The Section 846 Draft RFP, limiting competition for the $6-30B e-pilot

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.

Last week, the General Services Administration issued a draft Request for Proposal (RFP) for its initial Proof of Concept (POC) to implement Section 846 of the fiscal year 2018 National Defense Authorization Act.*

The draft RFP seeks to “pilot” only one of the three e-commerce portal models GSA devised, omitting from consideration the e-commerce and e-procurement models. Ironically, at the platform level, the e-marketplace portal model, is, arguably, the least competitive of the three models. The draft RFP contemplates a 5-year POC contract (one-year base with four one-year options), and it identifies, at a minimum, an annual, “addressable market of $6 [billion].” In other words, according to the RFP, this pilot potentially represents upwards of $30 billion over five years.

This $30 billion figure does not account for the potential impact of the draft RFP’s duplicative effort on existing programs, such as the GSA Schedules, NASA SEWP, and FedMall; nor does it account for the ability of platform providers to receive additional revenues through vendor participation fees. Coalition members report that commercial platform providers typically charge a participation fee of 15% per transaction, which would equate to approximately $900 million annually in revenue for the platform provider based on the addressable market of $6 billion.

As currently constructed, the draft RFP also allows providers both to manage the platform and to compete and sell their own products on the platform, providing, through an unmitigated organizational conflict of interest, yet another revenue stream for a marketplace portal provider, for which, the government receives no consideration. Left unaddressed, this organizational conflict of interest creates a significant risk of market distortion that will impact full, fair, and open competition. Under this model, the platform provider sets business rules for the marketplace, including, but not limited to, the terms of entry, participation fees and/or commissions, and the allocation of risks and rights. At the same time, the platform provider is competing directly with third-party suppliers on the platform.

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Under these circumstances, the POC misses the opportunity to enhance competition and increase access to the e-commerce market by limiting the pilot to one technological solution. By focusing on only the e-marketplace model, the draft solicitation misses an opportunity to take advantage of the cross-cutting forces of the competitive, commercial market. Moreover, limiting the competition in this manner undermines the ability of the government to understand how the e-marketplace model interacts with other equally market-accepted e-commerce solutions. Without this understanding, any effort to identify sound policy guidance from the pilot will be incomplete. In essence, the “pilot,” especially one of this size and duration, will likely amount to a pre-selection of a technological solution, rather than a market-driven, best value solution derived from competition. Also, it appears that there will be limited opportunity for the consideration of feedback on the draft RFP, as the draft suggests that the final RFP is expected within days of the receipt of comments. Indeed, this observation is reinforced by the fact that the “draft” RFP is dated August 9, and it includes a full communication plan with a Q&A turn-around date of August 26.

Stakeholders across the procurement community are paying close attention to this draft RFP and what unfolds. Commercial e-commerce portals offer a potentially promising tool for the acquisition of commercial items. In the coming weeks, Coalition members will continue to review GSA’s draft solicitation to identify opportunities to increase competition and assure the integrity of the market, while simultaneously meeting the needs of federal customers. As a first step, GSA should expand the scope of the pilot to include all types of e-commerce platforms. Coalition members would welcome the government’s efforts in this regard, and they offer any assistance needed to embrace competition that delivers best value for customer agencies.

* Pursuant to of Section 846 of the FY 2018 NDAA, GSA is responsible for establishing and managing an e-Commerce portal program described under the statute. In March 2018, GSA, in consultation with the Office of Management and Budget (OMB), issued the Section 846 implementation plan, “Procurement Through Commercial E-Commerce Portals.” The implementation plan is the end-product of Phase I of GSA’s Section 846 implementation efforts which focused on information gathering and analysis. In May 2019, GSA issued its Phase II report, “Procurement Through Commercial E-Commerce Portals Phase II Report: Market Research & Consultation,” which details the agency’s market research that will support its Phase III efforts to develop and implement e-Commerce procurement guidance.

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

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