E-Commerce, the integrity of the market and mixed messages

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.

On Jan. 31, the Trump administration issued Executive Order 13904, “Ensuring Safe and Lawful E-Commerce for United States Consumers, Businesses, Government Supply Chains, and Intellectual Property Rights Holders.” The EO establishes a framework for combating trafficking in counterfeit products, including addressing the role and responsibilities of e-commerce platforms.

At its core, the EO seeks to fundamentally address the integrity of the supply chain and e-commerce. Among the potential measures to be employed against entities that facilitate counterfeit trafficking is suspension and debarment from federal procurement.

As reported by Jason Miller, executive editor at Federal News Network, Peter Navarro, assistant to the president and director of the Office of Trade and Manufacturing Policy, conducted a press conference announcing the EO. During the press conference, Navarro highlighted the counterfeit trafficking concerns associated with e-commerce platforms. In describing the challenge of e-commerce, Navarro stated, in part, “Put simply, what’s being sold on the internet these days aren’t goods in a lot of cases — they’re bads. This crisis is not about any one e-commerce platform. This is about e-commerce platforms as a class playing by a different set of rules that simultaneously hammer brick-and-mortar retailers, defraud consumers, steal American jobs and rip off intellectual property rights holders.”

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Navarro also noted, among other items, that e-commerce platforms are not required by law to provide country of origin labeling on their websites, and most have not done so voluntarily. One of the most important actions that e-commerce platforms could take to address counterfeiting is to identify country of origin on their websites, much like brick-and-mortar retailers do when labeling product for sale.

GSA’s E-Commerce program

The thrust of the EO and Narvarro’s comments stand in contrast with the General Services Administration’s implementation of the government-wide e-commerce program pursuant to Section 846 of the 2018 National Defense Authorization Act. As noted in previous FAR & Beyond blogs, GSA’s e-commerce program will result in parallel contracting universes with fundamentally different frameworks. One procurement universe, GSA’s e-commerce program, will operate as a “non-compliant” purchasing program, meaning that the Buy American Act, the Trade Agreements Act (TAA), and small business preference procedures, among others, will not apply to purchases. According to GSA, the addressable market for its e-commerce program is at least $6 billion annually in acquisitions. As such, GSA’s e-commerce program is the largest commercial item program that fails to apply the TAA, meaning, that the government can purchase billions of dollars of non-TAA products, such as those from China. Under the e-commerce model, risk is shifted, fundamentally, to the buyer.

The existing procurement universe operates in a compliance-based environment, meaning requirements, like the TAA and small business preferences procedures, apply. Programs in this universe include GSA’s Multiple Award Schedules, NASA SEWP, the VA Multiple Award Schedules, DLA contracts, and a host of other agency specific contracting programs.

Much as Narravo spoke to e-commerce platforms in the commercial market, GSA’s e-commerce program, by comparison, presents a potentially greater challenge, in part, because it is weighted against the compliance Navarro supports. Competitive balance is at the heart of concerns raised by GSA’s industry partners operating in the compliance-driven universe under programs, like GSA’s Multiple Award Schedules. These concerns are compounded by the decision to limit the current e-commerce program implementation to e-marketplace solutions while excluding e-commerce and e-procurement solutions.

GSA’s E-Commerce solicitation, as amended — mixed messages?

Earlier this month, on Jan. 8, GSA issued an amendment to its e-commerce solicitation making over 80 separate changes.

As a threshold matter, GSA essentially relaxed and restated what originally were requirements for the e-commerce platforms making them desired outcomes or objectives. Moreover, the amendment appeared to provide offerors with the ability to limit the scope of the “desired outcomes” consistent with their commercial practice. The amendment eliminated previous solicitation requirements for screening products (e.g.  Section 889’s prohibition on the purchase of certain products from certain Chinese entities), including blocking “essentially the same items” consistent with the Ability One mandatory program requirements. The amended solicitation also eliminated the reporting requirements for product country of origin! In contrast, multiple award schedule contractors must comply with the TAA and provide country of origin.

This amendment double downs on limiting/excluding the compliance responsibility of GSA’s e-commerce platform providers at the very same time the administration is taking steps to address the integrity of the e-commerce marketplace. The stakes are high. In particular, the growth in e-commerce platforms is a potential multiplier for supply chain and cyber risk. The amended solicitation appears to place that risk on the buyer while giving the e-commerce platform contractors a pass on accountability. Addressing supply chain risk, cyber, and counterfeits is a shared responsibility.  Navarro is right; the single-most effective approach to addressing counterfeiting and supply chain risk in the government’s use of e-commerce is to require the listing and reporting of country of origin on websites and, correspondingly, applying the TAA.

As currently structured, the implementation of Section 846 misses an opportunity to address the critical economic, security, and intellectual property rights issues highlighted by the EO. There is still time for GSA to address these challenges in implementing Section 846. GSA’s e-commerce program can be re-engineered to provide an effective tool to meet core government requirements, like cybersecurity. Coalition For Government Procurement members stand ready to work with all stakeholders towards that end.