Section 846: GSA and protecting customer interests

The Coalition for Government Procurement has long supported common-sense solutions to streamline federal procurement processes, modernize procurement policies, and utilize commercial practices to the maximum extent practicable. It is important to recognize, however, that, consistent with the Federal Acquisition Streamlining Act (FASA), there are circumstances that necessitate the use of government-unique terms and conditions.

Further, Section 846, consistent with FASA, provides for the use of the standard terms and conditions of the commercial e-commerce portal, to the maximum extent practicable. Accordingly, although commercial e-Commerce portals offer a potentially promising alternative for the acquisition of commercial items, it also presents a new, different dynamic regarding the balance between commercial terms and government-unique requirements (e.g. FASA and Section 846’s commercial to the “maximum extent practicable” directives).

Earlier this month, the General Services Administration issued a draft request for proposal for its initial proof of concept to implement Section 846 of the fiscal year 2018 National Defense Authorization Act. Although the draft solicitation follows several months of outreach and engagement, this week’s blog examines several areas regarding how GSA’s approach relates to the underlying statute.

Pursuant to Section 846, GSA is responsible for establishing and managing an e-Commerce portal program that, to the maximum extent practicable, utilizes standard commercial terms and conditions. To that end, Congress directed GSA, as part of its Phase II activities, to conduct:

“A review of standard terms and conditions of commercial e-commerce portals in the context of government requirements.”

To date, however, the record — i.e. GSA’s Implementation Plan, Market Analysis, and draft RFP — has been devoid of any such review. Instead, as put forth in its draft solicitation, GSA is planning to conduct a review of the standard practices of each e-Marketplace offerers as part of a live test demonstration. If conducted in this manner, the review would be tantamount to placing the cart before the horse, as it would only take place as part of an ongoing procurement, rather than prior to the government committing resources. Moreover, this approach places GSA in a difficult position, as it would have to conduct this review at the later stages of the procurement process, where the pressure to award is at its most extreme.

In addition, this approach raises concerns regarding whether GSA is missing an opportunity to protect the interests of federal customers. As the manager of the program, and the government’s central purchaser, GSA is entrusted with assuring the delivery of best-value solutions that protect the interests of federal customers, and, ultimately, the American taxpayer. Under these circumstances, it is not clear how GSA, by delaying Congressional mandated reviews, can fulfill its significant responsibility of protecting the government’s interests, as it is squeezing its ability to fully assess vital information into an unnecessarily condensed period of time.

Ultimately, the critical nature of the review prescribed by Congress in Section 846 is underscored when accounting for the undue restriction on competition resulting from GSA’s decision to narrow the new program to only one of the three market models it developed. Specifically, as detailed previously in this blog, this approach misses an opportunity to take advantage of the cross-cutting forces of the competitive, commercial market; and it undermines the ability of the government to understand how the e-Marketplace model interacts with other equally market-accepted e-Commerce solutions. Under these circumstances, it is imperative that GSA understand the potential competitive and policy impacts that an e-Marketplace provider’s terms and conditions would have on federal business before establishing a new, five-year program that could represent up-to-$30 billion in addressable market. In particular, among other items, GSA should review:

Price parity provisions

Through these requirements, e-Marketplace providers can restrict the ability of third-party sellers to provide customers with better pricing, customer service, and/or quality information through alternative channels. Left unaddressed, these provisions raise significant concerns of reducing competition, increasing pricing, and stifling innovation.

Pay-for-play

The draft solicitation poses questions regarding an offerer’s capabilities, including the use of fees in exchange for enhanced product placement, raises significant concerns of a “pay-for-play” dynamic. In particular, such an arrangement, where a third-party seller can pay a fee to the marketplace provider in exchange for better product placement, would seem to be prohibited by the Anti-Kickback Act. At a minimum, it violates the spirit of the statute, as government purchasing decisions would be influenced based on payments made by the third-party seller.

Terms of entry

As part of their standard terms and conditions, e-Marketplace providers commonly require third-party sellers to participate on the provider’s commercial platform in order to sell through the provider’s business-to-business platform. Coalition members are concerned that these requirements could provide e-Marketplace providers with a proverbial “loop-hole” to the data collection and use restrictions outlined in Section 846.

Organization conflicts of interest

Although the draft solicitation states that the contracting officer has determined that GSA’s proof-of-concept carries the potential for organizational conflicts of interest (OCI), it does not provide any specific details regarding what the potential OCIs might be. Moreover, the draft solicitation provides no details regarding how the potential OCIs might be addressed, which appears to conflict with the requirements set forth under FAR 9.5.

Considering the potential impact on competition, the risk of establishing a market-dominate gatekeeper for the federal market, and the lack of substantive review and/or analysis, it is time for GSA to seek the assistance of the Federal Trade Commission – who has a history of examining competition in the federal market – to intercede.

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