The e-commerce crossroad: Where is the market headed?

This column was originally published on Roger Waldron’s blog at The Coalition for Government Procurement and was republished here with permission from the author.

Today the Coalition submitted comments in response to the General Services Administration’s Request for Information regarding commercial e-commerce portals. Specifically, the RFI sought feedback on several draft documents and questions related to GSA’s implementation of Section 846 of fiscal 2018’s National Defense Authorization Act. Following the release of the RFI, last week, GSA hosted a Federal Marketplace Industry Day to discuss its ongoing implementation efforts related to Section 846.

By way of background, Section 846 establishes a framework for the implementation and use of commercial e-commerce portals across the government for the acquisition of certain commercial off-the-shelf items. In addition, the Section charges GSA with establishing and managing the e-commerce Portal program.

In March, GSA, in consultation with the Office of Management and Budget, issued the Section 846 implementation plan, “Procurement Through Commercial E-Commerce Portals.” The Implementation Plan is the end-product of Phase I, which focused on information gathering and analysis, of GSA’s Section 846 implementation efforts. In addition to its four legislative recommendations, the implementation plan identifies the following three potential types of e-Commerce portal models:

  1. e-commerce model
  2. e-marketplace model
  3. e-procurement model

As you may recall, GSA is currently in Phase II of its Section 846 implementation effort, which focuses on market research that will support the agency’s Phase III efforts to develop and implement e-commerce procurement guidance.

In its recent RFI, GSA proposes piloting only one of the portal provider models it identified in its Phase I report, the so-called “e-marketplace model” that offers the portal provider’s proprietary products, products from third-party vendors or both. Section 846’s legislative history, however, clearly demonstrates that Congress’s direction and intent was to allow additional commercial e-commerce models the opportunity to participate in the government’s transition to greater use of commercial e-commerce portals.

Advertisement
Indeed, when Congress initially contemplated the role of e-commerce in the Defense Acquisition Streamlining and Transparency Act, the draft legislation utilized the term, “online marketplaces” to describe commercial e-commerce solutions. As the Coalition has previously noted, Section 801’s use of online marketplace was a misnomer, as the phrase “marketplace” implies that that there is an open, neutral exchange between buyers and sellers. Instead, the online service providers described in the draft legislation are really online platforms, not marketplaces. These platforms set the terms of entry for suppliers, including the fees charged to participate, as well as the terms of participation for buyers.

Based on the concerns raised by industry stakeholders, Congress ultimately changed the statutory language included in Section 846 to no longer limit the government’s e-commerce options to a particular e-commerce model. Instead, the statute utilizes a new, more expansive term for e-commerce that reflects a desire for, “a program to procure commercial products through commercial e-commerce portals…” [Emphasis added.] This program is to be carried out, “through multiple contracts with multiple commercial e-commerce portal providers.” [Emphasis added.] Further, the statute clearly defined an e-commerce portal as “a commercial solution providing for the purchase of commercial products aggregated, distributed, sold, or manufactured via an online portal.” [Emphasis added.]

The importance of this expansive view is critical, as it affords the government the ability to access multiple e-commerce solutions. More importantly, however, the language fosters healthy competition between various e-commerce models and minimizes the potential for one provider to serve as a gatekeeper to the government market, potentially restricting competition and exercising dominance in defining the terms of the market.

Under these circumstances, the Coalition is very concerned that GSA’s proposal to pilot only the e-marketplace model unduly restricts competition for the proof of concept. By not fully exploring the benefits and challenges associated with all commercial solutions, GSA is artificially and unilaterally narrowing the focus of the Section 846 pilot based on its non-statutory categorization of e-commerce models. Further, this approach places GSA, rather than the market, in the position of determining winners and losers. As a result, GSA could put the business interests of agency customers at risk and undermine competition in the federal market, two outcomes that Congress clearly did not intend. In sum, by restricting its focus to one type of solution, GSA appears to be circumventing the deliberative approach provided by Congress and signed into law by the president.

In addition, from a business perspective, it is not clear why GSA is pursuing an approach that restricts the pilot to a smaller subset of potential suppliers. To date, GSA has not publicly released any analysis, data, or rationale supporting the business case for its approach. This lack of substantive assessment is particularly troubling when considering the findings of several recent studies, which have confirmed that, in a significant majority of cases, GSA’s current e-Commerce tools already provide lower prices and faster and cheaper shipping for its customers than the commercial alternatives to which they are compared.

Commercial e-Commerce portals offer a potentially promising alternative for the acquisition of commercial items, and thus, it is important for GSA to execute its pilot program effectively and, certainly, consistent with the law. To this end, the Coalition looks forward to continuing to work with GSA and OMB to develop a “common sense” e-commerce solution for federal customers, industry stakeholders, and the American people.

Roger Waldron is the president of the Coalition for Government Procurement, and host of Off the Shelf on Federal News Radio.

Copyright © 2019 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area.