Following instructions from Congress to create a new online shopping system leveraging existing commercial practices, the General Services Administration (“GSA”), in coordination with the Office of Management and Budget (“OMB”), has released an implementation plan (“Plan”) to begin e-commerce purchases by 2019.  As discussed in a previous blog post, GSA’s Plan is a first step toward implementing Section 846 of the National Defense Authorization Act for FY 2018, which requires GSA to develop “e-commerce portals” – essentially online shopping sites – for commercially available off-the-shelf (“COTS”) item procurements.

Section 846 sets out three phases for the e-commerce program.  Phase I requires the development of a plan for implementing the commercial e-commerce portals program, including initial recommendations regarding “changes to, or exemptions from, [existing procurement] laws.”  Section 846(c)(1).  GSA’s announcement completes Phase I.  GSA will now proceed to Phase II, which will involve market analysis, “communications with potential e-commerce portal providers on technical considerations of how the portals function,” and consideration of impacts on other procurement programs.  Section 846(c)(2).  Significantly, at the conclusion of Phase II, GSA and OMB will be required to submit a report identifying “recommendations for any changes to, or exemptions from, laws necessary for effective implementation of this section,” as well as a report on “considerations pertaining to non-traditional Government contractors.”   Id.

GSA’s release of the Plan comes two months after it held a town hall to discuss options for the e-commerce program. The Plan emphasizes that this type of “stakeholder engagement . . . has deepened the knowledge of the commercial practices, the industry perspective, and the intersection of Federal acquisition laws and regulations.”  As GSA and OMB now move forward with Phase II of the program, they will likely again seek public input on their plans.

Possible Structure of e-Commerce Portals

GSA’s Plan identifies three potential types of e-commerce portals, each with different cost incentives and ordering structures.

  • E-Commerce Model:  Under this model, a vendor would use its existing online platform to sell its own proprietary or wholesale products to the government.  The vendor would be responsible for pricing and delivery.
  • E-Marketplace Model:  This model would create online marketplaces managed by a contractor, through which both proprietary products and the products of other vendors could be sold to the government.  Vendors would be responsible for fulfilling orders, although GSA held open the possibility that portal providers could be required in certain cases to fulfill orders.
  • E-Procurement Model:  This model calls for a contractor to provide an online marketplace – a so-called “portal of portals” – through which other vendors could then sell goods to the government.  The marketplace provider would not sell goods and would not be responsible for fulfilling orders.

GSA noted that under an E-Commerce model, competition may be “limited,” with “little to no horizontal price comparison.”  But under either an E-Marketplace or E-Procurement model, competition would increase.  An E-Marketplace model would promote “increased competition” by providing “access to both proprietary and third-party products.”  Meanwhile, an E-Procurement model would “allow[] for a larger supplier pool and horizontal price comparisons.”  GSA observed that the E-Procurement model contemplates “tiered subscription fees” that “generally increase as the volume of transactions on the platform increase,” although transaction fees could be capped.

GSA stated that it anticipates using an “appropriate mix” of these three models.  GSA also commented that it “anticipates a direct contractual relationship only with commercial e-commerce portal providers [and not with the suppliers that sell through the portal providers].”  At the same time, however, GSA stated that it “may consider” using an indefinite-delivery indefinite-quantity (“IDIQ”) type of contracting vehicle “that allows GSA to have a relationship with both a portal provider and suppliers that sell on the portal platform, if such strategy might generate greater efficiencies for products that are identified as suitable for the program.”  Observers should expect more information regarding the proposed contract structure of the commercial e-commerce portal program, as it is not clear from this brief reference how this proposal would align with current GSA practices.

Recommended Legislative Changes

In addition to setting out a Plan for e-commerce portals, GSA also issued an accompanying legislative proposal recommending that Congress make a variety of changes to help GSA and OMB implement the e-commerce mandate of Section 846.  Notably, GSA stated that its three-year timeline is contingent on Congress implementing these recommendations.

First, GSA proposed raising the micro-purchase threshold to $25,000 for purposes of the e-commerce portals program, an increase from the current thresholds of $5,000 for the Department of Defense and $10,000 for civilian agencies.  In theory, this proposed increase of the micro-purchase threshold to $25,000 is intended to promote commercial buying practices, as purchases beneath the micro-purchase threshold are exempt from many Government-specific requirements.

Second, GSA also proposed that Congress amend Section 846 to streamline certain statutory competition requirements.  Specifically, GSA proposed an amendment stating that procurements using Section 846 procedures would be deemed competitive, “so long as participation is open to all responsible sources and orders and contracts using these procedures result in the lowest overall cost alternative.”

Finally, GSA proposed that Congress amend the term “commercial e-commerce portal” in Section 846 to mean

[A] commercial solution providing for the purchase of commercial products aggregated, distributed, sold, or manufactured via an online portal.  The term does not include an online portal managed by the Government for, or predominantly for use by, Government agencies, unless such portal is designed for the purpose of accessing multiple other e-commerce portals, including commercial portals, via a single view for the purchase of commercial products.  (proposed amendment emphasized).

This revision appears to be aimed at broadening the definition of “commercial e-commerce portal” to encompass the “portal of portals” concept embodied by the E-Procurement model, discussed above.

Three-Year Plan for Phasing in e-Commerce Portals

GSA’s Plan sets out a three-year schedule for developing this new system.  Among other things, for Fiscal Year 2018 GSA plans to:

  • Conduct research and have meetings with stakeholders in industry and within government.
  • Determine what types of items would be “in-scope” for purchase on e-commerce portals.
  • Develop “options for an initial proof of concept.”

GSA’s effort to determine what items are “in-scope” is somewhat ambiguous.  It could be read to suggest that certain COTS items may be excluded from e-commerce portals, though it may also reflect GSA’s “phased approach for implementation” and the possibility of a product or category based phase-in.  For Fiscal Year 2019, GSA further plans to

  • Assess the impact of e-commerce portals on the Multiple Award Federal Supply Schedules, the National Supply System, small businesses, socioeconomic programs, and other preference programs.
  • Develop data ownership and cybersecurity rules.
  • Conduct an acquisition for an initial rollout of e-commerce portals.
  • Test the e-commerce systems with “a limited audience.”

Finally, in 2020, GSA plans to

  • Expand and scale rollout of the e-commerce systems.
  • Make final policy recommendations.
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Photo of Susan B. Cassidy Susan B. Cassidy

Susan is co-chair of the firm’s Aerospace and Defense Industry Group and is a partner in the firm’s Government Contracts and Cybersecurity Practice Groups. She previously served as in-house counsel for two major defense contractors and advises a broad range of government contractors…

Susan is co-chair of the firm’s Aerospace and Defense Industry Group and is a partner in the firm’s Government Contracts and Cybersecurity Practice Groups. She previously served as in-house counsel for two major defense contractors and advises a broad range of government contractors on compliance with FAR and DFARS requirements, with a special expertise in supply chain, cybersecurity and FedRAMP requirements. She has an active investigations practice and advises contractors when faced with cyber incidents involving government information, as well as representing contractors facing allegations of cyber fraud under the False Claims Act. Susan relies on her expertise and experience with the Defense Department and the Intelligence Community to help her clients navigate the complex regulatory intersection of cybersecurity, national security, and government contracts. She is Chambers rated in both Government Contracts and Government Contracts Cybersecurity. In 2023, Chambers USA quoted sources stating that “Susan’s in-house experience coupled with her deep understanding of the regulatory requirements is the perfect balance to navigate legal and commercial matters.”

Her clients range from new entrants into the federal procurement market to well established defense contractors and she provides compliance advices across a broad spectrum of procurement issues. Susan consistently remains at the forefront of legislative and regulatory changes in the procurement area, and in 2018, the National Law Review selected her as a “Go-to Thought Leader” on the topic of Cybersecurity for Government Contractors.

In her work with global, national, and start-up contractors, Susan advises companies on all aspects of government supply chain issues including:

  • Government cybersecurity requirements, including the Cybersecurity Maturity Model Certification (CMMC), DFARS 7012, and NIST SP 800-171 requirements,
  • Evolving sourcing issues such as Section 889, counterfeit part requirements, Section 5949 and limitations on sourcing from China
  • Federal Acquisition Security Council (FASC) regulations and product exclusions,
  • Controlled unclassified information (CUI) obligations, and
  • M&A government cybersecurity due diligence.

Susan has an active internal investigations practice that assists clients when allegations of non-compliance arise with procurement requirements, such as in the following areas:

  • Procurement fraud and FAR mandatory disclosure requirements,
  • Cyber incidents and data spills involving sensitive government information,
  • Allegations of violations of national security requirements, and
  • Compliance with MIL-SPEC requirements, the Qualified Products List, and other sourcing obligations.

In addition to her counseling and investigatory practice, Susan has considerable litigation experience and has represented clients in bid protests, prime-subcontractor disputes, Administrative Procedure Act cases, and product liability litigation before federal courts, state courts, and administrative agencies.

Susan is a former Public Contract Law Procurement Division Co-Chair, former Co-Chair and current Vice-Chair of the ABA PCL Cybersecurity, Privacy and Emerging Technology Committee.

Prior to joining Covington, Susan served as in-house senior counsel at Northrop Grumman Corporation and Motorola Incorporated.

Photo of Jennifer Plitsch Jennifer Plitsch

Jennifer Plitsch is a member of the Government Contracts Practice Group, where she works with clients on a broad range of issues arising from both defense and civilian contracts including contract proposal, performance, and compliance questions as well as litigation, transactional, and legislative…

Jennifer Plitsch is a member of the Government Contracts Practice Group, where she works with clients on a broad range of issues arising from both defense and civilian contracts including contract proposal, performance, and compliance questions as well as litigation, transactional, and legislative issues.

She has particular expertise in advising clients on intellectual property and data rights issues under the Federal Acquisition Regulations (FAR) and obligations imposed by the Bayh-Dole Act, including march-in and substantial domestic manufacturing. Jen also has significant experience in negotiation and compliance under non-traditional government agreements including Other Transaction Authority agreements (OTAs), Cooperative Research and Development Agreements (CRADAs), Cooperative Agreements, Grants, and Small Business Innovation Research agreements.

For over 20 years, Jen’s practice has focused on advising clients in the pharmaceutical, biologics and medical device industry on all aspects of both commercial and non-commercial agreements with various government agencies including:

  • the Department of Veterans Affairs (VA);
  • the Department of Health and Human Services (HHS), including the Biomedical Advanced Research and Development Authority (BARDA), the National Institutes of Health (NIH), and the Centers for Disease Control (CDC);
  • the Department of Defense (DoD), including the Defense Threat Reduction Agency (DTRA), the Defense Advanced Research Projects Agency (DARPA), and the Joint Program Executive Office for Chemical Biological Defense (JPEO-CBRN); and
  • the U.S. Agency for International Development (USAID).

She regularly advises on the development, production, and supply to the government of vaccines and other medical countermeasures addressing threats such as COVID-19, Ebola, Zika, MERS-CoV, Smallpox, seasonal and pandemic influenza, tropical diseases, botulinum toxin, nerve agents, and radiation events. In addition, for commercial drugs, biologics, and medical devices, Jen advises on Federal Supply Schedule contracts, including the complex pricing requirements imposed on products under the Veterans Health Care Act, as well as on the obligations imposed by participation in the 340B Drug Pricing program.

Jen also has significant experience in domestic sourcing compliance under the Buy American Act (BAA) and the Trade Agreements Act (TAA), including regulatory analysis and comments, certifications, investigations, and disclosures (including under the Acetris decision and Biden Administration Executive Orders). She also advises on prevailing wage requirements, including those imposed through the Davis-Bacon Act and the Service Contract Labor Standards.

Photo of Michael Wagner Michael Wagner

Mike Wagner represents companies and individuals in complex compliance and enforcement matters arising in the public procurement context. Combining deep regulatory expertise and extensive investigations experience, Mike helps government contractors navigate detailed procurement rules and achieve the efficient resolution of government investigations and…

Mike Wagner represents companies and individuals in complex compliance and enforcement matters arising in the public procurement context. Combining deep regulatory expertise and extensive investigations experience, Mike helps government contractors navigate detailed procurement rules and achieve the efficient resolution of government investigations and enforcement actions.

Mike regularly represents contractors in federal and state compliance and enforcement matters relating to a range of procurement laws and regulations. He has particular experience handling investigations and litigation brought under the civil False Claims Act, and he routinely counsels government contractors on mandatory and voluntary disclosure considerations under the FAR, DFARS, and related regulatory regimes. He also represents contractors in high-stakes suspension and debarment matters at the federal and state levels, and he has served as Co-Chair of the ABA Suspension & Debarment Committee and is principal editor of the American Bar Association’s Practitioner’s Guide to Suspension & Debarment (4th ed.) (2018).

Mike also has extensive experience representing companies pursuing and negotiating grants, cooperative agreements, and Other Transaction Authority agreements (OTAs). In this regard, he has particular familiarity with the semiconductor and clean energy industries, and he has devoted substantial time in recent years to advising clients on strategic considerations for pursuing opportunities under the CHIPS Act, Inflation Reduction Act, and Bipartisan Infrastructure Law.

In his counseling practice, Mike regularly advises government contractors and suppliers on best practices for managing the rapidly-evolving array of cybersecurity and supply chain security rules and requirements. In particular, he helps companies assess and navigate domestic preference and country-of-origin requirements under the Buy American Act (BAA), Trade Agreements Act (TAA), Berry Amendment, and DOD Specialty Metals regulation. He also assists clients in managing product and information security considerations related to overseas manufacture and development of Information and Communication Technologies & Services (ICTS).

Mike serves on Covington’s Hiring Committee and is Co-Chair of the firm’s Summer Associate Program. He is a frequent writer and speaker on issues relating to procurement fraud and contractor responsibility, and he has served as an adjunct professor at the George Washington University Law School.

Photo of Evan R. Sherwood Evan R. Sherwood

Evan Sherwood counsels federal contractors on Contract Disputes Act (CDA) claims, the cost accounting standards (CAS), cost allowability, requests for equitable adjustment (REAs), contract terminations for convenience / default, and related audits, litigations, and investigations. He also advises on contract compliance and formation…

Evan Sherwood counsels federal contractors on Contract Disputes Act (CDA) claims, the cost accounting standards (CAS), cost allowability, requests for equitable adjustment (REAs), contract terminations for convenience / default, and related audits, litigations, and investigations. He also advises on contract compliance and formation issues, including TINA / defective pricing, data rights, mandatory disclosure rules, ethics, conflicts of interest, teaming arrangements, and other transaction agreements (OTAs). He has litigated matters before the Court of Federal Claims, the Armed Services Board of Contract Appeals, and the Government Accountability Office. Evan was partially seconded to Northrop Grumman from 2019 to 2022 as business unit counsel.

In his work for defense and civilian agency contractors, Evan:

  • Prepares CDA claims and REAs;
  • Litigates and counsels on matters involving CAS compliance, cost accounting practice changes, and cost allowability under the FAR and agency supplements;
  • Defends contractors during audits and investigations involving the Defense Contract Audit Agency (DCAA), Defense Contract Management Agency (DCMA), and the Office of the Inspector General (OIG);
  • Advises on constructive changes, work delays, defective specifications, stop-work orders, government-furnished property, CPARS, warranty matters, data rights, and quality controls;
  • Counsels on disputes between primes and subcontractors, including teaming disputes;
  • Conducts internal investigations and defends clients in federal investigations involving whistleblower allegations and retaliation claims.

Evan is a Vice Chair of the ABA Public Contract Law Section’s Contract Claims & Disputes Resolution Committee. He routinely writes and speaks about legal issues in federal contracting.