July 22, 2018

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GSA Unveils Plan for Commercial Online Shopping Portal

Following instructions from Congress to create a new online shopping system leveraging existing commercial practices, the General Services Administration (“GSA”), in coordination with the Office of Management and Budget (“OMB”), has released an implementation plan (“Plan”) to begin e-commerce purchases by 2019.  As discussed in a previous blog post, GSA’s Plan is a first step toward implementing Section 846 of the National Defense Authorization Act for FY 2018, which requires GSA to develop “e-commerce portals” – essentially online shopping sites – for commercially available off-the-shelf (“COTS”) item procurements.

Section 846 sets out three phases for the e-commerce program.  Phase I requires the development of a plan for implementing the commercial e-commerce portals program, including initial recommendations regarding “changes to, or exemptions from, [existing procurement] laws.”  Section 846(c)(1).  GSA’s announcement completes Phase I.  GSA will now proceed to Phase II, which will involve market analysis, “communications with potential e-commerce portal providers on technical considerations of how the portals function,” and consideration of impacts on other procurement programs.  Section 846(c)(2).  Significantly, at the conclusion of Phase II, GSA and OMB will be required to submit a report identifying “recommendations for any changes to, or exemptions from, laws necessary for effective implementation of this section,” as well as a report on “considerations pertaining to non-traditional Government contractors.”   Id.

GSA’s release of the Plan comes two months after it held a town hall to discuss options for the e-commerce program. The Plan emphasizes that this type of “stakeholder engagement . . . has deepened the knowledge of the commercial practices, the industry perspective, and the intersection of Federal acquisition laws and regulations.”  As GSA and OMB now move forward with Phase II of the program, they will likely again seek public input on their plans.

Possible Structure of e-Commerce Portals

GSA’s Plan identifies three potential types of e-commerce portals, each with different cost incentives and ordering structures.

  • E-Commerce Model:  Under this model, a vendor would use its existing online platform to sell its own proprietary or wholesale products to the government.  The vendor would be responsible for pricing and delivery.
  • E-Marketplace Model:  This model would create online marketplaces managed by a contractor, through which both proprietary products and the products of other vendors could be sold to the government.  Vendors would be responsible for fulfilling orders, although GSA held open the possibility that portal providers could be required in certain cases to fulfill orders.
  • E-Procurement Model:  This model calls for a contractor to provide an online marketplace – a so-called “portal of portals” – through which other vendors could then sell goods to the government.  The marketplace provider would not sell goods and would not be responsible for fulfilling orders.

GSA noted that under an E-Commerce model, competition may be “limited,” with “little to no horizontal price comparison.”  But under either an E-Marketplace or E-Procurement model, competition would increase.  An E-Marketplace model would promote “increased competition” by providing “access to both proprietary and third-party products.”  Meanwhile, an E-Procurement model would “allow[] for a larger supplier pool and horizontal price comparisons.”  GSA observed that the E-Procurement model contemplates “tiered subscription fees” that “generally increase as the volume of transactions on the platform increase,” although transaction fees could be capped.

GSA stated that it anticipates using an “appropriate mix” of these three models.  GSA also commented that it “anticipates a direct contractual relationship only with commercial e-commerce portal providers [and not with the suppliers that sell through the portal providers].”  At the same time, however, GSA stated that it “may consider” using an indefinite-delivery indefinite-quantity (“IDIQ”) type of contracting vehicle “that allows GSA to have a relationship with both a portal provider and suppliers that sell on the portal platform, if such strategy might generate greater efficiencies for products that are identified as suitable for the program.”  Observers should expect more information regarding the proposed contract structure of the commercial e-commerce portal program, as it is not clear from this brief reference how this proposal would align with current GSA practices.

Recommended Legislative Changes

In addition to setting out a Plan for e-commerce portals, GSA also issued an accompanying legislative proposal recommending that Congress make a variety of changes to help GSA and OMB implement the e-commerce mandate of Section 846.  Notably, GSA stated that its three-year timeline is contingent on Congress implementing these recommendations.

First, GSA proposed raising the micro-purchase threshold to $25,000 for purposes of the e-commerce portals program, an increase from the current thresholds of $5,000 for the Department of Defense and $10,000 for civilian agencies.  In theory, this proposed increase of the micro-purchase threshold to $25,000 is intended to promote commercial buying practices, as purchases beneath the micro-purchase threshold are exempt from many Government-specific requirements.

Second, GSA also proposed that Congress amend Section 846 to streamline certain statutory competition requirements.  Specifically, GSA proposed an amendment stating that procurements using Section 846 procedures would be deemed competitive, “so long as participation is open to all responsible sources and orders and contracts using these procedures result in the lowest overall cost alternative.”

Finally, GSA proposed that Congress amend the term “commercial e-commerce portal” in Section 846 to mean

[A] commercial solution providing for the purchase of commercial products aggregated, distributed, sold, or manufactured via an online portal.  The term does not include an online portal managed by the Government for, or predominantly for use by, Government agencies, unless such portal is designed for the purpose of accessing multiple other e-commerce portals, including commercial portals, via a single view for the purchase of commercial products.  (proposed amendment emphasized).

This revision appears to be aimed at broadening the definition of “commercial e-commerce portal” to encompass the “portal of portals” concept embodied by the E-Procurement model, discussed above.

Three-Year Plan for Phasing in e-Commerce Portals

GSA’s Plan sets out a three-year schedule for developing this new system.  Among other things, for Fiscal Year 2018 GSA plans to:

  • Conduct research and have meetings with stakeholders in industry and within government.
  • Determine what types of items would be “in-scope” for purchase on e-commerce portals.
  • Develop “options for an initial proof of concept.”

GSA’s effort to determine what items are “in-scope” is somewhat ambiguous.  It could be read to suggest that certain COTS items may be excluded from e-commerce portals, though it may also reflect GSA’s “phased approach for implementation” and the possibility of a product or category based phase-in.  For Fiscal Year 2019, GSA further plans to

  • Assess the impact of e-commerce portals on the Multiple Award Federal Supply Schedules, the National Supply System, small businesses, socioeconomic programs, and other preference programs.
  • Develop data ownership and cybersecurity rules.
  • Conduct an acquisition for an initial rollout of e-commerce portals.
  • Test the e-commerce systems with “a limited audience.”

Finally, in 2020, GSA plans to

  • Expand and scale rollout of the e-commerce systems.
  • Make final policy recommendations.
© 2018 Covington & Burling LLP

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About this Author

Susan B. Cassidy, Government Contracts Attorney, Covington Burling, Law Firm
Partner

Susan Cassidy advises clients on the complex rules and regulations imposed on government contractors, with a special emphasis on the defense and intelligence sectors. She combines a sophisticated knowledge of the FAR and DFARS with the practical insight gained from senior in-house positions at both dedicated defense and commercial item contractors.

Ms. Cassidy conducts internal investigations for clients on wide array of government contracts and national security compliance issues. She regularly advises on FAR mandatory disclosure obligations and represents...

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Jennifer Plitsch, Litigation attorney, Covington
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Jennifer Plitsch is co-chair of the firm’s Government Contracts practice group where her practice includes a wide range of contracting issues for large and small businesses in both defense and civilian contracting. Her practice involves advising clients on contract proposal, performance, and compliance questions as well as litigation, transactional and legislative issues. She has particular expertise in advising clients on intellectual property and data rights issues under the Federal Acquisition Regulations and Bayh-Dole Act, and has significant experience in negotiation and compliance under non-traditional government agreements including Other Transaction Authority agreements (OTAs), Cooperative Research and Development Agreements CRADAs, Cooperative Agreements, Grants and Small Business Innovation Research agreements.

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Mike Wagner, Covington, government contracts lawyer
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Mike Wagner helps government contractors navigate high-stakes enforcement matters and complex regulatory regimes.

Mr. Wagner works closely with contractors across a range of industries to achieve the efficient resolution of regulatory enforcement actions and government investigations. He also conducts internal investigations of potential compliance issues, advises clients as to FAR mandatory disclosure requirements, and regularly represents clients in suspension and debarment proceedings.

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Evan Sherwood, Covington Burling Law Firm, Government Contracts Attorney
Associate

Mr. Sherwood helps clients solve problems arising from government contracts. He advises government contractors on a wide range of matters, such as compliance with procurement regulations, contract formation, and government investigations. Mr. Sherwood also represents clients in bringing and defending bid protests, including challenges to the terms of competitions.

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