A large, new, Amazon-esque marketplace could be about to open up for commercial retailers across the United States. And its singular customer is huge!
A U.S. House-passed defense bill awaiting action by the Senate includes a non-heralded section that could have significant effects on procurement methods across the entire federal government. And, it may drift down to state and local governmental entities.
The defense bill has a provision that requires the General Services Administration (GSA) to establish a program to allow federal agencies to purchase products through online commercial marketplaces. The bill also specifically requires the U.S Department of Defense (DOD)to purchase commercial products from the program. Other agencies will simply be encouraged.
Aimed at cutting down on red tape for purchase of commercial off-the-shelf (COT) goods by the DOD, the provision not only could make procurement processes faster and simpler, but it could also make it easier for commercial retailers to sell to government. In fact, it could open up a huge new, lucrative marketplace for retailers that sell products to government.
In the case of the DOD and other agencies, COT goods have previously been purchased from the GSA or through an often slow and complicated agency-specific contracting process. The procurement provision in the defense bill would create an online marketplace. That, says bill sponsor Rep. Mac Thornberry, should ensure that the federal government is paying reasonable prices for products.
Federal agencies currently purchase most commercial products through supply schedules, which are pre-negotiated agreements with vetted providers. The provision in the defense bill would bypass that process and allow commercial retail firms to sell all kinds of products directly to federal agencies.
This provision in the bill arose from a GSA Inspector General’s report that showed GSA rates for information technology products alone were 13 percent higher than on the open retail market. Supporters of the bill say that not only is purchasing items through the GSA more expensive, but it is also slow and complicated.
Additionally, the House Armed Services Committee determined that GSA schedule prices have climbed over the years because of bureaucratic red tape. That makes it harder and costlier for private-sector providers to get on the GSA schedule. Taxpayers are not well served by this old process.
The bill establishes a number of criteria for online marketplaces. They must already be widely used in the private sector, and must provide “dynamic” selection, with frequent updates of products and pricing. Also, no products or sellers can be featured based on any kind of fee or compensation. The marketplace must be a commercial entity that distributes, sells, manufacturers or creates aggregates of products.
According to the bill, as long as two or more suppliers offer the same or similar product on an online market, the requirements for full and open competition are met. Also, online purchases from small businesses will be considered prime contract awards and will satisfy an agency’s small business goals.
While some have expressed that such a marketplace would benefit a singular seller, such as Amazon or Home Depot, officials from Amazon are quick to point out that 40 percent of purchases from their site are fulfilled by 2 million suppliers, many of which are small businesses.
This is an important issue and an impactful bill for commercial retailers interested in the trillion-dollar government marketplace. It could be a “game changer” and should definitely be monitored as it moves through the U.S. Senate.