anchored to the initial information we have about a topic. That’s why it’s critical to arrange the procurement process in such a way that initial information about applicants does not favor any specific applicant. Likewise, the belief bias would cause procurement officials evaluating bidders to treat the first application as a baseline when considering all other applications. That’s why it’s so important for different evaluators to assess applicants in a different order.

The availability bias causes us to look for information that is most easily available in our memory. Having clear criteria that remind us of additional information that we need to address offers one way to help mitigate this problem.

The halo effect and horns effect pose particular dangers for non-blinded procurement; in other words, when the evaluators know the identity of each applicant. The halo effect refers to the fact that when we like a certain characteristic of an option, we will tend to have too-favorable views of the option as a whole without realizing it; the horns effect refers to how when we have a negative perception of one characteristic of an option, we will tend to have too-negative views of the option as a whole. If we know the identity of certain applicants, we will then let our impressions of their characteristics sway the outcomes.

Biases Affecting Group Decision-Making in a Procurement Process

A particular danger for group-based decision-making in procurement, such as consensus scoring, is the phenomenon known as groupthink. This concept refers to the opinions of people in a group coalescing around the perspective of the most powerful person in the group.

Groupthink is driven by a desire for consensus among a group of people, where there are some people with more power and some with less. It often leads to a biased outcome due to unintentional (or sometimes intentional) peer pressure effects, where some evaluators may have hesitations about the beliefs of those with more power but agree for the sake of keeping the peace.

A related problem is called authority bias, which is people’s tendency to submit to those they perceive as having authority. If there is a source of authority in a consensus meeting, such as an evaluator who is also a high-level executive, or the facilitator of a consensus meeting, this authority may powerfully sway the evaluators and lead to a biased outcome.

Many Procurement Officials Are Deliberately Indifferent to Bias

If you Google “cognitive biases,” you’ll find over 75 million results. Despite the extensive information widely available about cognitive biases, the procurement officials, in the case of the over $20 billion Medicaid contract award, failed to take even the most basic steps to address them, such as learning about these cognitive biases.

The state Department of Medicaid hired a well-known consulting company as the expert to facilitate the procurement process. Two staffers from the consulting company, Jane and Doe, served as the key facilitators.

Jane, who led the consensus meeting and served as the lead principal on the contract, was asked about her expertise in a deposition. She described herself as an expert with substantial experience in “working on evaluation committees and different processes in which we have to deal with identifying bias.”

Yet when asked whether she had any formal training in procurement evaluation, she said she did not. When asked what is “confirmation bias”—perhaps the most famous cognitive bias—she said, “I do not know what you mean by that.” When asked whether she had any training in the area of bias, she indicated that she did not.

Given her self-acknowledged lack of understanding of training in bias or even a basic understanding of fundamental concepts such as “confirmation bias,” how could she effectively protect the procurement process from either intentional or unintentional bias?

Perhaps her collaborator on the consensus meeting, Doe, had more expertise in addressing bias? Unfortunately not. In her testimony, she indicated that she neither consulted experts in bias nor had she taken bias training. When she was asked if she knows what anchoring bias refers to, she indicated she does not, despite anchoring bias being one of the most dangerous threats to successful procurement. Similarly, asked about other cognitive biases, she indicated she could not define any of the ones she heard. Moreover, she indicated that her consulting company has no policy of going back to the procurement process and checking it to see for any potential bias.

Making the Procurement Process Free of Bias Is a Requisite to Prevent Bid Protests

Now, it’s not that the procurement officials completely ignored bias. One evaluator, who also served as medical director for the state, testified that for awarding $20 billion in Medicaid funding, “removing bias would be another thing that’s important”; and that the contract award "process was designed to be as objective as possible.” A separate state employee who headed up the procurement process testified that “the entire [procurement] process was designed to prevent bias.”

What they did was ask evaluators to sign a paper saying they weren’t biased. They also asked evaluators not to have outside communication during the period of evaluation.

However, the lack of education about bias is a fatal flaw. If evaluators, facilitators, and other procurement officials don’t know what they need to be protecting against, how can they protect against it?

Indeed, the bid protest lawsuit uncovered extensive bias in the procurement process—which could have been prevented with some education and interventions based on that education. The lack of concern with addressing bias cost the state department of Medicaid dearly in the lawsuit that followed the contract award.

Conclusion

A “flawed selection decision” is among the top four reasons for sustaining procurement bid protests filed with the Government Accountability Office (GAO), yet the efforts of procurement officials to protect procurement from bias are inadequate. Despite the intention of officials to make an optimum judgment, the outcome suffers from deliberate and unintentional bias, more specifically, cognitive biases.

Recognizing these mental blindspots is the first step to preventing biased decisions. This list includes confirmation bias, belief bias, anchoring bias, availability bias, halo effect, and horns effect, among others. Likewise, consensus scoring and authority bias can lead to a biased outcome in group decision-making in a procurement process.

Despite this information being readily available, even consultants hired by states to facilitate the procurement of contracts, such as Medicaid, often lack awareness and formal training in evaluating and identifying bias in procurement. Undoubtedly, this lack of understanding on the part of officials makes procurement contracting susceptible to biases, which could otherwise have been prevented.

References

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