House Armed Services Committee Proposes DOD “Direct Buy” from Online Commercial Sellers

Industry and government have long been at odds while trying to achieve the same thing—better pricing and faster access. The government increases compliance requirements to ensure best pricing practices and industry increases prices to pay for compliance systems. House Armed Services Committee (HSAC) Chairman Mac Thornberry (R-TX) is addressing the DOD procurement process. He is releasing his “stand-alone” acquisition bill this Thursday afternoon, May 18. The stated objectives are to improve procurement transparency, increase technological innovation by reforming intellectual property (IP) ownership rules that stop businesses from avoiding work with the Department of Defense (DOD), and shorten the time it takes for DoD buyers to obtain what they need. Chairman Thornberry has repeatedly criticized the current DOD acquisition process as complicated, inefficient, expensive, and not conducive to innovation.  He has proposed that DoD buyers be permitted to purchase items directly from online marketplaces such as OfficeMax or Amazon and others rather than through the GSA Schedule program.   It will be interesting see how this bill will address procurement data transparency as well as how this will impact the DOD reaching its small business goals.  DOD buyers may be eliminating a lot of small businesses using these commercial ecommerce sites.

Proposed Changes on How DOD Purchases Services & Acquires Commercial Products

This is the third round of Thornberry’s effort to change the method by which DoD procures commercial items.  The first two rounds took a macro approach to the overall issue of DoD procurement. They were shifting procurement authority from the Secretary of Defense to the leadership of the individual branches of service, as well as abolishing the office of the Undersecretary (of Defense) for Acquisition and Technology.  The third step is to allow DoD buyers to purchase directly from online. This step provides the hope that decentralization will engender greater competition and lower prices. In order to implement such a change, Thornberry has drafted legislation that would allow the DoD to “operate like any other business,” and choose to buy online in the open marketplace rather than through the GSA Schedule or other procurement vehicles. The legislation could target the GSA Schedule program.  Thornberry claims that the red tape and administration costs of using GSA Schedules increases costs.  He also cited the difficulties and expenses that vendors experience in obtaining and maintaining GSA schedules.

Additional Provisions in the HASC Bill

  1. The HASC bill increases scrutiny of the $150 billion in DOD services contracts including requiring the Pentagon to include projected contracted services requirements with its annual budget submittal.
  2. It would also allow the Defense Contract Audit Agency (DCAA) to outsource some of its audit functions to eliminate audit backlogs.
  3. The bill also addresses a difficult issue for the IT community. Currently, DoD retains full IP rights in weapons systems and applications developed on behalf of DoD. IT companies feel this is unfair because it limits their ability to competitively use knowledge to further their business.  The legislation would implement negotiations on the IP rights between the Government and the IT company that could allow IT companies to retain some rights without compromising national security interests.

As GSA Schedule consultants that help other businesses do business with the government, we see first-hand the hurdles and barriers these companies experience selling to the government. There is an eagerness from both government agencies and industry to streamline the acquisition process while making it transparent and cost effective for the tax payers. Recently, we have seen increased reporting and regulatory burdens on commercial companies with the recently introduced pilot program Transaction Data Reporting (TDR) requirement.  Increased burdens will no doubt push away companies that are not able to keep up with the contract management requirements, GSA has been aware of these problems and have stated a goal of creating a more “business friendly” approach under Trump. Let’s hope GSA gets the message and revamps some processes but for now, the best path forward it GSA.

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