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Government E-Commerce: In Search of a Direction from Government

Readers of this blog will recall that, recently, we addressed the mixed messages being sent by the government on e-commerce.  We juxtaposed the concerns of Dr. Peter Navarro, Assistant to the President and Director of the Office of Trade and Manufacturing Policy, that, “e-commerce platforms[,] as a class[, play] by a different set of rules that simultaneously hammer brick-and-mortar retailers, defraud consumers, steal American jobs[,] and rip[-]off intellectual property rights holders,” against the reality of the General Services Administration (GSA) implementing a government-wide e-commerce program pursuant to Section 846 of the FY2018 NDAA that is rooted in non-compliance with the Trade Agreements Act (TAA), the Buy American Act (BAA), and various socio-economic laws.  Significantly, GSA further amended its solicitation in January to limit platform provider accountability for product integrity and even reporting requirements for product country of origin.

Dr. Navarro made his comments on the release of Executive Order 13904Ensuring Safe and Lawful E-Commerce for United States Consumers, Businesses, Government Supply Chains, and Intellectual Property Rights Holders. Given the recent publication of EO 13904, it is imperative that GSA review the e-commerce solicitation to ensure that it is consistent with the Administration’s current e-commerce policy.

Coalition members generally have been strong supporters of acquisition streamlining measures, like e-commerce.  At the same time, we have commented repeatedly on the many unaddressed issues associated with the construct of GSA’s e-commerce effort, specifically, its impact on spending, security, foreign acquisition, and the overarching market.  One issue, the program’s focus on purchases below the Micro Purchase Threshold (MPT), warrants some emphasis here.

The MPT is a process device with roots in the acquisition reforms of the 1990s.  Facilitated by the government’s use of purchase cards, it streamlines certain small purchases by allowing them to be made outside of compliance with the TAA, BAA, and socio-economic laws.  Again, it is a process, not a program, and that distinction is a key concern with GSA’s e-commerce effort.

Central to GSA’s implementation of Section 846 is its reliance on the MPT for its waiver of compliance with the law.  This reliance, however, has elevated the MPT process tool to the status of a program, as is demonstrated by the fact that GSA is embedding a transactional industrial funding fee in the effort at the same rate applicable to the Multiple Award Schedules, notwithstanding the fact that, unlike the Schedules, platform management is outsourced.  In addition, the sheer size and impact of GSA’s e-commerce effort demonstrate the MPT’s program status.  GSA estimates that its e-commerce program will impact $6 billion in sales annually, but, in reality, the program’s non-compliant platforms have the potential to impact upwards of $60 billion in government commercial transactions annually, including transactions under the Schedules program.

Grounding a program that fails to support compliance with the law contradicts sound public policy.  Simply put, the minimum needs of the government, presumably manifested in the law, cannot be met.  Moreover, the economic impact of this noncompliance cannot be overstated.  Recall that, under the Schedules program, GSA negotiates with industry partners to ensure that products meeting the requirements of the TAA, BAA, small business, AbilityOne, and other laws and regulations are available to agencies at competitive prices.  To obtain a Schedules contract, almost 14,000 vendors undertake the expenditures of time, resources, and money to follow the law.  With the implementation of GSA’s e-commerce effort, however, they will compete against platform vendors that, with the waiver of such compliance and associated costs, are placed at a significant profit advantage.

In the end, with GSA’s e-commerce solicitation at odds with the Administration’s overarching concerns about e-commerce articulated by Dr. Navarro, the government is at an inflection point.  It needs to provide clarity in the form of a consistent e-commerce agenda to GSA and the industrial base that serves its agencies.  To that end, the Coalition has sent a letter to Dr. Navarro seeking guidance on this matter. Given the legitimate need for compliance with the law to mitigate supply chain and other risks, a consistent policy on e-commerce is essential for stakeholders to orient their corporate activities and serve their customer agencies.

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