Insight by Amazon Business

Procurement transformation: Why agencies need to leverage digital purchasing forums

Roughly a dozen years ago the federal government first instituted its Cloud First policy and has become one of the most impactful and successful digital transformation efforts across the federal government.  There is now an opportunity to further leverage the cloud infrastructure that permeates our lives across entertainment, social media, research and development and our purchasing habits.

Mark Fox, Director of Federal sales at Amazon Business, sees the next opportunity to leverage cloud computing to...

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Roughly a dozen years ago the federal government first instituted its Cloud First policy and has become one of the most impactful and successful digital transformation efforts across the federal government.  There is now an opportunity to further leverage the cloud infrastructure that permeates our lives across entertainment, social media, research and development and our purchasing habits.

Mark Fox, Director of Federal sales at Amazon Business, sees the next opportunity to leverage cloud computing to transform federal procurement in much the same way that purchasing habits at home have transformed over the past 20 years.

“How can agencies modernize the procurement process for commercial items? Does it make sense to continue traditional purchasing models such as the traditional RFP process or attempt to use outdated static catalogs for most commercial purchases below the Simplified Acquisition Threshold ($250K)?” he asked. “Are our tax dollars best utilized when buyers purchase through the traditional contract vehicles at the General Services Administration (GSA) and Defense Logistics Agency (DLA), which really have taken physical catalogs — akin to the old Sears catalog – and post it online? These schedules or catalogs are largely out of date the day that they’re posted and it’s a challenge for the government to keep them up to date, even with recent allowances for unlimited economic price adjustments (EPAs), in light of the supply chain challenges that we’ve seen over the course of the last few years.”

Outside of the government, digital purchasing platforms are the norm for how procurement is done today. That Business to Consumer (B2C) experience we enjoy at home, Fox argued, could and should be even further adopted by the government as well.

The biggest challenge, Fox said, is education and awareness. The Federal Acquisition Regulation (FAR) is dense, arcane and not always clear even to experts. Fox said there is language in those rules that allow federal purchasers to buy everyday commercial products like nuts and bolts, office supplies, even gas generators on digital platforms like the average consumer would, but with the added benefits of using a business-to-government (B2G) platform.

And there’s always the option of updating the FAR itself. Fox said the micro-purchase threshold, for example, currently sits at $10,000. But increasing that to $250,000, would simplify many acquisition decisions agencies have to make because it increases the number of products available for purchase via digital platforms.

For example, Amazon Business satisfies the requirements of obtaining multiple competing quotes, all through a single platform.

“Right now, the buyer may perceive that as just a single Amazon quote. The reality is that it’s a collection of multiple sellers: some Amazon first-party products where Amazon is the actual distributor, but most are from third-party sellers presented through the Amazon Business website that you can pick and choose,” Fox said. “You could pick the recommended product based upon your preferences, that shows up first, or you could pick option number three, because it is being sold by an 8a veteran owned business that’s 25 miles from your base, and you would prefer to spend your money with that particular seller and align to recent guidance from the White House to increase spending with small businesses.”

And that’s one of the advantages of using an online store like Amazon Business: It can assist federal agencies in hitting their small business goals. That’s due to the bulk of the sales on Amazon’s website, whether for businesses (Amazon Business) or consumers (Amazon.com), come from third-party sellers. Amazon acts as a supply chain and logistics management system, connecting small, local and diverse businesses with the purchaser, and providing warehousing, transportation, delivery and returns for most products sold.

That also makes it easier for agencies to more quickly support their given mission. For example, most major weapons systems require the purchase of everyday commercial items to maintain mission capable status. An example would be the F-35 Joint Strike Fighter and the maintainers need for General Use Consumables (GUC) such as wooden tongue depressors, plastic Solo Cups, a specific brand of epoxy, and a specific brand of sandpaper. The tongue depressors and Solo Cups are used to mix the epoxy, and the sandpaper is used to finish the surface repairs on the aircraft.

“We are impacting mission with simple things like that,” Fox said. “Today, down at the squadron level, they have challenges leveraging traditional prime contract mechanisms in getting those items fast enough at a price that is realistic, so that planes are not sitting there waiting on $20 worth of commercial items to be fully mission capable.”

Amazon Business allows purchasers to filter and set preferences, much like how consumers would use Amazon.com at home, but with additional parameters. In fact, government purchase card administrators can set their accounts to default to these parameters through “guided buying” policies (a Prime feature) that set guardrails for card holders to purchase within agency requirements and drive toward purchasing goals.

For example, purchasers on Amazon Business can filter for veteran-owned small businesses, or even add HUBzone businesses as preferred. Buyers can filter by location, allowing them to shop within their community. This is often a priority for military installations, which prefer to spend locally to support the communities that in turn support their service members. The Air Force refers to this as its First Look Program, which prioritizes purchases from small businesses within 50 miles of any Air Force base. This way, they’re still supporting local military communities across the U.S. This also provides a larger buying audience for these small sellers beyond just the Air Force as their offerings, once in the system, are available for all Amazon shoppers to see. This then becomes a supply chain risk management tool as well, helping to ensure the long-term viability of these traditional federal suppliers.

Another example is that Amazon Business is on track to release an updated in early 2023, to make it easier for federal buyers to find and purchase AbilityOne and Skilcraft mandatory source of supply products.

One of the challenges with promoting even more purchasing from the small, disadvantaged business sellers is with the Federal Procurement Data System (FPDS). It does not encourage agencies to report purchases below the micro-purchase threshold. This has impacted agencies reporting this spend and negatively impacting their small business goals. Amazon Business can help simplify the reporting of this spend with its built-in reporting and analytics capabilities.

“For those agencies participating in the GSA Commercial Platforms Initiative, this information is readily accessible within a single report that could be submitted to FPDS for small business spend across all participating agencies.  For other agencies who manage their own Amazon Business account, they can do the same in a self-service reporting process. In fact, one of the most impactful value propositions of Amazon Business is the significant amount of reporting and analytics that a customer has access to,” Fox said. “So agencies can go in there and ask, ‘how much have I purchased in a particular category? How much within that particular category have we bought from a veteran-owned small business or a particular brand?’ With that information readily available, it’s also easy for agencies to share the information with FPDS and their respective Office of Small & Disadvantaged Business Utilization (OSDBU). This represents an area of opportunity for government to get full credit for all the small business purchasing they’re actually making.”