In a groundbreaking academic study coordinated by the National Association of State Procurement Officials (NASPO), private and public supply chain professors from across the United States conducted a nationwide survey of states’ responses to the pandemic. The study was based on over 100 hours of interviews conducted by the academic research team (Professors Robert Handfield (North Carolina State University), Zhaohui Wu (Oregon State University), Andrea Patrucco (Florida International University), Christopher Yukins (George Washington University) and Thomas Kull (Arizona State University)) with many states’ procurement staff, suppliers, and other state officials. Key takeaways from the study:
Assessing state procurement systems through a maturity model. Different states responded very differently to the pandemic, based in part on their organizational structures and preparations for the disaster. To help states better prepare, the researchers developed a “maturity model” to assess state procurement systems, in preparation for future catastrophes.
Courage and professionalism in the face of catastrophe. The researchers’ interviews with state procurement officials and suppliers “corroborate observations made in much of the disaster science research: disasters often bring out the best in us, and people rise to the occasion.” The study noted “how private citizens collaborated with entrepreneurial state employees to identify innovative and little-known PPE suppliers and often established innovative solutions to seemingly hopeless situations where PPE could not be found. Purchasing managers, staff members, and CPOs [Chief Procurement Officers] emerged as heroes. Our interviews revealed the pride and renewed sense of professional identity . . . . We observed a growing sense of camaraderie as people faced a common crisis.”
Centralization of the state procurement function was a key factor in success. The study’s results suggested “that increased centralized governance of state procurement led to a more effective response in tackling large-scale supply chain disruptions.” Centralized procurement “enabled increased coordination, improved leveraging of the volume of the state’s purchasing power, and provided for more efficient application of contracting expertise to a difficult market situation.” A centralized approach, the study found “also led to better coordination among disaster relief entities, PPE suppliers and hospitals, counties, and agencies requiring PPE to operate.”
Constitutional issues in federal-state confrontations over critical supplies. In principle, the federal government should have helped better coordinate states’ responses to the pandemic. In practice, however, during the early stages of the pandemic the federal government was repeatedly accused of abusing its powers under the Defense Production Act to seize and redirect emergency supplies that had been purchased by individual states — although, under the U.S. federalist system of government, the states bear first responsibility for the health and welfare of their citizens, constitutionally, practically, and politically. The study argued that “[s]erious consideration should be given to whether the Defense Production Act should be amended to recognize the deference owed by the federal government to the states under the Constitution, much as many other federal laws (such as those governing federal grants, use of National Guard troops, etc.) recognize and defer to the sovereign authority of the states.”
U.S. Perspectives on the UK “Green Paper” — Post-Brexit Public Procurement Reforms
On March 10, 2021, Chris Yukins submitted comments to the UK Cabinet Office in response to the United Kingdom’s plan for transforming its public procurement laws after Brexit, in the “green paper” entitled Transforming Public Procurement. These comments respond to consultation questions posed by the Cabinet Office, and provide a U.S. perspective on the proposed reforms.
While our UK-based colleagues Sue Arrowsmith, Anne Davies and Ruairi Macdonald, Jane Jenkins, Michael Bowsher QC and Albert Sanchez-Graells, among others, have published very useful comments on the green paper, these comments focus on points of special interest and concern for the U.S. procurement community — and especially on points of potential cooperation between the United States and the United Kingdom. The two nations have cooperated very effectively in related areas of legal regulation, such as corporate compliance; the green paper presents other areas of potential intergovernmental cooperation, which could improve procurement outcomes, open trade opportunities, and enhance anti-corruption efforts in both nations.
Transforming Public Procurement is the Cabinet Office’s plan (or “green paper”) for a new public procurement legal regime in the United Kingdom after Brexit. Lord Agnew, the Minister of State for the Cabinet Office, called this “an historic opportunity to overhaul” the United Kingdom’s “outdated public procurement regime” – a “dividend,” as it were, “from the UK leaving the EU,” to rebuild the procurement system to make it easier for “innovative companies to win business” and to improve public goods and services by making it simpler “to exclude suppliers that have performed poorly in the past.” Id. at 5-6.
The comments deal with specific questions thematically, with reference (as appropriate) to parallel procedures in the U.S. government’s procurement system, and – most importantly – to how the United Kingdom’s proposed reforms may affect ongoing cooperation with the United States as our two nations reaffirm their special relationship.
In a guest post in the International Economic Law and Policy Blog, Professors Andrea Biondi and Michael Bowsher QC, King’s College London, Professor Christopher Yukins, George Washington University, Dr Luca Rubini, University of Birmingham, and PhD candidate Gabriele Carovano, King’s College London, addressed a European Commission “White Paper” which proposes (among other measures) to exclude foreign competitors from EU procurements if those vendors receive government “subsidies” (very broadly defined) that boost their ability to compete for public contracts in the European Union.
The European Commission’s proposal could harm U.S. vendors that receive support from the U.S. government — such as COVID-19 relief — because European competitors might claim that U.S. firms were receiving barred government subsidies.
The European Commission’s proposal would define government “subsidies” to include any “financial contribution by a government . . . of a non-EU State . . . which confers a benefit to a recipient . . . and which is limited, in law or in fact, to an individual undertaking or industry.” The commentators pointed out the European Commission’s proposal could badly harm U.S. vendors that receive “subsidies” — which some might argue includes CARES Act relief (related to COVID-19) from the U.S. government — in no small part because European competitors could claim that vendors from abroad were receiving subsidies, and thus in effect disable competition from the United States and other nations.
On June 17, 2020, the European Commission published the “White Paper” that called for “levelling the playing field as regards foreign subsidies.” The White Paper has several modules, only one of which (Module 3) addresses public procurement directly. Module 1 would establish a general regulatory instrument to address distortive effects of foreign subsidies, and Module 2 would specifically address distortions caused by foreign subsidies which facilitate the acquisition of EU companies.
The academics submitted their comments to the European Commission as part of the public comment process. While they were generally supportive of Modules 1 and 2, the academic commentators were sharply critical of Module 3, which the Commission described as follows:
Foreign subsidies could also have a harmful effect on the conduct of EU public procurement procedures. This issue is addressed under Module 3. Foreign subsidies may enable bidders to gain an unfair advantage, for example by submitting bids below market price or even below cost, allowing them to obtain public procurement contracts that they would otherwise not have obtained. Under this Module, the White Paper proposes a mechanism where bidders would have to notify the contracting authority of financial contributions received from non-EU countries. The competent contracting and supervisory authorities would then assess whether there is a foreign subsidy and whether it made the procurement procedure unfair. In this case, the bidder would be excluded from the procurement procedure.
The academic commentators noted:
While foreign subsidies may distort the market regarding undertakings (Module 1) and the acquisition of undertakings (Module 2), foreign subsidies in public procurement markets in effect reduce the costs of public services – and so should be separately assessed. Distortions that may be caused by foreign subsidies (displacing higher-cost local producers, for example) are regularly resolved through sustainability measures allowed by the European procurement directives. . . . The framework proposed under the White Paper may . . . displace the legislative regime contemplated by the existing procurement directives, and thus up-end the careful policy decisions that are reflected in those directives.
. . . Module 3 would exclude – disqualify – vendors from public procurements in the European Union, on the grounds that the vendors have received a subsidy from a foreign government. In practical terms the proposal would revise the European Union’s procurement directives by adding an additional ground for exclusion – foreign subsidy – without a normal legislative process. In doing so, the proposal could raise costs for Member States, impair competition in procurement markets across the European Union, open the door to strategic interference by competitors, delay and disrupt ongoing procurements, deprive Member States of best value in their public procurements, and undermine Europe’s relations with key trading partners internationally.
. . . [T]he proposal would defer to the European Union’s obligations under free trade agreements, but assumes – incorrectly – that those obligations are well-defined under instruments such as the WTO Government Procurement Agreement. They are not. For example, the United States covers tens of billions of dollars in preferences by a single sentence in the GPA annexes, which states that the United States’ obligations do not extend to “any set aside on behalf of a small- or minority-owned business.” If the European Commission and Member States, in implementing the proposed measures, read that reservation narrowly and excluded U.S. vendors because other procurement preferences were considered government subsidies not reserved under the GPA, trade relations with the United States and other important trading partners could be badly disrupted.
GW Law Webinar Discussed European White Paper
The White Paper was addressed in a GW Law webinar on EU-U.S. trade, and was discussed in detail in an October 8, 2020 webinar sponsored by Wolters Kluwer, the publishing house. While the public comment period on the White Paper has closed, Eddy De Smijter, Head of the International Relations Unit in DG Competition at the European Commission, made clear during the October 8 session that the Commission continues to welcome informal comments on the proposal.
Global challenges related to the climate changes as described in the Paris Agreement influence various aspects of public policies across the world. This leads us to observe in the U.S. presidential candidate Joe Biden’ s New Green Deal, and in Europe, where for example the New Industrial Strategy for Europe calls for the support and implementation of the green aspects in public procurement. Also, the New European Green Deal and the Just Transition Fund should have a significant impact on the public procurement market and regulations.
Although Green Public Procurement (GPP) is still a non-mandatory legal instrument, the European Commission has opted for this solution as an effective measure in the EU’s efforts to become a more resource-efficient economy. GPP can help stimulate a critical mass of demand for more sustainable goods and services which otherwise would be difficult to get onto the market.
The new European initiatives are important not only for European public authorities and contractors but also for U.S. enterprises interested in Transatlantic cooperation.
The Institute of Law at the Univeristy of Silesia, Association ‘’Pro Silesia,’’ with the support of the George Washington University’s Government Procurement Program, invite you for a 90-minute, free webinar concerning current challenges and opportunities for green public policies and their influence on public procurement markets in the USA and the European Union, with discussions with leading specialists from both sides of the Atlantic.
Agenda and Speakers:
Prof. Jerzy Buzek, Member of the European Parliament, President of the European Parliament in the years 2009–2012, Prime Minister of the Republic of Poland in the years 1997–2001
New Green Deal and Just Transition Fund
Prof. Alexandra Harrington, University of Albany School of Law, Assistant Director of the Global Institute for Health and Human Rights (USA), Adv.Magdalena Stryja, University of Silesia in Katowice, Just Transition Research Group (Poland)
Intersections between Global Governance Regimes and Climate Change Law
Prof. Christopher Yukins, George Washington University, Washington D.C. (USA)
The U.S. experiences with the support of environmental aspects in government contracting.
Dr Wojciech Hartung – Counsel, Domański Zakrzewski Palinka (DZP) (Warsaw)
European Green Deal and Just Transition Fund reflections on the European Public Procurement legal regime
Adv. Katarzyna Kuzma, DZP, Public Procurement Law Association (Poland)
The support of the green effects in the new Polish Public Procurement Act
Question and Answer Session
Moderator:
Prof. Michał Kania, University of Silesia in Katowice
Speakers Biographies:
Prof. Jerzy Buzek – Member of the European Parliament continuously since 2004, and in the years 2009-2012 – its president. In the European Parliament prof. Buzek is a member of the Committee on Industry, Research and Energy. In 2016, Euractiv recognized him as one of the three most influential people of European energy policy. He was ranked by the Rzeczpospolita daily as the best Polish MEP in 2008 and 2018.
In the years 1997-2001 he served as the Prime Minister of the Republic of Poland; his government carried out reforms of administration, education, health, pensions and mining. Professor Buzek also introduced Poland to NATO and started negotiations on its membership in the European Union. Knight of the Order of the White Eagle.
Prof. Alexandra Harrington – author of the book International Organizations and the Law and the forthcoming International Law and Global Governance: Treaty Regimes and Sustainable Development Goals Interpretation. Alexandra is the Director of Studies for the International Law Association Colombian branch, a member of the International Law Association Committee on the Role of International Law in Sustainable Natural Resource Management for Development, and an adjunct professor at Albany Law School. She also provides guest lectures globally on topics related to international law, environmental law, global governance and sustainable development. Prof. Harrington has served as a consultant for entities such as the Commission for Environmental Cooperation of the North American Agreement on Environmental Cooperation and UN Environment.
Prof. Harrington’s publications address a variety of fields relating to international law, including environmental law, legal issues relating to climate change, natural resources regulation, international organizations, international human rights law, international child’s rights, international trade law, corporate social responsibility, and criminal law. Prof. Harrington routinely presents her works at domestic and international conferences.
Adv. Magdalena Stryja performs the function of the Chair of the Science and Development Committee with the District Bar Association in Katowice. She is Poland’s first member of the international organization: Centre for International Sustainable and Development Law. Magdalena is a member of the interdisciplinary Polish Research Group Just Transition, which aims at developing and implementing the concept of fair transformation with a view to transforming the economy, lifestyle, culture and social values in Silesia in the face of climate change. She is a member of the University of Silesia-based Bioethics Research Group dealing with legal and bioethical aspects of medicine and animal protection as well as environmental and climate protection. She is also a member of The Labour Law and Social Policy Research Group at the Institute of Legal Sciences at the University of Silesia.
Magdalena delivers lectures on labour law and social policy. Her research interests also encompass legal aspects of climate change, including the social aspects of retraining employees.
Prof. Christopher Yukins – serves as co-director of the government procurement law program at George Washington University Law School, and has taught there on contract formations and performance issues in public procurement, bid protests and claims litigation, state and local procurement, Anti-corruption issues, foreign contracting, procurement reform, and comparative and international law. He has testified on issues of procurement reform and trade before committees of the U.S. Congress and the European Parliament. He is a visiting professor at the Université Paris Nanterre, where he lectures annually, and has taught a week-long course on procurement issues and corruption at the International Anti-Corruption Academy (Austria).
Prof. Yukins has spoken as a guest lecturer at institutions around the world, and he was a contributing editor to the UN Office on Drugs and Crime manual, Guidebook on Anti-Corruption in Public Procurement. He is an active member of the Public Contract Law Section of the American Bar Association, and is a member of the Procurement Roundtable, an organization of senior members of the U.S. procurement community. He is a faculty advisor to the Public Contract Law Journal, is a member of the editorial board of the European Procurement & Public-Private Partnership Law Review and is on the advisory board of The Government Contractor. He has worked on a wide array of international projects on capacity-building in procurement, and he was an advisor to the U.S. delegation to the working group on reform of the United Nations Commission on International Trade Law (UNCITRAL) Model Procurement Law. Together with his colleagues, he runs a colloquium series on procurement reform at The George Washington University Law School. In private practice, Professor Yukins has been an associate, partner and counsel at leading law firms; he is currently counsel to the firm of Arnold & Porter.
Dr Wojciech Hartung – counsel at the Polish law firm Domański Zakrzewski Palinka, advises on infrastructure projects carried out under the Public Procurement Law or using partnership structures, i.e. PPP, concessions and other forms of co-operation between public and private partners, specialises in public-public cooperation (in-house procurement) issues. They have been addressed in his PhD dissertation on the “Independence of a basic local government unit upon the organisation and provision of municipal services in light of European law and Polish legal order’’. Wojciech is a Member of a working group set up by the Ministry of Development to review the law on public-private partnerships and to draw up a government policy in this respect. Until March 2009 dr Hartung acted as the Director of the European Union and International Co-operation Department at the Public Procurement Office. Wojciech was also Polish representative on the European Council’s Working Group on Public Procurement and on the Advisory Committee for Public Works Contracts set up by the European Commission. Wojciech is a member of Public Procurement Law Association.
Adv. Katarzyna Kuzma – partner at the Polish law firm Domański Zakrzewski Palinka and heads the team providing services relating to Polish and European public procurement law. She has extensive experience in advising both public and private entities operating in various sectors (including construction and engineering services, environmental protection, pharmaceutical and energy) on projects carried out in the traditional form (public procurement) and those based on partnership structures in the broad meaning of the term (PPP, concessions).
The advice Katarzyna renders covers all stages of procedures (including representation before the National Appeal Chamber and common courts) and performance of public contracts, including inspections and financial adjustment procedures. She actively promotes implementation of compliance systems in the area of public procurement, with special focus on bid rigging. Katarzyna is also the Vice-President of the Public Procurement Law Association.
Michał Kania – professor at the Silesian University in Katowice, legal adviser with 15 years of experience, member of the Just Transition Research Group. Michał is also an active member of the Public Procurement Association and legal consultant with the specialization in Public-Private Partnership and public procurement law, Visiting Fulbright Scholar at the George Washington University (2018-2019), Fellowship of German Academic Exchange Service at the Ludwig Maximilian University in Munich (2017), speaker at the Polish and international conferences, initiator and lecturer at the Postgraduate Studies in Public-Private Partnership and Public Procurement at the Silesian University in Katowice, independent adviser for the Polish Ministry of Development for the concept of the new Polish Public Procurement Act, adopted on 11 September 2019, plenipotentiary of the President of the University of Silesia for PPP projects.
This year has seen an unprecedented rise in trade barriers – both direct and indirect – involving public procurement. Join a free 60-minute webinar sponsored by George Washington University Law School’s Government Procurement Law Program, to hear leading experts on emerging trade barriers affecting grants and procurement.
These measures, driven in part by the broadening role of foreign firms in the U.S. government’s supply chain, and in part by the specific challenges posed by Huawei and other Chinese high-technology firms to U.S. security, impose substantial compliance burdens on contractors and grantees in U.S. procurement. For many in the U.S. government, it would be “nothing less than madness to allow Huawei to worm its way into one’s next-generation telecommunications networks,” and Section 889 and parallel initiatives (such as the “Clean Network” initiative) are intended to shield the United States.
In practical terms, the Cybersecurity Maturity Model Certification (CMMC) and Section 889 may make it very difficult – if not impossible – for foreign vendors to compete in U.S. markets
In practical terms, the CMMC and Section 889 may make it very difficult – if not impossible – for foreign vendors to compete in U.S. markets, raising questions under the United States’ international free trade agreements and reciprocal defense procurement agreements. (The vulnerabilities in the U.S. government’s information technology supply chain are the subject of an upcoming GAO report, and a separate private-sector study is assessing barriers to procurement trade generally.) Although the Trump administration, bowing to industry pressure and the Defense Department’s concerns, extended the Section 889 implementation deadline to September 30, 2020 for Defense Department contractors, the compliance burdens remain quite serious.
Donald Trump in Ypsilanti, Michigan
Trump Administration’s “Buy American” Order for Medicines – and the Biden Plan: From its start, the Trump administration has adopted a broad range of “Buy American” measures, including a recent change to federal grants rules which says that grantees should, when possible, buy U.S. goods. Although even some supporters have criticized the Trump administration’s “Buy American” efforts as ineffective, Trump’s protectionist rhetoric has undoubtedly affected the international debate over free trade in procurement.
In response to the COVID-19 pandemic, on August 6, 2020 President Trump issued an executive order for “on-shoring” the manufacture of essential medicines bought by the U.S. government. The order calls for limiting U.S. market-opening commitments under the World Trade Organization (WTO) Government Procurement Agreement (GPA) and free trade agreements – a process which could trigger months of renegotiations with trading partners and result in limiting U.S. access to foreign markets. Jean Heilman Grier, former procurement negotiator at the Office of the U.S. Trade Representative, has written on the Executive Order.
Impact of the Pandemic: Of course controversial trade measures have been driven in part by the COVID-19 pandemic.
By Rosario “Charo” Gutierrez (USAF)
Robert Anderson co-wrote an article with Anna Mueller of the WTO on the constraints and flexibility afforded by the WTO’s Government Procurement Agreement. For their part, co-moderators Laurence Folliot Lalliot and Christopher Yukins co-wrote a piece in Concurrences, the competition periodical, on the pandemic’s lessons for international markets, including especially the pandemic’s disruptive effect on protectionism. While the pandemic exacerbated economic nationalism and trade barriers, the pandemic also pointed up the sometimes mortal dangers of cutting off international supply chains.
European Trade Measures: Roland Stein (of the BLOMSTEIN firm, Berlin) and Professor Michal Kania (University of Silesia/Poland) will discuss important developments in access to European procurement markets:
White Paper — Possible Exclusion of Subsidized Foreign Firms: Following on 2019 guidance from the European Commission to member states on abnormally low bids from vendors from outside the European Union, in June 2020 the Commission issued a white paper on “levelling the playing field as regards foreign subsidies.” The white paper launches an EU-wide consultation on how to address foreign subsidies which distort EU procurement markets; among other measures under consideration, member states might exclude vendors that receive foreign subsidies. The white paper notes that the EU continues to assess the proposed International Procurement Instrument, a measure which has received cautious support from European industry and which would allow member states to raise new barriers against vendors from nations (including potentially the United States and China) that do not cooperate in EU efforts to open procurement markets.
Exclusion for Non-Domestic Content: Article 85 of EU Directive 2014/25/EU, which governs utilities’ procurement, says that a bid may be rejected if more than 50% of the products being offered would come from nations that have not entered into a free trade agreement with the EU (such as China) – a rarely enforced restriction which, as codified in German law, was recently applied by an important German court, the Brandenburg higher regional court.
The Government Procurement Review, one of the leading compilations of procurement laws from around the world, is now available in its 8th edition. Congratulations to the editors, Jonathan Davey and Amy Gatenby of the law firm of Addleshaw Goddard.
Amy Gatenby
The volume, published annually, covers procurement law from fourteen countries and the European Union, including reviews by leading procurement practitioners from Australia, Austria, Belgium, Brazil, Canada, the Dominican Republic, Germany, Greece, Italy, Mexico, Russia, Switzerland, the United Kingdom and the United States.
For further information on foreign and international sources on public procurement law, please see the research guide prepared by GW Law’s government procurement research librarian, Mary Kate Hunter.
The Senate Armed Services Committee report to accompany the pending National Defense Authorization Act (NDAA) for Fiscal Year 2021, Senate Report No. 116-236, calls for a Defense Department report on agency-level bid protests. This follows on the Administrative Conference of the United States project (supporting materials on this website) to study agency-level bid protests. Both the House (H.R. 6395) and Senate (S. 4049) versions of the pending NDAA have passed, and the legislation will now likely proceed to conference to reconcile the two bills.
The Senate report states:
Repeal of pilot program on payment of costs for denied Government Accountability Office bid protests (sec. 846)
The committee recommends a provision that would repealsection 827 of the National Defense Authorization Act for Fiscal Year 2018 (Public Law 115-91), which required the Secretary of Defense to carry out a pilot program to determine the effectiveness of requiring contractors to reimburse the Department of Defense (DOD) for costs incurred in processing covered protests. The committee finds that the pilot program is unlikely to result in improvements to the bid protest process given the small number of bid protests captured by the pilot criteria and lack of cost data.
The committee continues to support efforts to improve the handling of bid protests. In support of such efforts, the committee directs the Secretary of Defense to undertake a study of the processes for agency-level bid protests. The study should evaluate the following for agency-level bid protests:prevalence, timeliness, outcomes, availability, and reliability of data on protest activities; consistency of protest processes among the military services; and any other challenges tha affect the expediency of such protest processes. In doing so, the study should review existing law, the Federal Acquisition Regulation, and agency policies and procedures and solicit input from across the DOD and industry stakeholders. The study should also include recommendations to improve the expediency, timeliness, transparency, and consistency of agency-level bid protests.
Not later than September 1, 2021, the Secretary of Defense shall provide the congressional defense committees with a report detailing the results and recommendations of the study, together with such comments as the Secretary determines appropriate.
In this piece in the Government Contractor, Christopher Yukins and Kristen Ittig reviewed key issues under Section 3610 of the CARES Act, a provision which allows agencies to modify existing contracts, under appropriate circumstances, to reimburse contractors for leave paid to employees during the COVID-19 pandemic. 62 Government Contractor para. 156 (June 10, 2020).
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.
Department of Homeland Security – Best Practices Guide on “Combating Trafficking in Counterfeit and Pirated Goods”
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.
