How the House wants to make federal procurement less complex, more competitive

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As the House and Senate go to conference to solve differences in the Defense authorization bill in the next few weeks, the acquisition community will be watching Section 801 of the lower chamber’s bill closely.

That provision is commonly known as the “Amazon” amendment, developed by Rep. Mac Thornberry (R-Texas), chairman of the Armed Services Committee, and would require the General Services Administration to set up more than one online marketplace featuring commercial companies. Agencies could then buy from these online marketplaces the same way average people buy from Amazon.com, BestBuy.com, Walmart.com or any other similar commercial provider.

As the Senate finished its work on its version of the NDAA, that provision was not included amid concerns among industry associations and some Senate staff members.

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“The fact that the Senate didn’t put anything in their version of the NDAA means they have grave reservations, and it means they are also at complete opposite ends of negotiation spectrum,” said one industry expert, who requested anonymity, in order to talk about the controversial provision. “There have been no formal hearings or public discussions or vetting of this provision’s impact. The House folks are just doing it even though it’s a major change in the way agencies will buy in the future.

Multiple emails to Senate Armed Services Committee Chairman John McCain (R-Ariz.) seeking comment on the provision were not returned.

Concerns over Section 801 are not new — with industry raising them as far back as June — but uneasiness rose higher when word spread that Amazon and Deloitte were planning a fundraiser for Thornberry on Sept. 27, where they were asking attendees for donations between $500 and $2,500.

An Amazon spokeswoman said that event has been postponed. The spokeswoman added Amazon routinely holds fundraisers and donates to lawmakers’ reelection campaigns, including hosting or co-hosting 25 events this year.

Industry observers who follow this type of political lobbying and electoral support say a fundraiser like this isn’t unusual and part of building relationships.

But some said if nothing else, the timing of it was suspect, as the NDAA was heading to conference and Thornberry would be a conferee. But the fundraiser has been postponed, so it becomes more of a footnote to the larger discussion of Section 801.

Who was behind 801?

There are serious disagreements over who is responsible for the provision and why it may go governmentwide.

Industry sources say the strong rumor is Amazon played a huge role in working with House Armed Services Committee staff members to create the provision.

But a senior staff member of the House Armed Services Committee emphatically denied Amazon came up with the provision.

“The idea for Section 801 came from conversations the committee staff had with DoD. It did not originate in the private sector and it didn’t come from Amazon,” the staff member told Federal News Radio. “There may be people who will lose out in this new construct that offers real competition, so they are resorting to whatever tactics to end-run it. But the whole point of the provision is to inject actual real competition into the system instead of government-generated faux competition.”

The aide added the committee issued the draft NDAA six weeks before the markup to generate feedback, and spent the previous year exploring how such a provision would work.

A second HASC staff member said the idea for the provision came from DoD, saying general officers were frustrated with the current procurement process and the time it takes to obtain goods and services for the warfighters.

When pressed on who in DoD asked for the language, the staff member wouldn’t say, but did confirm it came from the acquisition community.

Industry sources, however, say there are some parts of the military that are not in favor of the provision. One potential signal of the Pentagon’s concerns is the somewhat expedited transition of DoD’s EMALL to FedMall, an online marketplace that aims to streamline the registration, ordering and research processes.

Additionally, the rumor gained momentum because HASC members visited Amazon in Seattle to understand their business model, but didn’t take field trips to any other companies. The staff member confirmed the visit to Seattle, and said there wasn’t time for other visits, but the committee met with several other similar companies.

One industry source said the way the language is written, some companies like Granger may not be eligible for a contract. Companies also are concerned about getting into a situation where the only platform for DoD to buy from is Amazon, and how Amazon would then use the data.

Implementation is the key

Jon Etherton, a former Hill staff member and now president of Etherton and Associates, said while the inclusion of commercial online marketplaces in federal acquisition would be a major change, companies and agencies shouldn’t get too stressed about it.

“Everyone likes the concept, so it’s just a question of how do you work through the details to make it compatible with government procurement and that sort of thing. It’s not an either-or situation,” Etherton said. “I think it will be an issue where we will work out a lot of details during implementation, but I believe that we will see something in the final bill at the end of the day.”

Etherton added GSA will not just “flip a switch” to get the marketplaces stood up.

Part of the issue for industry is HASC hasn’t been clear in how the marketplaces would work.

The HASC staff member said the committee has improved the provision since they first introduced it.

The staff member pointed to the expansion of the provision governmentwide, the language asking for more than one marketplace and clarifying it so it could work for all types of business models.

Additionally, the committee made some explicit additions to ensure agencies met governmentwide requirements and goals around small businesses.

But that’s the rub in this discussion. HASC wants to remove complexity and ensure “real competition” in federal procurement, but the policy and regulations around small business goals, or Buy American or the Berry amendment or the Truth in Negotiations Act (TINA) are part of why federal acquisitions are complex.

The HASC staff member said the core set of statutes that agencies and vendors comply with today will not change under this new model. The provision would require GSA to provide information on those kinds of products in the online portal that satisfy those laws. The staff member added agencies can fundamentally still buy American-made goods without the hassles of the current procurement model.

Industry experts question how GSA can make that happen without the costs of compliance driving up prices, like many say happens on the GSA Schedule and other federal procurement vehicles.

“If I go to Amazon or Walmart or Granger, how can I validate the Trade Agreements Act or the Small Business Act? How can I make the determination about the size of the company or the source of product or if the products continue to be eligible for purchase by the government?” said another industry source. “How does GSA Schedule 70 fit in with this concept? If a vendor has to be compliant with the FAR on Schedule 70 and not on a commercial marketplace, that scares the government. And why would those rules apply if you can buy the same commercial products on GSA schedule or other government vehicles, if they don’t apply to the commercial marketplace?”

Why not improve GSA?

The other issue that many experts bring up is why not improve the GSA schedules or other vehicles instead of imposing new approaches that may or may not work.

The HASC staff member said the goal is to give agencies more options, particularly one that will drive competition and innovation.

The staff member said the online marketplace concept taps into the existing free market, where agencies could buy high-quality products at less expensive prices and have access to more goods. The staff member also said this approach also improves transparency and accountability because, through online e-commerce portals, agencies will be able to do so much more spend analysis, understand what they’re buying, how they are buying it and that will lead them to make smarter decisions.

Etherton said the government has to move more toward the commercial marketplace and this approach is a potential candidate.

“One of the things that I come back to is even the folks who are most concerned about different aspects of the provision say conceptually they are in agreement that the government needs to buy more commercially. So at the end of the day, that’s where we have to end up,” he said.

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