Earlier this week, the House Subcommittees on Government Operations and Information Technology received testimony regarding the, “General Services Administration – Acquisition Oversight and Reform” (the hearing).   The subcommittees heard from witnesses Alan Thomas, Commissioner of the Federal Acquisition Service (FAS), and Rob Cook, Deputy Commissioner of the Technology Transformation Service (TTS) on several important topics during a vibrant and comprehensive discussion, including the acquisition reform proposal contained in Section 801 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2018. As many of you know, Section 801’s “online platform” has been the subject two previous blogs (See: June 22, 2017 and June 27, 2017).  In addition, the Coalition participated in providing joint comments regarding the proposal earlier this summer.

While the subcommittee hearing covered several GSA topics, a great deal of give and take between the Members and the witnesses centered on acquisition streamlining through use of a commercial online platform to simplify purchasing by the federal government.  It was during the course of this discussion that Commissioner Thomas made an important and thoughtful observation regarding the federal government’s use of such platforms.

After expressing frustration with the current the federal acquisition system, one Member asked why the federal government could not use a popular commercial online platform to increase competition and overcome hurdles in the current federal acquisition system.  Commissioner Thomas responded as follows:

I think the bill, the NDAA bill, goes some ways towards addressing that. There are, as you know, some specific regulatory and policy concerns that the Federal government has that those of us who just buy as private citizens through Amazon don’t necessarily have to take into account. So, you want to make sure that those are accounted for in the appropriate way. But, I do think introducing commercial marketplaces, like that, into the government buying process should yield some savings and speed and offer some simplification.

Transcript of the July 12, 2017 subcommittees hearing, transcribed from the public recording available at https://oversight.house.gov/hearing/general-services-administration-acquisition-oversight-reform.

Later in the hearing Commissioner Thomas also stated that GSA is supportive of the online platform legislation.

The Commissioner’s recognition of the need to account appropriately for the regulatory and policy concerns that differentiate purchases by the Federal government and purchases by private citizens is an important and insightful statement regarding the future adoption of the commercial online platform concept by the Federal government.  Like Commissioner Thomas, the Coalition supports the online platform concept. At the same time, however, there are critical regulatory, policy, and management concerns that need to be addressed to ensure GSA’s adoption of an open, transparent, accountable, and fair platform that safeguards the public interest.  As drafted, the current bill language prompts concerns that, unfortunately, have not been vetted to date:

  • Absent a rationale policy explanation, the statutory requirement for full and open competition should not be waived for the award of a platform contract. Full and open competition protects the public by ensuring accountability, transparency, openness, and access to competitive commercial solutions.  During the hearing, there were multiple references to having the government benefit from competition in its purchases of COTS items.  Yet, it is not clear how the government would benefit by avoiding competition to allow one or two vendors the almost exclusive power to set transaction fees and terms for those government purchases.   Moreover, without competition among platform providers, it is not clear how the government will identify the optimum number of platforms.  The current statutory language risks distorting the federal marketplace by creating a duopoly controlling a single point of entry for commercial firms seeking to compete in the federal online marketplace.  Emphasis should be placed on opening the concept up to as many online platforms as practicable, consistent with the focus of the procurement system to broaden the government’s access to the market.  Examination of the business practices and operations of different providers could promote efficiency and downward pressure on their transaction fees, enhance market research, and otherwise lead to a government strategy that employs a robust family of commercial online platforms designed to meet differing commercial business segment practices.

 

  • Organizational conflict of interest issues need to be understood and addressed. The proposed language does not prohibit the commercial online platform provider from selling its products in direct competition with the firms selling through the platform.  The online platform provider will be paid by the firms selling through its system and then, potentially, have the ability to use that transactional data to target markets/customers for sale of its own products.  Another potential conflict of interest is the potential role indirect business relationships could play in establishing the priority listing of products for purchase by the government.  The current language addresses direct payment for priority listing, but does not address fully, the potential for indirect compensation.

 

  • The impact of this platform model on small and medium-size businesses needs to be considered. The current language requires a Government Accountability Office review and report on these matters in three years.  In three years, what transpires will have impacted small and medium size businesses already.

 

  • If GSA is to administer the program, it must be given the authority to do so. The current language provides that all purchases through the commercial online platforms must be in accordance with the platform provider’s standard terms and conditions.  In other words, the government cannot require the provider to change its standard terms and conditions to address any of the policy issues associated with the procurement system.  Rather, it appears that the provider will have sole authority to establish the terms of entry and terms of use, including fees.  Under this construct, it is not clear whether even DoD’ Defense Priorities and Allocations system would apply.  The Coalition advocates the use of commercial terms to the maximum extent possible.  There are times, however, when mission critical needs of the government prevail.  The usefulness of the online platform will be diminished if the critical needs of government cannot be addressed when appropriate.  Moreover, it is important to note that, without any accounting for government needs, and in the absence of competition, this legislative construct creates an argument against itself.  Indeed, if the platform provider’s terms and conditions control unilaterally, and if the award of the platform provider’s contract is not subject to full and open competition and other requirements of law, it is not clear why any no-bid contract needs to be awarded at all or why a program without authority to manage any no-bid contract needs to be centralized in government.  Rather, agencies need only have the capacity to purchase from online platforms clarified.

 

  • Data security needs to be understood and addressed. As unfortunate events over the last few years have shown us, data security in government is critical to safeguard the logistical and transactional needs of government.  These needs do not disappear simply because the government is purchasing COTS items.  At this point in time, data security issues have not been identified and discussed, and thus, it is not clear what risks to the government and citizens exists.

These are just some of the matters regarding the proposed statutory language that the procurement community will wrestle with over the coming months.  The joint subcommittee hearing provided a valuable service by highlighting the balance between the government’s need to comply with the law and policies necessary to protect the nation and commercial practices.  The Coalition looks forward to a dialogue on ensuring that a proper, safe balance is struck, and that commercial practices are utilized to the maximum extent practicable.