Trade Group Targets Federal E-Commerce Bid It Says Favors Amazon

(Bloomberg) -- A trade association representing wholesale distributors is pressuring lawmakers not to approve increased government spending on a highly lucrative e-commerce contract the group says favors Amazon.com Inc.

The National Association of Wholesaler-Distributors argued in a letter addressed to a dozen lawmakers that Congress should reject a proposal to raise the maximum threshold for federal agencies to make purchases on a new digital marketplace for off-the-shelf products.

The General Services Administration, a federal procurement agency, is asking companies to develop digital portals that sell products such as office supplies to federal agencies. The government spends about $6 billion annually on these kinds of small purchases, according to GSA figures. That means that the initiative could deliver revenues in the hundreds of millions to the winners of the contract, who will be able to collect fees on the goods.

The GSA is conducting a five-year pilot for the project, known as the Commercial Platforms Initiative. Thursday is the deadline for companies to submit bids. The GSA has asked Congress to increase the maximum amount that federal agencies would be authorized to spend on a single purchase through the portal to $25,000 from $10,000. The GSA supports the increase to allow contracting officers to focus on bigger projects.

The GSA contract “delivers an unfair advantage that benefits Amazon” if the spending threshold is increased, the group wrote in the letter, which Bloomberg obtained Tuesday and was dated May 31. “No other e-commerce model can be included in the pilot or otherwise sell to the government with the expanded” terms, according to the letter, which was addressed to the chairmen of the House and Senate Armed Services committees, the House Oversight and Reform Committee and the Senate Homeland Security and Governmental Affairs Committee, besides other lawmakers.

E-Commerce Market

Amazon is expected to have the edge in the “e-marketplace” trial due its sheer dominance of the U.S. e-commerce market. The Seattle-based company controls an estimated 38% share of U.S. online sales, dwarfing competitor Walmart, which accounts for only about 4%, according to new data from EMarketer.

Amazon declined to comment on the letter. The GSA didn’t immediately return a request for comment.

The letter adds to the pressure on Amazon as policy makers scrutinize the e-commerce giant’s quest to bolster sales in the federal contracts market. President Donald Trump said earlier this month that he may intervene in a $10 billion Pentagon cloud-computing contract that is slated to be awarded in August. Amazon is widely-seen as a top contender for the contract because of its the leader of the commercial cloud market.

The GSA operates its own online purchasing portal, called GSA Advantage!, which serves thousands of government employees every year. Some procurement advocates, including the Coalition for Government Procurement have argued that the government should run an extensive trial with commercially run and government-run portals. The House’s 2020 Defense spending bill included a measure that directed the GSA to test the effectiveness of the model against government-run marketplaces.

Amazon’s quest to ramp up sales to federal agencies has drawn opposition from some policy makers and industry critics. Republican lawmakers pressured the Trump administration to intervene in the Pentagon’s plan to award the Joint Enterprise Defense Infrastructure, or JEDI cloud contract, which critics say limits competition and raises security concerns.

Oracle Corp. and International Business Machines Corp. also waged a fierce legal and lobbying campaign that questioned whether the terms of the bid were unfairly narrow and tainted by alleged conflicts of interest involving former Defense Department employees and Amazon.

To contact the reporters on this story: Naomi Nix in Washington at nnix1@bloomberg.net;Chris Cornillie in Washington at ccornillie1@bloomberg.net;Jennifer Jacobs in Washington at jjacobs68@bloomberg.net

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, Mark Niquette

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