Delivering for Best-in-Class Wholesaler-Distributors
June 25, 2019

The Fiscal Year 2018 National Defense Authorization (NDAA) bill was enacted on December 12, 2017 (PL 115-91). The provisions included in Sec. 846 (“Procurement Through Commercial E-Commerce Portals”) restructured the process by which Federal agencies acquire more than $50 billion in commercial off the shelf (COTS) products annually. The General Services Administration (GSA) is directed to establish a program for their procurement through commercial online e-commerce portals.  GSA is to “carry out the program … through multiple contracts with multiple e-commerce portal providers …” Implementation of the program is to occur in three phases over a period of two years.

In the spring of 2017, NAW organized its Online Procurement Working Group (“NAW Working Group”) comprised of private sector businesses which sell commercial products to federal agencies. Its purpose is to evaluate proposals to implement the Sec. 846 program and offer advice grounded in commercial and e-Commerce expertise to procurement professionals and to policy makers both on Capitol Hill and in the Executive Branch.

GSA is currently in Phase II, which is focused on market research via a proof of concept to support its implementation guidance for government wide e-Commerce portals envisioned by Phase III. Yet no Congressional oversight hearings have examined the program, either prior to or subsequent to its enactment. As GSA is now well into Phase II of the law’s three-phase process, further implementation by GSA or any legislative action should await a studied review by the Congress.

To date, Sec. 846’s implementation challenges several core principles – adhering to the law’s direction, best serving the government customer, fair opportunity for small and large businesses and that decisions be based on public comment and accompanied by reasoned explanations. Preeminent concerns to NAW Working Group members include:

  • We Support Vigorous Competition, Not a Single Marketplace Provider

NAW Working Group members support vigorous competition at every level. To ensure broad choice and competitive pricing, the law mandates the government pursue “multiple contracts with multiple e-commerce providers.”

With no explanation why, GSA’s path portends that its Phase III implementation guidance will solely embrace the E-Marketplace Model. This directly conflicts with the law’s direction that each viable model be tested and assessed.

  • Fair Access to the Portal Best Serves the Government

Access must be fair and promote competition and choice among vendors. Access by third-party suppliers to the portals and their placement on those platforms are critical to genuine opportunity to compete for the government customer.

  • Seller’s Data Must Be Protected – Proprietary Information/Transactional Data

Sec. 846(h) limits a portal’s ability to use proprietary information/transactional data derived from third-party suppliers. Protecting proprietary information and transactional data with clear and enforceable standards underlines Sec. 846’s credibility as a modern marketplace upholding innovation and investment.

  • Essential and Complex Product Lines Should be Exempt

Healthcare and IT products present recognized supply chain vulnerability for which industry has committed significant investment to ameliorate. Yet GSA has not excluded healthcare and IT COTS items where risks are real and meaningful from its proof of concept. The result will endanger the patient that the product is assisting in healing or will expose broader information systems to counterfeit and cybersecurity assault (i.e., malware etc.).

  • Product Integrity and Supply Chain Security

The current E-Marketplace environment profiles have no protections against and are susceptible to counterfeit/grey market products. Platform owner responsibility is explicitly absent. Sec. 846 implementation appears in direct conflict with the law’s direction that compliance and policy obligations as to counterfeit and sham products, currently enforced by GSA in its Multiple Award Schedule Program, be addressed and considered.

In the 116th Congress, NAW arranged and participated with members of our working group in many meetings on the Hill with key Committee and Member staff.  On June 13, 2019, we were successful in having language included in the House FY’20 NDAA that directs the GSA to conduct the upcoming pilot with multiple e-commerce models, not just the Amazon model.

While our efforts have been successful in the House, the battle continues in the Senate as they consider S. 1790, their FY’20 NDAA legislation.  NAW urges the Senate to also oppose GSA’s legislative request to increase the Micro-Purchase Threshold from $10,000 to $25,000 and to concur in the House Armed Services Committee’s direction that GSA test all three e-commerce models.