Within the past year, there have been several initiatives undertaken across the government space focused on moving the federal procurement process onto commercial e-commerce portals. Last March, the FAR & Beyond blog examined a partnership between the Homeland Security Department (DHS)/the Federal Emergency Management Agency (FEMA) and Amazon Business to establish a centralized business account for FEMA purchase card ordering via the Amazon Business marketplace.
More recently, there have been indications that the Air Force is looking to form a similar agreement (to be clear, AKA a contract). Indeed, the report that served as the basis for last week’s blog was initiated by the Air Force in an effort to determine whether it could derive savings by establishing a platform preference. Interestingly, despite many urban myths, the report found, among other things, that, when comparing the acquisition outcomes for GSA Advantage and Amazon Business for the top 60 commercially available items purchased by the Air Force using government purchase cards (GPCs), prices were lower on GSA Advantage more than 80 percent of the time; prices on GSA Advantage were still lower than those on Amazon Business after applying quantity discounts; and shipping was both cheaper and faster on GSA Advantage.
This week, the Veterans Affairs Department (VA) issued a Request for Information (RFI) seeking feedback from commercial vendors with existing online business marketplaces regarding user agreements. While these efforts provide some opportunities to improve the buying experience, for Coalition members, they collectively raise significant program, policy and legal questions that should be resolved.
Fundamentally, the RFI is a duplication of effort considering that Congress, through the enactment of the Fiscal Year (FY) 2018 National Defense Authorization Act (NDAA), directed GSA, in coordination with the Office of Management and Budget (OMB), to investigate the issues associated with establishing and managing an e-commerce portal program that will provide federal customers access to commercial online portal providers. Thus, at the outset, the Coalition questions why federal agencies are pursuing initiatives that appear to be duplicative, rather than leveraging the increases in the micro-purchase threshold (MPT) to maximize their spending through existing vehicles. Recall that, pursuant to Section 806 of the FY18 NDAA, the standard micro-purchase threshold (MPT) for civilian agencies has been increased from $3,000 to $10,000, and this change comes just one year after the FY17 NDAA increased the Department of Defense’s (DoD) MPT to $5,000.
In addition, the VA RFI, as well as the DHS and Air Force initiatives, raises other procurement policy and legal questions. Most of these questions surfaced at a recent OMB/GSA public meeting on e-Commerce portals. Specifically:
Does the user agreement constitute a government endorsement of a particular online service?
Is the user agreement a contract, and, if it is, how will the VA compete/select the online service?
Does the FAR govern the user agreements?
What criteria were used in identifying potential firms providing the “marketplace service?” How will compliance with procurement regulations, such as the hierarchy of sources, be monitored and validated?
What, if any, protocols will be included in this user agreement to bar counterfeit and gray market items and otherwise reduce threats to national security?
Will the user agreement clearly identify the party, with whom, the government possesses privity of contract for the purposes of all legal compliance, and how will enforcement be executed?
Recall that, without privity of contract, the government may be delegating inherently governmental functions and, in the process, losing its ability to ensure compliance with government specific requirements.
What, if any, minimum standards will be included related to cybersecurity?
Will the user agreement require the identification and transparency of any fees associated directly or indirectly with transactions?
What will be the impact on the federal market, including small businesses, including veteran-owned small businesses?
Will the agreement provide that ownership of any data directly or indirectly related to a given transaction, whether aggregated or otherwise, reside with the government, thus assuring, among other things, that the portal provider may not use that data for any other purpose than facilitating the immediate transaction?
Inevitably, there will be numerous other questions raised by stakeholders across the procurement community regarding these duplicative marketplace initiatives, especially considering the fact that a key driver of these initiatives, in fact, is to reduce duplication. Considering the significant program, policy, and legal questions, the Coalition believes the VA, as well as the government as a whole, would be better served by working with GSA and OMB on the Section 846 effort.
One final thought: the increase in the MPT to $10,000 and the SAT to $250,000 streamlines federal procurement through pre-existing multiple award contract vehicles, including the GSA Schedules, GWACs, and other Multiple-Award Indefinite-Delivery, Indefinite-Quantity (IDIQ) contracts. Prices on these pre-existing contract vehicles have been through full and open competition for award and are subject to continuing competitive market pressures at the task and delivery order level. As last week’s blog highlighted, the GSA Schedules program offers customer agencies competitive pricing via the its electronic market place, GSA Advantage. Also, it is significant to note that, for federal customers, pre-existing contract vehicles provide immense value as the contractors and products have already been vetted for various compliance requirements that are important to the government (e.g. Trade Agreements Act, cybersecurity requirements, socio-economic and small business goals, etc.). Given this “win-win-win” for customer agencies, the current focus should be on leveraging current contract vehicles until GSA and OMB examine and work through the issues, opportunities, and challenges of e-commerce in the federal space. As they do, the Coalition offers its assistance just as it looks forward to providing comments to the VA in response to the RFI.
Roger Waldron is the president of the Coalition for Government Procurement, and host of Off the Shelf on Federal News Radio.