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The Amazonization of government spending may be moving closer.

A key defense spending bill calls on the General Services Administration to create an online marketplace program to buy commercial products. It also directs the Secretary of Defense to use the marketplaces.

GSA must contract with more than one marketplace provider, under the measure, but none can be government agencies. Instead, they must be commercial entities providing portals for buying commercial products they aggregate, distribute, sell or manufacture.

The proposal appears in Section 801 of the Fiscal 2018 House National Defense Authorization Act (NDAA), which is up for House Armed Services Committee consideration on Wed., June 28.

The online market or markets GSA commissions must:

  • Be widely used in the private sector
  • Enable frequent updates of suppliers, products and prices
  • Permit sorting of suppliers’ offers to be sorted by product, shipping price, delivery date and user reviews
  • Never feature products or sellers based on a fee or other compensation
  • Provide for the government to control spending limits and approve and track orders

At least monthly, GSA would provide the online market operators lists of small business suppliers, debarred vendors and those compliant with Buy America, trade provisions and requirements to buy from nonprofit agencies for the blind and severely disabled.

Under 801, purchases from an online market would satisfy the requirements for full and open competition as long as two or more suppliers offered the same or similar product. Online purchases from small businesses would be deemed awards of prime contracts and count toward agencies’ small business goals, and agencies could restrict competition to small companies.

GSA could award contracts to online marketplace providers without full and open competition and the agency would be proscribed from requiring the online marketplaces to change their terms and conditions to become part of the GSA program.

GSA also would have to collect and enter into the Federal Procurement Data System a range of purchase data from the marketplaces every month, including product descriptions and prices, date and time of orders, names of buyers or their organization and agency or department, authorizing officials, delivery addresses, the number of sellers of the product or its equivalent on the date of purchase. The marketplace providers could not sell or share any of that data without GSA’s consent.

Within three years, the Comptroller General would review small business participation in the online markets, including number of small companies that have sold goods, the effect of the program on meeting federal small business goals and any limitations on small businesses in the program.

The Coalition for Government Procurement (CGP), a group that advocates for companies on the GSA multiple-award schedules, opposes 801. CGP also opposed its antecedent, the Defense Acquisition Streamlining and Transparency Act, introduced May 18 by HASC Chairman Rep. Mac Thornberry (R-Texas). CGP remains opposed even though the Thornberry bill was modified when included in the House authorization bill.

“The changes highlight further the growing concerns surrounding the potential impact of the legislation on the federal procurement system, customer agencies, industry partners, and the American economy,” the group wrote June 27.

CGP’s main concern is that Section 801 would create a monopoly. “Hundreds, if not thousands, of commercial firms with their own online platforms will see their access to the federal market limited to the two online platform providers GSA selects,” it wrote. “Firms that previously contracted directly with the federal government likely will pay fees to, and, largely dictated by, an online provider for access to the federal market.”

The group also contends that the marketplace providers alone would set transaction terms and that they would be able to use transaction data to compete with companies selling on their platforms.

Thornberry’s initial streamlining bill directed DoD alone contract with and buy through online platforms. “If you’re buying office supplies, you ought to be able to go on Amazon and do it,” Thornberry said. 

Thornberry favors online markets because they would enable the pentagon to buy “commercial-off-the-shelf goods, ranging from bottled water to treadmills or even MRI machines,” faster and at lower cost than through the DoD contracting process or through GSA. That’s according to the HASC summary of the NDAA.

Use of marketplaces also will allow “DOD to track and analyze procurement data.”

“Any business will tell you that this ‘spend analysis’ is critical to efficient operations. For the government, that kind of transparency and accountability would be revolutionary,” according to the NDAA summary.

The House NDAA also includes a requirement that the Defense Department’s more than $140 billion in annual services contracts be submitted through the defense budget process “forcing the Pentagon to analyze actual needs and spending patterns much like they do for weapons,” according to the summary.

Incurred cost audits, which determine whether the costs charged to the government were reasonable and permissible under a contract, provide a low return on investment and suck resources from the Defense Contract Audit Agency, the summary notes. Thus, Thornberry would send 25 percent of them to private sector firms to conduct. He also supports the work of the Section 809 Panel on Streamlining and Codifying Acquisition Regulations and has proposed a longer term effort to revise the U.S. Code to remove requirements that “create a culture of compliance within the acquisition community, rather than empowering smart, agile, decision-making.”