On Friday, the General Services Administration (“GSA”) announced that it had awarded three contracts to develop online shopping portals for commercially-available off-the-shelf (“COTS”) items. The awardees are Amazon Business, Fisher Scientific, and Overstock.com.
GSA’s awards were made to implement Section 846 of the NDAA for FY 2018, which required the agency to develop an online marketplace for COTS items, and to exempt these sales from a broad range of typical procurement rules. Although implementation details are still in process, in theory, the program would allow government buyers to purchase COTS items with the click of a button, similar to how a private consumer might buy things over the internet.
GSA’s RFP sought contractors to develop an “e-marketplace” model of online shopping, which connects customers to multiple vendors all on the same platform, creating competition among vendors. GSA had considered using other models, including an “e-commerce” model in which the portal provider would also be the vendor, but decided to table them while it evaluates its options. For a more detailed discussion of the alternate platform models, we have explained them here.
Under the proposed e-marketplace model, purchases initially will be limited to transactions below the $10,000 Micro-Purchase Threshold, which can be processed using government-issued purchase cards. Despite this limitation, GSA still estimates that government purchase cards represent roughly $6 billion of government spending annually.
With that much money on the line, the White House appears to have taken an interest in GSA’s procurement. In an Executive Order issued this year, it directed Customs and Border Protection (“CBP”) to consider debarring vendors that violate customs laws “knowingly” or “with gross negligence.” The order specifically called out “e-commerce platform operators,” explaining that they “should not facilitate importation involving persons who are suspended or debarred by CBP.” As a practical matter, this means that platform operators and their vendors may need to establish processes for screening or otherwise identifying vendors who traffic in counterfeit goods or have been debarred by CBP.
In the coming months, the three awardees will deliver proofs of concept, which GSA will then test and potentially scale-up over time. The contracts are no-cost, and performance may last up to three years. However, GSA may look to move more quickly, considering that Section 846(c) encouraged GSA to develop the program expeditiously. As we have reported, GSA began planning for this procurement in 2017, solicited industry input in 2018 and 2019, and issued an RFP in the fall of 2019.
Many questions remain about the future of GSA’s e-commerce procurement, including how the new online marketplaces will interact with GSA’s existing Multiple Award Schedules program and whether traditional procurement regulations will be applied if and when the online marketplaces expand beyond the Micro-Purchase Threshold. We will continue to closely track these developments and recommend that commercial item contractors do the same.