The U.S. General Services Administration (GSA) on June 26, 2020 announced the award of three contracts which will allow government users to make billions of dollars in purchases directly from “electronic marketplaces” online. The contracts were awarded to Amazon Business, Overstock.com and Fisher Scientific. This “commercial platforms” initiative, detailed in Government Contractor pieces available here and here, could radically reshape public procurement in goods and services, as government users will be able to make “micro-purchases” (typically up to US$10,000) directly from these commercial platforms.
Join a webinar to discuss these developments on Tuesday, June 30, 2020 at 12 noon Eastern. Info. Registration.
This is a three-year pilot (or “proof-of-concept“) initiative. The estimated total value of these contracts is $6 billion annually, and GSA announced that it expects these online platforms to be available in 30 days.
Now that GSA has made awards on the pending solicitation, contractors may choose to join the online marketplaces which could regularize access to approximately 4.5 million federal personnel.
While the cap on micro-purchases is normally $10,000, that cap has increased to $20,000 in the pandemic, and GSA and the Office of Management & Budget (OMB) (within the White House) have urged Congress to increase the limit to $25,000 for purchases through GSA’s approved portals. Although as noted GSA estimates that $6 billion in sales could go to these new electronic marketplaces, micro-purchases across the federal government total several times that amount.
GSA and OMB have urged Congress to increase the micro-purchase threshold to $25,000 for purchases through GSA-approved portals
While the transactions through these electronic marketplaces will be directly between vendors and federal users, GSA will earn a .75% referral fee on every sale, or $45 million on a conservative estimate of $6 billion in sales every year. This fee matches the “industrial funding fee” charged by GSA for sales through the Multiple Award Schedules contracts, though the electronic marketplaces apparently will entail little workload and few legal obligations for GSA. This fee to a centralized purchasing agency may prove attractive to other centralized purchasing agencies, both in the United States and abroad, when those other agencies consider entering into similar arrangements with Amazon or other online marketplaces.
Micro-purchases by users on the commercial platforms will carry almost no regulatory requirements.
Unlike traditional federal contracts, the micro-purchases on the commercial platforms under Federal Acquisition Regulation (FAR) Subpart 13.2 will carry almost no regulatory requirements. This means that buyers and vendors working through the commercial platforms will be able to avoid the competition and transparency normally required for federal procurements, and will not need to meet socioeconomic requirements such as the Buy American Act.
The initiative has raised questions regarding cybersecurity. The U.S. government is imposing tighter cybersecurity requirements, such as the Cybersecurity Maturity Model Certification (CMMC) being implemented at the U.S. Department of Defense. While the awarded contracts should exclude certain products from vendors such as Kaspersky Labs and Huawei, other security issues may arise as security standards change.
Questions have also arisen regarding counterfeit goods on the commercial platforms. GSA has announced that it intends to follow best practices guidance regarding counterfeit goods published by the U.S. Department of Homeland Security.
Because of these and other risks, the new initiative may result in a spike in debarments. Unlike traditional federal contracts, vendors joining the online marketplaces and selling directly to federal users will not go through the same careful vetting for price, quality and qualification (responsibility). Individual government officials using these marketplaces may not have the requisite skills to assess quality and past performance. As a result, the government may seek to exclude vendors, through debarment or otherwise, if they pose serious corruption, reputational or performance risks.
The next month could prove a pivotal time for this initiative. Contractors will need to assess whether and how their federal market strategies may shift if federal users turn to this new sales channel. For government agencies it may also be a time of assessment, as agencies weigh whether federal customers—specifically, non-procurement personnel—should be specially trained to take on more authority for direct micro-purchases.
GWU Law will be hosting a free hour-long webinar on GSA’s “commercial platforms” initiative on Tuesday, June 30, 2020, at 9:00 Pacific, 12 noon Eastern and 18:00 CET.
