Last year, this blog discussed the partnership relationship between the Department of Homeland Security/FEMA and Amazon Business. The partnership created a centralized business account for FEMA purchase card ordering via the Amazon Business marketplace. The blog highlighted some of the key legal, policy, and operational questions surrounding the partnership. Earlier this year, the Air Force established an e-Commerce pilot with Amazon for use of the Amazon Business marketplace for purchases. This week’s blog focuses on the Air Force pilot and the universality of the operational, legal and policy issues surrounding the federal government’s approach to e-Commerce
As threshold matter, the Air Force pilot overlaps the Section 846 e-Commerce effort underway at GSA and OMB. It is unclear whether the pilot addresses any of the key operational and policy issues Congress identified in Section 846 to be addressed by GSA and OMB through the Section 846 implementation process. Those issues include, among other things, the following:
- The applicability of, and compliance with, specific government requirements (g. Trade Agreements Act, the Buy American Act, and mandatory sources);
- Small business preferences;
- Cyber and supply chain risk;
- Ownership and protection of the transactional data;
- The prohibition on use of the transactional data by a solution provider for its own competitive purposes;
- The impact on/operation with pre-existing contract programs; and
- The identification of products suitable for purchase by the Federal Government via commercial e-Commerce platforms.
Currently, GSA and OMB are in the market research phase of Section 846 implementation. The agencies are seeking feedback and comments on these issues from stakeholders across the procurement system. GSA and OMB are to be commended for an open, transparent, and collaborative approach to Section 846 implementation. It is important for the Air Force to take a similar approach to its e-Commerce initiatives.
The Air Force pilot, to some extent, has been “flying under the radar.” Our understanding is that the pilot is based on an agreement between the Air Force and Amazon Business for the use of the Amazon Business marketplace for purchases below the Micro-Purchase Threshold (MPT) by six participating bases. It is not clear whether the pilot addresses any of the operational, legal, and policy issues identified in Section 846. Indeed, the agreement itself raises a series of issues/questions:
Competition in Contracting Act (CICA): Here, there appears to be a bargained-for exchange between the parties. The Air Force has established Amazon as a formal channel with a distinct/different/evaluated status as an Air Force source of supply in exchange for the marketplace services and data. Observers need to understand the nature of the transaction, in particular, the underlying authority for the agreement (i.e. whether it is subject to CICA), whether the agreement rises to the level of a contract, and the criteria used for selecting the pilot participant(s).
Compliance and Government Requirements: The pilot limits covered Air Force purchases to below the MPT. It is significant to note that with the MPT limit, the Air Force has chosen to create a new, formal supply channel where a host of government requirements, such as the Trade Agreements Act (TAA), Buy American Act, Berry Amendment, and small business preferences, do not apply. This approach raises significant management and strategic risk questions. For example, recognizing that TAA requirements do not apply to transactions below the MPT, it is unclear whether the Air Force has formalized a supply channel open to Chinese products at a time when supply chain risk associated with those and other products is being considered in multiple bills on Capitol Hill.
Cyber and Supply Chain Risk: More generally, it is unclear whether there are any requirements or restrictions in place to address cyber and supply chain risk, such as a limitation on types or categories of products.
Data ownership and control: Recognizing that data traversing the pilot platform belongs to the Government, it would be helpful to understand what protections of that data have been established under the pilot. In this regard, it is noteworthy that Section 846 prohibits competitive use of the third-party supplier’s transaction data by an e-Commerce platform provider. Controls on this data are important because information, like the business intelligence regarding Air Force purchasing patterns, is significant, and the absence of controls would yield a windfall to a marketplace provider at the expense of the taxpayer and potentially undermine competition to provide such solutions in the future.
Conflict of Interest: There are potential organizational and other conflict of interest issues that could be attendant to this pilot, such as circumstances where the marketplace provider is also a competitive supplier. See FAR 9.5. Additionally, the pilot raises the potential for “pre-selection” of a source and compromising the imperative of full and open competition for future Air Force e-Commerce requirements.
Mandatory Source: Mandatory source requirements, like AbilityOne, exist for government purchases, and thus, it would be helpful to understand how those source requirements are addressed. By way of example, under GSA Schedule contracts and electronic systems, there is blocking to ensure that “essentially the same” commercial products are not offered where an AbilityOne item exists and is offered.
Pricing and Competition: As noted in previous blogs, a recent study comparing prices between GSA Advantage and a commercial e-Commerce platform found that, for the top 60 selling items, GSA Advantage pricing was lower at least 80 percent of the time. Is the Air Force conducting any similar studies and/or comparisons? Moreover, the MPT limitation eliminates the ability of the Air Force to leverage requirements to seek competitive pricing and terms, which can be done through a host of multiple award IDIQ contracts across the Department and governmentwide.
It is interesting to note that the issues and concerns identified regarding the Air Force pilot are exactly the issues and concerns GSA and OMB are addressing with all stakeholders as part of the Section 846 initiative. The Coalition has appreciated and looks forward to continuing the dialogue with GSA, OMB, and all stakeholders regarding the important role e-Commerce can play in delivering best value mission support to customer agencies. In light of the foregoing, we encourage the Air Force to reach out to GSA and OMB and capitalize on their research and understanding of e-Commerce.