Given the news of the last few weeks, you’d be forgiven for feeling like Amazon is eating the world and for wondering whether government is next.
All indications are, it might be. For proof, look no further than the Amazon Business For Government page, which could hardly be more direct:
“Amazon Business makes purchasing easy at all levels of government: local, state and federal – including civilian and Department of Defense. Find the products you need, apply your tax exemption, and stay in compliance with our government-ready solutions.”
For those who fear Amazon’s nose is pushing under government’s tent via Rep. Mac Thornberry’s “Defense Acquisition Streamlining and Transparency Act,” Amazon’s reference to DoD should provide a frisson. The bill, which was introduced May 18 by the Texas Republican and Chairman of the House Armed Services Committee, calls on the Pentagon to “procure commercial products through online marketplaces for purposes of expediting procurement and ensuring reasonable pricing of commercial products,” and to do so through one or more contracts with commercial providers. It goes so far as to stipulate that the online markets DoD adopts be “used widely in the private sector, including in business-to-business e-commerce.”
There are plenty of such markets — think Grainger, office supply giants Staples and Office Depot, as well as Walmart, which bought Amazon competitor Jet.com. But seems clear that Thornberry had one of them top of mind. “If you’re buying office supplies, you ought to be able to go on Amazon and do it,” he said when announcing his bill.
If the Pentagon were to sign on with Amazon Business, it wouldn’t be the first government entity to do so. U.S. Communities, a buying cooperative for more than 55,000 state and local public-sector agencies kicked off in January an Amazon deal that could run 11 years and rake in $5.5 billion.,
But opponents are lining up against Thornberry’s bill, deeming it an existential threat to federal acquisition as we know it. It’s “the most consequential procurement policy change in a generation,” and not in a good way, according to the Coalition for Government Procurement, which represents companies that sell on the General Services Administration’s multiple-award schedules. CGP contends Thornberry would permit a no-bid award to just one marketplace, thereby giving its owner a DoD monopoly affecting thousands of sellers and imposing its terms and conditions on all comers. The bill also could wreak havoc with Buy America, competition, small business and trade rules, as well, CGP says.
Law firm Holland and Knight warns that using an online market, the Defense Department could wind up spending millions on goods from sex, race, religion and more discriminators; users of child labor; human traffickers; sellers based in China and other restricted countries; and companies that use counterfeit or unsecure parts. What’s more, the firm notes, Thornberry added no plan for fostering small businesses.
Amazon is sparking other protests that could affect government’s thinking. The firm’s success in 2015 came at the cost of more than $1 billion in lost local sales and property taxes and more than 200,000 jobs, according to a study by independent retailer advocate Civic Economics. Amazon refuses to collect state taxes.
The revenue losses come despite taxpayer subsidies of more than $600 million since 2005 for Amazon distribution centers, according to Oren Teicher, CEO of the American Booksellers Association, which collaborated on the Civic Education study.
Amazon, for its part, has been thinking about all these objections and preparing to answer them. A case in point is the conversation between Daniel Smith, Amazon Business general manager of worldwide education, and Elliott Branch, deputy assistant secretary of the Navy (Acquisition and Procurement), at the National Contract Management Association’s Government Symposium last December.
“We’re committed to creating an open and dynamic marketplace that also has the right centrally negotiated contracts in place,” Smith said. “We are very
focused on what procurement does, to identify and create increasingly efficient and helpful tools for identifying demand, connecting that demand with supply, and helping to drive efficiency in the delivery of those goods.”
He also noted that 40% of Amazon purchases come not from Amazon, but from two million suppliers, many of which are designated small businesses. And as for the many compliance requirements on government procurement, Smith said, “Our job is to create a set of configurable, flexible technology solutions that ensure that when an individual is buying, they’re complying with said policy.” It’s just that Amazon wants to do it without recreating a burdensome approval process, and instead transform the way people buy, he added
Smith and former Office of Federal Procurement Policy Administrator Anne Rung, who now directs the Amazon Business government sector, point to two other aspects of compliance that Amazon can help with: purchasing things that are fit for purpose and mission to address procurement professionals’ fiduciary duty, and creating an efficient and effective purchasing organization to ensure government deepens relationships with suppliers that provide long-term value.
Expect to hear much more about online marketplaces and Amazon as the Trump administration’s budgets and government reorganization and downsizing plans take hold.