- Section 846 of the 2018 National Defense Authorization Act (NDAA) directed the General Services Administration (GSA) to create a new e-commerce portal for the sale of commercial goods.
- The portal is to come on line in three phases, and the GSA released its Phase 1 implementation plan and schedule on March 16, 2018. The plan is intended to act as a guide over the next couple of years as GSA marches toward implementation of the e-commerce portal.
- Contractors and those hoping to participate in this new portal should continue to monitor the implementation process to ensure they are positioned to take advantage of the opportunities offered.
One of the most closely monitored provisions of the 2018 National Defense Authorization Act (NDAA), Section 846, directed the General Services Administration (GSA) to create a new e-commerce portal for the sale of commercial goods.1 Section 846 established delayed implementation of the new e-commerce portal, which is set to occur in phases that each require distinct action items and submissions. Phase 1 requires the Office of Management and Budget (OMB), in consultation with the GSA, to create an implementation plan and schedule for carrying out the e-commerce portal program. Phase 2 requires OMB and GSA to prepare recommendations for any changes to – or exemptions from – laws necessary for effective implementation of the program within one year of submitting the implementation plan and schedule contemplated under Phase 1. Phase 3 requires OMB and GSA to create guidance for the e-commerce portal program within two years of submitting the implementation plan and schedule contemplated under Phase 1.
GSA released its Phase 1 implementation plan and schedule (the Plan) on March 16, 2018. The Plan is intended to act as a guide over the next couple of years as GSA marches toward implementation of the e-commerce portal. The Plan therefore includes important information contractors should keep on their radars as the new portal is developed, implemented and goes live.
Stakeholder Feedback Reveals Key Themes Ahead of Implementation
First, GSA reached out to stakeholders outside the government and noted certain recurring themes in the feedback it received. These themes included:
- regulation balance (important not to have too many or too few regulations)
- significant emphasis on the valid public policy rationales behind existing procurement regulations
- price should not be the most important factor (look at terms and the total cost of ownership; this is something that has been echoed by the 2018 and 2017 NDAAs)
- transparency in fees and supplier access
- implementation should be in stages and allow access to multiple marketplaces
- security should be sufficient to guard against supply chain and cybersecurity risks
- transition planning should build the case for the value of the new portal and delineates the roles and responsibilities of the involved parties
GSA also sought agency feedback. This included that:
- data ownership associated with the portal should reside with the government
- the portal should be "flexible, dynamic, and iterative to account for a constantly changing environment"
- burdens on contracting staff should be reduced by virtue of the portal
- agencies would need relief from existing policies to utilize the portal
To Implement the Plan, GSA Seeks Greater Flexibility in the Portal Models
Section 846 of the NDAA defined a "commercial e-commerce portal" as "a commercial solution providing for the purchase of commercial products aggregated, distributed, sold, or manufactured via an online portal." Initially, GSA has found this definition to be limiting and is seeking for it to be flexible enough to include the three main provider models that currently predominate the marketplace: E-Commerce, E-Marketplace and E-Procurement.
- E-Commerce models usually only have the vendor's proprietary products on its own online platform.
- E-Marketplace models that can "connect buyers with a portal provider's proprietary products, third-party vendors, or both." Fulfillment can be by the product provider or portal.
- E-Procurement models are essentially software-as-a-service that allows third-party vendors to establish their own marketplace and merely using the software provider to run the underpinnings of the marketplace.
GSA is recommending legislative action to expand the definition in Section 846 to include all three alternatives (stand-alone or in some combination), above.
GSA is Seeking to Fulfill Specific Objectives with the Platform
GSA wants the e-commerce platform to meet specified objectives for identified stakeholder communities. These objectives, outlined in the Plan and detailed below, will guide how the portal is shaped over the next few years.
With respect to government purchasers and the acquisition workforce, objectives include: 1) making it easier to buy commercial off the shelf (COTS) items, 2) realizing confidence that the products offered are the best value because of increased competition, 3) making the user experience similar to consumer experiences outside of the government, and 4) refining transparency and data reporting. On the one hand, these objectives collectively indicate (to the extent it was not already obvious) that the government is going to try and seek a large number of traditional and nontraditional contractors to populate the portal. This likely means limiting the regulations required of sellers on the portal. On the other hand, the need for data reporting will likely mean that agency buyers will get insight into the price similar products have sold for on the portal. The risk in this is that not only are all products not created equal (even if they appear to be very similar), but they also may be subject to different terms and conditions or lifecycles that impact the perceived value. Full information and an apples-to-apples comparison is necessary to ensure that the data can be used effectively.
For industry, the objectives include: 1) making the portal an attractive place to sell items, 2) ensuring transparency, and 3) abating burdens on contractors. While there is no direct conflict with the enabling section of the NDAA, Section 846 required certain burdens remain on contractors (such as domestic preference requirements, where applicable).
Balancing Government Priorities and Regulatory Burdens
GSA also discusses the constant tension in government contracting between making selling to the government as consistent with commercial practices as possible and not sacrificing protections for the government or government-wide policies (such as socio-economic policies, supply chain protections and cybersecurity). GSA purposefully singles out certain policies that must be considered when constructing the portal:
- small business opportunities
- supply chain security
- trade laws
- contracting requirements to buy from certain supplies such as Federal Prison Industries and AbilityOne that "advance key national interests"
It will be interesting where GSA comes out on these priorities. Although it is important to note some contracting requirements were specifically listed in Section 846.
GSA Makes New Legislative Recommendations
As noted above, GSA recommends the adoption of additional legislation for the greatest flexibility in establishing the portal and to allow for greater portal use. Suggested legislation includes:
- Increasing the micro-purchasing threshold to $25,000 coupled with ensuring spend data "is captured and shared across the Government." For the reasons noted above, spend data is not necessarily a panacea when attempting to compare products.
- Update the Competition in Contracting Act to reflect the realities of modern technology and allow for greater flexibility, such as that already is available to GSA under 41 U.S.C. §152(3), that provide ordering procedures are competitive so long as all responsible contractors can be part of a competition and results in the "lowest cost alternative."
- Allow for GSA to have a direct contractual relationship with portal product sellers (and not just the company running the portal). GSA argues this would allow for greater efficiency by entering into indefinite-delivery indefinite-quantity (IDIQ) contracts with sellers. This may be the most transformative of the legislative proposals.
- Update the definition of "commercial e-commerce portal," as discussed above.
Holland & Knight attorneys will, of course, monitor whether these legislative suggestions gain traction.
What's to Come?
In the Plan, GSA also specified steps that are to come over the next three years. Below are important ones for contractors.
- define products or categories of products that would be appropriate to sell on the portal
- begin to understand the impact to existing programs, such as NASA Solutions for Enterprise-Wide Procurement (SEWP) comes to mind
- explore options for an initial proof of concept
- finalize understanding of impact of the new portal to various other programs and preference programs
- identify the government's data ownership and cybersecurity needs and develop rules (consistency with existing FAR and DFARs requirements will be interesting to see)
- conduct an acquisition and draft implementation guidance for the initial rollout
- have an initial rollout of the proof of concept with a limited audience
- review initial rollout and make adjustments
- expand and scale rollout
- make final policy recommendations regarding implementation of the portal
Consistent with Section 846, the Plan lays out a gradual implementation of the new portal and will provide contractors with ample notice of changes in the marketplace. While 2020 is some time away, contractors and those hoping to participate in this new portal should continue to monitor the implementation process to ensure they are positioned to take advantage of the opportunities offered by the new portal. While more complicated and exclusive, the One Acquisition Solution for Integrated Services (OASIS) was no oasis for some companies.
Even though Section 846 was relatively narrow in the categories of products that would be offered (COTS under a certain dollar threshold), GSA will seek (even through legislation) to make the new portal(s) as attractive to government customers and nontraditional contractors as possible. This will, of course, reintroduce the age-old question we have seen for some time: how does the government best balance is socio-economic and self-preservation (such as supply chain and cybersecurity) goals with the need to act more like a commercial buyer? The answer may dictate how much of a game changer the new portal is once it comes on line.