An Analysis of NDAA Section 846’s Online Marketplace Provisions

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This blog post series was created with materials from our lobbying expert, Tonya Saunders at Washington Premier Group

There has been a lot of speculation about the future of commercial items purchasing within the Federal Government since Representative Mac Thornberry circulated his “Section 801” proposal to hand over the bulk of DoD COTS (commercial-off-the-shelf products) purchasing to one or two existing online commercial marketplaces. Industry groups mobilized, companies called their legislators, and the media contributed several stories describing the widespread criticism of the House NDAA proposal. To the surprise of many, however, the Senate seems to have heard industry’s concerns or at least some of them.

The compromise language that just emerged from the House/Senate Conference, designated Section 846 of the 2018 NDAA, reflects significant improvements from the original Thornberry bill. While the new compromise language still moves the Government significantly down the path toward the creation of an online marketplace, which almost certainly will change the way DoD (and likely other federal agencies) will purchase COTS items, the new approach resolved many of the most problematic provisions of the original House bill.

Unlike Section 801, which contemplated a quick, non-competitive award to an existing commercial marketplace provider to handle DoD COTS purchasing, Section 846 directs OMB and GSA to create a phased-in implementation plan and schedule to develop, evaluate, and implement the new online marketplaces (now called “e-commerce portals”) over the better part of three years.

The new language identifies a three-phase approach:

  •  Phase 1 gives OMB and GSA 90 days to develop an implementation plan and schedule.
  •  Phase 2 gives OMB and GSA a year after the plan/schedule is complete to conduct market research and to consult with federal agencies, potential e-commerce portal providers, and potential suppliers. Among other things, the “consultation” contemplated in this phase will focus on how current commercial portals function, the standard terms and conditions of such portals, and to what extent the currently-existing portals would have to be modified to meet Government needs.
    This phase will also involve an assessment of data security, consideration of issues of concern to “non-traditional” Government contractors, and a review of the impact of fees charged by portal providers. On the issue of fees, the Conference Report accompanying the compromise language offered this warning to GSA: “The conferees are aware of various fee-based and other business-to-business arrangements to feature products offered by certain vendors in many commercial e-commerce portals. The conferees expect the Administrator to ensure that any contract or other agreement entered into for commercial e-commerce portals under this program preclude such business-to-business arrangements.”
  • Phase 3 gives OMB and GSA two years (from the creation of its Phase 1 plan/schedule) to develop guidance for the use of the portal, “including protocols for oversight” of procurements through the new program.

As OMB and GSA progress through these three phases under the watchful eye of Congress and the GAO, their efforts will be guided by other provisions of Section 846 that differ significantly from Section 801.

In two follow-up posts, we’ll look more closely at how the new language handles who can be a portal provider and how the portals will work, and then we’ll discuss some concerns about this new program.


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