Within the past year, much of the conversation around e-Commerce has focused on the General Services Administration’s (GSA) implementation of Section 846 of the Fiscal Year (FY) 2018 National Defense Authorization Act (NDAA). [1] As the deadline for GSA’s Phase II report rapidly approaches, this week’s blog examines many of the “unknown unknowns” associated with the treatment of foreign products that should be addresses in the upcoming report.
The Trade Agreements Act (TAA), which implements the World Trade Organization Government Procurement Agreement (WTO GPA), is among the most significant government-unique requirements. Under the WTO GPA, signatory countries, including the United States, have agreed not to engage in discriminatory purchasing practices in government procurement against products from other signatory countries. The TAA limits applicable Federal procurements to only American products or products from countries that have agreed not to discriminate against each other’s products, per the WTO GPA or Free Trade Agreements.[2] From a policy perspective, the purpose of the WTO GPA and the TAA is to promote fair treatment and opportunities for American companies, products, and jobs in government procurement.
As the Coalition has noted previously, its members remain concerned that, as currently set forth, GSA’s approach for implementing the requirements of Section 846 would establish parallel procurement universes for commercial items:
- Procurement Universe 1: Where pre-existing contracts for commercial products ensure compliance with government unique requirements, like the TAA, is mandated.
- Procurement Universe 2: Where products, including IT, from non-TAA designated countries, like China, are available for purchase through the proposed commercial e-Commerce platform initiative.
Under these circumstances, this new, seemingly non-compliant procurement universe would establish a channel to the government market that competes directly with existing programs, like the GSA Schedules, without accepting the standard compliance and other government-unique requirements.
By way of example, in FY 2018, Federal customers placed more than 800,000 orders, valued at over $300 million through GSA’s Schedule 51V, Schedule 75, and OS3 vehicles on GSA Advantage. Included below is the average dollar value for each order placed through the three vehicles during FY 2018:
- Schedule 51V: $497.93
- Schedule 75: $382.25
- OS3: $429.63
Notably, because the TAA applies to GSA’s Multiple Award Schedules (MAS) program, products from eligible countries can be purchased by the Federal government, while products from non-WTO GPA designated countries are ineligible for such purchase. As a result, even when an individual transaction’s value does not exceed the Micro-Purchase Threshold (MPT), compliance with the TAA is still assured under the program.
In contrast, however, GSA’s current approach would allow for products from non-WTO GPA countries to be purchased through transactions that do not exceed the $10,000 MPT. For example, it provides for the unlimited/unrestricted purchase of products made in China that are not eligible for purchase under standard government contracts where the TAA applies. Consequently, the procurement community is confused with regard to GSA’s establishment of a preferred contracting framework that allows for the purchase of non-compliant, non-TAA products (i.e. Chinese products) as a result of its current approach.
Moreover, as currently structured, GSA’s approach to the implementation of Section 846 raises questions regarding the agency’s role and/or value for Federal customers, as it shifts the burden of assuring compliance from GSA to the individual purchaser. Further, under this approach, the e-Commerce platform providers would have no responsibility for similar vetting of products. As illustrated above, under the current “value-add” offered to Federal customers by GSA through its MAS program is that GSA screens products for compliance and leverages the government’s purchasing power to negotiate better prices. By establishing a new Federal procurement universe where these services are no longer provided to Federal customers, however, GSA’s approach appears to remove its role in the procurement process.
The rise of supply chain security concerns manifested in recent legislation demonstrates that this issue is only growing in importance and not ameliorated at any arbitrary dollar valuation. As we approach the release of the March 2019 Phase II report, GSA’s community of TAA-compliant industry partners will be eagerly watching to see how the agency will address these important matters associated with the treatment of foreign products.
[1] Pursuant to of Section 846 of the FY 2018 NDAA, GSA is responsible for establishing and managing an e-Commerce portal program described under the statute. In March 2018, GSA, in consultation with the Office of Management and Budget (OMB), issued the Section 846 implementation plan, “Procurement Through Commercial E-Commerce Portals.” The implementation plan is the end-product of Phase I of GSA’s Section 846 implementation efforts which focused on information gathering and analysis. Currently, GSA is in Phase II of Section 846 implementation focused on market research that will support the agency’s Phase III efforts to develop and implement e-Commerce procurement guidance. GSA’s Phase II report is expected to be released in March 2019.
[2] The TAA, WTO GPA, and Free Trade Agreements are implemented at Federal Acquisition Regulation Subpart 25.