[pmr_]

I think the statement following this is much more important and interesting to HN:

> The tendency has become more and more prevalent under electronic auction systems.

While incidents like this are often used as examples of the failures of technocracy, I think the problem is elsewhere. A decision process has been out-sourced to a machine that is not smart enough yet to make a good decision. The decision might be good in a very localized and easy to measure sense (cheap), but lacks an understanding of other economical signals.

[bradleyland]

When I read this article, I felt a sharp pain, as it sounded as if it could be directed at our company [1]. Acquiring pricing for local governments through online reverse auctions is what we do.

Your observations are poignant. There is strong incentive to treat everything as a commodity these days. Part of our business is in helping buyers structure their RFQ documents so that the product or service can be competitively sourced. In the government sector, however, we rarely participate in this process.

Governments must purchase based on their state and local laws, which often ties their hands. A local school system may want to purchase better quality chalk for a reasonable premium, but the laws pertaining to procurement frequently prevent them. It's a really bizarre circumstance where public perception of government waste has resulted in laws that eliminate buyers' ability to cut deals that are better for everyone. I'm not saying it's impossible; it's just much easier for a procurement officer at a local government to follow the standard process (which prioritizes price) than it is to fight for quality.

There are pockets of innovation, however. Our eRA platform stands out because we offer the ability to incorporate non-price factors in to our ranking algorithm. This gives a buyer the ability to "weight" one bidder over the others. We developed some of our most advanced features jointly with local governments in Arizona. I'm not sure I should name names, but there are people doing really great work out in Arizona.

We have even considered founding a separate not-for-profit organization whose entire purpose would be to assist local governments in improving their procurement laws so that there would be a better balance of good sourcing practices and the ability to incentivize quality over price where appropriate. That's a huge challenge though. You frequently end up directly opposed to special interests with very deep pockets and a financial incentive to keep procurement laws just as they are.

1: If you're wondering: http://www.eauctionservices.com

[daurnimator]

If you instruct a machine to optimize for the cheapest price; it will do that. The failure is in the instructions given, not the introduction of machines.

[noir_lord]

> If you instruct a machine to optimize for the cheapest price; it will do that

if (x < y) { // } is a simple optimisation.

The classic "you optimise for what is or can be measured rather than what is important."

There are ways around this of course by setting minimum quality via an objective third party (MIL-STD's for example) but that process introduces a whole new can of worms.

[pmr_]

That much should be clear, my (unfortunately) implicit question is: how can we instruct a machine to optimize for the very intangible things everybody seems to love so much about this chalk? What about the more subtle economic things (like signals of economic climate and value of quality).

[fsloth]

I'm totally unaware of conventions used in public purchases.

Isn't an "electornic auction system" just a database anyone can spam - the actual decisions are probably made by humans? My hunch (might be incorrect) that the auction system creates a barrier of disinterest where the official has very little else to go with than the prices quoted. In this case it's not that the machine is stupid - it's way worse, the system stops actively humans doing what humans are particularly good at - separating wheat from chaff based on experience and intuition - if the official will never use the chalks and has no idea what the impact of the product will be.

[kolinko]

The problem is that there is no known alternative really. If you just the government official decide, it breeds corruption.

Or at least it used to. Perhaps with the modern IT systems we could create a solution that delivers the transparency to the process - the official would explain his/her choices publicly, and the public would have an opportunity to argue...

[eli]

Sometimes you're required by law to go with the lowest valid bid (presumably to discourage kickbacks and self dealing)

[gcb0]

i bet on the other side there are teachers complaining about the quality of chalk they end up getting. this is nothing but a case of the employee responsible for inputting the auction parameters being a lazy bastard and not talking to the people that used the product he is buying in great quantities.

it's all a matter of doing your job right. despite the fact that a machine will help you with some portion of it.