By the end of 2019, the General Services Administration plans to begin testing the first online marketplace to see if the government can buy commercial items more easily.
GSA laid out its plans Thursday to implement the congressionally-mandated e-marketplace initiative, commonly known as the Section 846 e-commerce requirement.
“Commercial technology has made buying easier, increased transparency, and opened opportunities to a broader pool of suppliers. The online markets continue to evolve through new technology, streamlining commercial business practices and emerging suppliers,” GSA writes in the plan delivered to Congress. “The implementation plan lays out the approach for the government to maximize those benefits and includes initial findings; legislative relief requirements and recommendations; and an aggressive but achievable timeline to evolve [commercial off-the-shelf] buying across the whole government.”
GSA will release a solicitation by the end of June for e-marketplace provider services and implement the proof of concept by Dec. 31.
The goal of Section 846 is to change the way agencies, particularly the Defense Department, buys commercial products. In the 2018 National Defense Authorization Act, lawmakers laid out a three-phase approach. The release of the implementation plans finishes phase 2 of analysis and study and enters phase 3 of testing concepts.
Congress mandated the commercial buying pilots as a reaction to and an outward frustration with the federal procurement system, and how slow it can take to buy commercial products and services.
GSA chose the e-marketplace approach to test out over the e-procurement and e-commerce concepts.
Key objectives for commercial platform
GSA says based on its research and discussions with providers and other stakeholders, the e-marketplace approach made the most sense based on several factors like competition, user experience and degree of complexity.
“We are continuing to focus on a few key core objectives,” said Keil Todd, the program manager of the Commercial Platforms Initiative in the Office of Information Technology Category in GSA’s Federal Acquisition Service (FAS), during a briefing with reporters. “Modernizing the commercial product line experience by bringing in capabilities that are offered on today’s commercial e-commerce platforms. Streamlining the way the government buys commercial items by giving agencies and their acquisition workforce the ability to focus on the high-value, mission oriented activities. Increasing visibility and analysis into commercial item spend to really help enable better buying decisions.”
Todd said these goals will be accomplished through multiple platform providers.
The three options GSA reviewed for the proof of concept were:
The e-marketplace model, which is the most common one where the vendor hosts other vendors’ products and acts as a middle man of sorts between the buyer and seller
The e-procurement model, where the buying organization uses a software-as-a-service applications, and often has workflows connecting the internal procurement organizations to financial systems.
The e-commerce model, where the online platform provider sells their own proprietary items or wholesale products.
GSA decided to limit the proof of concept to the micro-purchase threshold (MPT) of $10,000.
Mark Lee, the assistant commissioner in the Office of Policy and Compliance in FAS, said the decision to stick with the MPT made sense for several reasons.
“We are doing this to drive adoption, create insights into this type of spend and mitigate our risks. The micro-purchase threshold represents the point where government rules and regulations most closely represent commercial terms and conditions,” Lee said. “We thought this was a logical starting point that balances the direction of Section 846, which didn’t waive any procurement laws and asks us to adopt commercial practices to the greatest extent practical.”
GSA is asking Congress, once again, to increase the MPT to $25,000 for five years during this proof-of-concept. Lawmakers rejected the administration’s request last session.
Jeff Koses, the senior procurement executive at GSA, said the increase in the MPT would improve the e-marketplace pilot.
“At that dollar level, we’d pick up a potential 23% of all open market transactions, talking about volume or the number of orders that get processed, but only about 1% more of the total dollars,” he said. “If you think about that dichotomy, 23% of the actions, but 1% of the dollars would mean our contracting officers could focus on the high dollar, or complex transactions, which underlines the focus on moving our people low-value to high-value work.”
Koses said an increase of the MPT to $25,000 also means it would be easier for new companies to do business with the government.
“There are over 60 additional government requirements that kick in once we cross over the micro-purchase threshold,” he said. “In trying to ensure a simplified buying experience, we think it’s important to remain under the micro-purchase banner.”
Increasing threshold causes concerns
The desire for the increase of the MPT is one of several concerns the implementation plan raises among some in industry.
Roger Waldron, the president of the Coalition for Government Procurement and host of Off the Shelf on Federal News Network, said raising the MPT would create inconsistencies in the federal procurement marketplace where contracting officers would have one buying approach where the threshold is $25,000, and then for all others it would be $10,000.
“There is no discussion on the impact of the e-marketplace on existing programs. There are two studies that show GSA schedules are cheaper than the commercial marketplace,” he said. “The e-marketplace platform may also limit competition unnecessarily. GSA would be better off testing all the models to get an understanding of how they work.”
Waldron said he would like more details about GSA’s plan to test out the other concepts as there is no articulation of other phases in the implementation plan. He also said there is no details about how do this effort may be impacted by GSA’s other initiatives around schedules modernization.
Coalition will offer GSA some comments on the implementation plan. GSA said after the initial proof of concept, it will apply those lessons learned to future commercial buying efforts.
Future pilots are unclear
It’s unclear if GSA will test out the e-commerce or e-procurement approaches, or what it will recommend to Congress.
Koses said GSA has had discussions with other agencies such as the Air Force, who ran separate e-marketplace pilots with Amazon, and is trying to incorporate their experiences in this governmentwide effort.
“One of the central points that we’ve emphasized is this needs to be multiple awards. If we don’t receive at least two offers that meets all the requirements and we are comfortable with, we are not going to award,” he said. “At that point, we would take a step back, relook at the requirements and figure out what happened. We cannot be locked into a single provider. We see a number of risks in a single award environment. This will be a multiple award solution.”
Koses added that GSA also is working with a number of agencies who may want to be more active participants in the pilot. But at the same time, any federal employee with a purchase card can use the platforms.
“We see a number of advantages to the program. One is having a centralized program across government management. There are purchase card holders across government that are buying from the consumer sites already,” Lee said. “What GSA is looking to do is enter into a business-to-business arrangement, where generally you get more favorable terms and have a centralized management. We’ve also seen people enter into single arrangements where we’d be entering into multiple arrangements and have a more easy access into the various marketplaces with direct management of that spend.”