Contractors worry e-commerce portals could create ‘parallel compliance’ models

The General Services Administration is continuing with plans to create e-commerce portals for federal procurement, hosting its second town hall meeting with industry stakeholders late last week.

And while those stakeholders expressed overall support for the initiative, some were concerned that the policy GSA is designing could create a diverging compliance structure from its multiple award contracts, which could cause some tough choices for businesses.

The agency is in the middle of a three-phase plan to craft a system of portals that will allow officials to capitalize on the potential cost savings of buying from competitive e-commerce retailers like Amazon and others.

The first phase included several recommendations to Congress, among them, raising the threshold for micropurchases in the portals from the current levels of $10,000 for civilian agencies and $5,000 for the Department of Defense to $25,000 overall.

GSA officials said raising the micropurchase threshold would allow agencies to effectively buy through the portals using commercial practices as part of a simplified acquisition process while also addressing federal buying requirements, like considering AbilityOne and designated small business contractors for procurements.

But the concern among some in the contracting realm is that the move would create two “parallel” systems of compliance forcing companies to weigh the costs of navigating both.

“It really is a big deal for companies because they have to make decisions about compliance requirements,” said Roger Waldron, president of Coalition for Government Procurement. “So if there are compliance requirements in one channel and they don’t exist in another channel, do they stay in the channel where they have compliance requirements and increase costs and lower margins? They are going to be making those kinds of business decisions ultimately.”

When asked in the Thursday meeting about the possible impact of creating differing compliance systems for e-commerce and traditional multiple-award contracts, GSA officials said they are still weighing how to design the policies for the portals and would be testing the new micropurchase threshold in a proof of concept pilot sometime next year.

“We are still trying to determine if this is more of an [indefinite delivery/indefinite quantity] type of relationship or is this something else,” said Jeffery Koses, senior procurement official in GSA’s Office of Governmentwide Policy. “It’s a fair question. I don’t know if we have all of the answers at this point.”

Matthew Blum, associate administrator for the Office of Federal Procurement Policy in the Office of Management and Budget, said contractors selling on GSA’s contract schedules today are already familiar with the complexity of multiple regulations affecting business. But the pilot could spotlight the need for more consistent acquisition rules.

“This could become a very powerful pilot,” he said. “This proof of concept work that we do in this space to demonstrate — along with some of the feedback that you give us on the inconsistencies with customer and commercial practice — that if we use this successfully, the benefits and efficiencies that could come from making changes in this pilot, this helps us and hardens us to move forward with our existing program so we have consistency and our rules are more geared toward the nature of what we are buying.”

Waldron told FedScoop that he supports GSA’s open and transparent process in trying to craft the e-commerce portals, but some of the proposed micropurchase changes could easily be extended to existing contract vehicles.

“Right now, it seems to me, that there are opportunities as parts of GSA to streamline what they already have,” he said. “There’s really no reason why they couldn’t be asking for an increase in the micropurchase threshold for pre-existing contracts, multiple award contracts, as well as initiative if you want to push spend under management and using preexisting contract vehicles.”

Waldron added that there remains a lot of complexity to sort out regarding the role of third-party suppliers selling on an e-commerce platform, the role of platforms that serve as providers and suppliers and how the e-commerce contracts will comply with the Trade Agreements Act requirements.

“There are all kinds of those moving parts on the parallel universe piece [to be addressed],” he said.

GSA recently issued two requests for information seeking input from industry on the regulations needed for suppliers and providers.