In March, GSA, in consultation with OMB, issued the Section 846 implementation plan, “Procurement Through Commercial E-Commerce Portals.” As set forth in the statute, the implementation plan is the end-product of Phase I. Phase II contemplates a market research effort by GSA to gather information and to conduct analysis necessary to support the Phase III development of implementation guidance for procurement through e-commerce portals.
GSA’s implementation plan provides the framework for Phase II’s information gathering, review and analysis. Given the short/tight deadline for production of the plan (90 days from enactment of the NDAA), GSA and OMB put together a responsive plan that establishes solid parameters for the effort. With this short deadline, however, it is understandable that there are inevitable gaps in the plan’s information and analysis. Phase II provides an opportunity to continue the dialogue and fill in those gaps.
Section 846 provides that the Phase I implementation plan include, among other items, “a discussion and recommendations regarding whether any changes to, or exemptions from laws that set forth policies, procedures, requirements or restrictions for the procurement of property or services by the Federal Government are necessary for effective implementation. . .” The Phase I implementation plan does in fact include four legislative recommendations. The Coalition believes transparency and a rigorous public dialogue around the impact of these recommendations will be essential for successful implementation of e-commerce portals.
For example, the Phase I implementation plan proposes raising the Micro-Purchase Threshold (MPT) to $25,000 for transactions made through the e-commerce portals. For all other transactions the MPT would remain at $10,000 for civilian agencies and $5,000 for DoD. This significant change would create parallel procurement channels with unintended consequences potentially impacting billions of dollars in transactions (at least $15 billion annually). Yet, this recommendation was not publicly addressed with GSA’s industry partners prior to inclusion in the Phase I plan.
The requested increase in the MPT is significant in that it has the potential to substantially expand the market for micro-purchases by millions of transactions and tens of billions of dollars over the next decade. Many of these purchases currently take place under existing contract vehicles in which commercial items have been pre-vetted to meet certain government unique/statutory requirements. It is at this point the creation of parallel procurement universes for commercial products becomes apparent.
Under the Federal Acquisition Regulation (FAR) there are no required provisions or clauses for micro-purchases except for FAR 52.232-39 – Unenforceability of Unauthorized Obligations, and FAR 32.1110 (financing). So that means no FAR 52.212-4 and FAR 52.212-5 (the commercial item standard clauses). The following also do not apply to micro-purchases:
- No competition requirements
- No Organization Conflict of Interests (OCI) requirements or reviews
- No Buy American Act
- No Trade Agreements Act
- No small business preferences or provisions
Given the potential unintended consequences of a blanket increase in the MPT for e-commerce portal transactions, it would be beneficial and consistent with Section 846’s statutory direction for GSA, in consultation with OMB, to specifically identify the requirements (including the key requirements listed above) it wishes to eliminate and to provide a detailed rationale for each requirement to be eliminated. An analysis of these requirements, striking the appropriate balance between streamlining and necessary government requirements, would be a transparent and timely task for Phase II.
The elimination of the Buy American Act (BAA) and the Trade Agreements Act (TAA) are prime examples of the need for further public dialogue and analysis. The BAA currently applies to open market transactions between $10,000 and $25,000, and thus, it would be affected significantly by the proposed increase in the MPT to $25,000. Likewise, the increase in the MPT conflicts with the application of the TAA to tens of billions of dollars in commercial items purchased through pre-existing agency specific contracts and government-wide contracts like NASA SEWP, the GSA Schedules, and the VA Schedules. Historically, the US Trade Representative’s office has emphasized its support of GSA’s steadfast application of the TAA through the GSA Schedules as it ensures /promotes fair treatment of American-made products by foreign governments. Ironically, GSA’ s e-commerce MPT proposal, without further clarification or context, appears to undermine that application of TAA.
Understanding the rationale for eliminating these requirements would be especially helpful given Congress’ and the Executive’s longstanding commitment to Federal procurement preferences for the purchases of products that are made in America and/or TAA designated countries, and to support small businesses.
In closing, the proposal to raise the MPT to $25,000 for purchases made through e-commerce portals is one of many topics that are appropriate for additional dialogue and analysis. I look forward to discussing these topics in future blogs. In the meantime, the Coalition offers its services to the agency as it endeavors to improve commercial item acquisition.