Starting small, GSA will limit online shopping portals to $10,000 per purchase

Correction: An earlier version of this story misstated the due date for GSA’s next report to Congress on the commercial platforms initiative. It is due in March, not January. 

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A year after the president signed legislation meant to ease federal buyers into online shopping, the General Services Administration presented vendors with its current thinking on how to implement the new e-commerce portals on Wednesday. The focus, officials said, is on getting the process right, not necessarily on moving quickly.

Businessman pointing dollar currency icon, Concept online transaction application for e-commerce and internet investment

Because of that, GSA wants to start small. Although it’s still seeking input from industry, current plans call for it to have multiple commercially-operated portals online and available for government use in a pilot stage by late 2019.

And at least in the early going, GSA would limit the portals to commercial products and services that fall beneath the government’s micro-purchase threshold ($10,000), instead of the $250,000 simplified acquisition threshold Congress allowed when it ordered the e-commerce experiment.

“We’re positioning ourselves to evaluate the opportunities posed by the commercial online marketplaces by starting with a proof of concept, talking to stakeholders, starting small, collecting data and managing risks,” said Matthew Blum, the associate administrator in the Office of Federal Procurement Policy.

Limiting the portals to the micropurchase threshold also lets GSA sidestep vexing policy questions about how and whether normal government procurement requirements, such as the Buy American Act and the Trade Agreements Act, will apply to the new online platforms. Those issues have been a central part of the debate since Congress first proposed the portals in 2017, and purchases below the threshold are already exempt from a wide variety of procurement laws.

That’s not to say there will be no government-unique requirements. Buyers, for example, would still be subject to the governmentwide ban on purchasing Kaspersky antivirus software or telecom gear from Huawei and ZTE.

Likewise, the commercial marketplaces would have to enforce the government’s list of contractors who’ve been suspended or debarred, and officials will expect every vendor who sells through the portals to register themselves in the government’s System for Award Management.

In the long run, the government also wants the portals to be able to show agency buyers whether a particular vendor is a small business or qualifies as a preferred supplier in other socioeconomic categories.

Light regulatory touch on portals

But as a general matter, GSA  said it’s trying to apply as light a regulatory touch as possible, both with regard to its contracts with the operators of the e-commerce platforms, and with the products and services they’ll offer.

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“Our draft list of terms and conditions is pretty limited. They’re either required by law to apply to commercial contracts or required by executive order, or they’re things that we think are customary commercial practices,” said Jeff Koses, GSA’s senior procurement executive. “Getting to this limited list is a pretty substantial deviation from the Federal Acquisition Regulation. For suppliers, they’re really minimized by treating them as individual micro-purchases, not as a big umbrella contract with the suppliers.”

But GSA and OFPP have at least one other major reason for focusing the e-commerce effort on micro-purchases.

Currently, those small, open market procurements, often made with government purchase cards, represent a giant gap in the government’s collective knowledge about the commercial items it buys.

By funneling a bigger proportion of them through centrally-managed and monitored portals, officials believe they’ll discover new insights into exactly what products agencies are introducing into the federal supply chain and how agencies might buy them more intelligently.

“This is about starting to bring better management to their micro-purchase buys,” Koses said. “It’s about the need to get to the visibility into how that spend is happening, and potentially to start shifting their spend — not just to GSA solutions — but perhaps to some of the mandatory sources. Today, for instance, we have no visibility on AbilityOne or Federal Prison Industries spend. We just don’t have the insights into what happens in the micro-purchase spend today, and there’s a huge thirst for data among the agencies.”

GSA intends to require the portal providers to gather and send spending data back to it; GSA will then aggregate that information and share it governmentwide.

What are the benefits?

However, in line with restrictions Congress added in the 2019 defense authorization act, it also plans to explicitly prohibit the e-commerce platform operators from using that government spending data for their own business purposes. Its use would be limited to what’s “necessary to comply with the requirements” of the platform provider’s contract with GSA.

By limiting the online portals to the micro-purchase threshold, GSA also partially forestalled another longstanding industry question: What’s the true benefit of such a program when agencies already have access to good commercial item prices via the GSA Schedules and its own Advantage portal?

Koses said that’s one of the questions GSA is trying to answer via the pilot. But as a going-in proposition, it doesn’t believe the portals will cleave a meaningful amount of government purchasing away from the Schedules program.

“We’re not actually targeting the buys going through Schedules. We think there is a vast, substantial amount of true open market micro-purchases that are out there,” he said.

And he acknowledged GSA has no idea whether the government will lower its procurement costs by opening itself up to a larger universe of commercial suppliers via the portals.

“The only fair answer is we don’t know,” he said. “We have two theories of the case, and there are some pretty interesting arguments on both sides, but we have no responsible data. What we do know is Congress gave us the authority to run with this. We know Congress’s sense is there’s the potential for significant savings, including streamlining the buying process for time savings.”

In an earlier progress update in March, GSA told Congress its market research had led it to contemplate three different models for potential implementation in the pilot program:

  • “E-Commerce,” where vendors largely sell their own supplies and services via their own websites.
  • “E-Procurement,” a software-as-a-service model. A buying organization like GSA would operate the portal, contract with suppliers, and charge fees to use it.
  • “E-Marketplace,” similar to Amazon or Overstock.com, where the portal provider offers products and services from a variety of sellers, sometimes including its own.

For the proof of concept, GSA is only testing the E-Marketplace model, the same basic notion that generated consternation among government vendors when Rep. Mac Thornberry (R-Texas), the chairman of the Armed Services Committee, first proposed the move to e-commerce as a standalone bill in 2017.

GSA officials said the plans the agency discussed Wednesday should not be seen as final. They said they intend to continue to refine the marketplace strategy with the help of feedback from industry, along with lessons it hopes to learn from the 2019 pilot program.

Concerns over pre-selecting one approach

But Roger Waldron, the president of the Coalition for Government Procurement, said GSA’s initial focus appeared to show a bias that will favor the “E-Marketplace” model over the long term.

“The concern is, mentally, you’re preselecting one approach that’s going to define the marketplace,” he said. “Our view is that you’re redefining the statute by essentially picking a winner up-front. That’s a concern from the companies who have an E-Procurement solution, and it’s a concern from the companies who have an E-Marketplace solution.”

GSA officials emphasized that the plans they presented to industry only represented their current thinking, and said they still wanted industry input to inform the report to Congress they must submit by March before moving onto “phase three” of the portal initiative.

The administration published a written version of its tentative plans via a request for information this week. Vendors have until Dec. 21 to submit comments.

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