Earlier this month, the General Services Administration (GSA) issued a draft Request for Proposal (RFP) for its initial Proof of Concept (POC) to implement Section 846 of the Fiscal Year (FY) 2018 National Defense Authorization Act (NDAA). Although the draft solicitation follows several months of outreach and engagement, which Coalition members sincerely appreciate, there is still much left to understand as it pertains to GSA’s approach and how it relates to the underlying statute. Notably, in its draft solicitation, notwithstanding the fact that many e-Commerce solutions exist and have years of acceptance in the commercial market, GSA proposes an up-to-$30 billion, five-year “pilot” of only one of the three market models it developed to represent the commercial e-Commerce market.
The graphic above portrays, in the simplest of terms, the problem with this approach and the risk it presents to the government. In the commercial market, there exist e-Commerce purchasing technologies and aggregate solutions (the large circle in the graphic). These technologies and solutions are in motion, as they evolve over time in response to the incentives and reactive forces of the commercial market. We see this process play out in our daily lives. Five years ago, for instance, online purchasing channel alternatives were not what they are today.
Although Section 846 seeks to access the totality of the commercial market, GSA’s market segmentation effectively “freezes” a subset of those technologies and solutions in time (the three circles), leaving other technologies and solutions to remain open to evolution based on market forces. By further choosing to focus on only one of its three segments, GSA has given rise to critical risks:
– It risks foreclosing government access to the dynamic forces of the competitive commercial market; only one channel to that market exists under the program, and there is no defined plan for introducing complete access to the commercial market, let alone even GSA’s other market segments as channels back to the market.
– Likewise, it risks foreclosing the government from access to evolving technologies and solutions that otherwise are or will be available.
– It risks insulating the market model solution from any forces of competition; as the only channel under the program, that model solution will have little market pressure to improve its services or lower its fees. Indeed, over the course of deliberating the implementation of Section 846, the community was told that providers of these solutions would not participate in the program if they had to accept terms that commercial suppliers already accept in the government market.
– Most ominously, it risks leveraging the power of the government and the funds of the taxpayers to establish and subsidize a third-party market gatekeeper with the freedom to control industrial base access based on its incentives, not government mission needs. This risk is exacerbated as, to date, there appears to have been no review of standard terms and conditions of commercial e-commerce portals in the context of government requirements, as required by Section 846.
The commercial market is a wonderful mechanism. Like gravity, the incentives and activities of buyers and sellers tend toward balance all on their own, and when that balance is disturbed, externalities arise, with associated cost and harm. GSA would do well to embrace the forces of the market before the e-Commerce program locks-in a final approach. As they have in the past, Coalition members remain available to assist GSA to make this program successful.