NDAA Section 846’s Online Marketplace Provisions – Concerns and Final Analysis

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

We’ve been taking a look at new compromise language released about the creation of an online marketplace for DOD COTS purchases.

In this final post, we’ll look at some of the concerns people have about the program. The first is about data security. Another improvement over the original Section 801 language is the way the compromise bill deals with the treasure trove of data to which the portal providers will have access.

The previous Thornberry language precluded the online marketplace provider from selling or giving those data to third parties, but imposed no constraint on the provider’s use of those data for its own strategic purposes. Consequently, if a provider also were a seller, the provider could have used sales data from its competitors strategically to tailor its own offering and price its own products.

The new language precludes this by requiring the portal provider to agree “not to use for pricing, marketing, competitive, or other purposes, any information related to a products from a third-party supplier featured on the commercial e-commerce portal….” While this is improved language, it will not be easy for GSA to police this requirement. No doubt, the GSA OIG already is thinking through how it can help.

Notwithstanding the many improvements in the Section 846 language, the extensive breadth of the new program continues to concern many.

  • First, the e-commerce portals will accommodate purchases up to the Simplified Acquisition Threshold. While more limited than the original Section 801 language, this still will direct a significant volume of DoD COTS purchasing into the hands of commercial entities.
  • Second, while the language is focused on DoD purchasing, it expressly states the portal must be able to accommodate Government-wide purchasing. In other words, DoD is just the starting point. We can expect to see the program expanded to all agencies over time.
  • Third, and perhaps most importantly, a companion provision of the NDAA provides that if a product previously has been purchased through a commercial items vehicle (e.g., a FAR Part 12 contract), it cannot be purchased via a more structured procurement (e.g., a FAR Part 15 contract) in the future without jumping through certain hoops.Indeed, the text expressly states that monies given to DoD may not be used to fund a FAR Part 15 procurement if the products being procured previously were purchased through a FAR Part 12 procurement. This new language appears to be designed to make it extremely difficult for DoD (and other agencies in the future) to circumvent the new portals by creating full and open commercial items competitions.

On the topic of commerciality, it is worth noting that, in addition to the e-commerce portal provisions of the compromise bill, the NDAA also includes a number of provisions designed to expand the Government’s use of commercial items purchasing vehicles and expand the number of products qualifying as commercial items.

These new provisions direct DoD to undertake a broad review of its current regulations, contracts, and subcontract flow-down terms to get rid of non-commercial clauses and provisions that have crept into DoD programs over the years. Indeed, the new language directs the Defense Acquisition University to develop new, meaningful training for COs to help them master commercial items acquisitions. This is a welcome development.

Finally, in addition to the positive changes for large businesses, small businesses also have something to cheer about in the compromise language. Section 846 makes clear purchases through the new e-commerce portals are deemed purchases from prime contractors such that the ordering agencies still get their small business purchasing credit.

The language also expressly states that agencies still can set aside their purchases for small businesses as they did before. (These provisions also suggest small business designation will be one of the several attributes portal providers will be required to display on their websites.)

In the end, the new language is a significant improvement over the original House proposal, but it leaves many questions unanswered. Section 846 directs OMB and GSA to fill in those blanks. And it provides for multiple reviews (including a detailed, phased-in GAO review) of how well OMB and GSA do their job.

Time will tell what the new program looks like. But we can be certain of one thing at the moment. The commercial items procurement landscape will change. It just may take longer than Rep. Thornberry had hoped.


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