Independent Business Groups Urge U.S. Government to Buy Local

On January 16, the Advocates for Independent Business (AIB) answered the General Services Administration’s (GSA) call for public comment in regard to the rollout of Section 846 — the “Procurement through Commercial e-Commerce Portals” — in the National Defense Authorization Act of 2018, urging that the GSA include the importance of shopping locally.

This section of the authorization act will send federal procurement of commercial off-the-shelf items, a $53 billion market, to e-commerce portals. The section initially stipulated that procurement would be through online marketplaces, but after a number of experts criticized the provision as the “Amazon amendment,” language in the provision was changed before being signed into law.

The most notable modification to Section 846 was that online marketplaces were changed to the more general term “e-commerce portals.” Also added is that the only requirements for qualified portals are that they are “widely used in the private sector” and that they offer typical features of e-commerce sites, such as updated selection, reviews, and customer service, as reported by the Intercept.

In their public comment, five AIB member organizations urged GSA to remember the value of shopping locally as they design the rollout of 846: “Bricks-and-mortar retailers employ 47 people for every $10 million in sales, according to an analysis by the Institute for Local Self-Reliance of U.S. Census data. (Excluding chains and looking at just independent businesses, the figure is even higher — 57 jobs.) But Amazon employs only 14 people per $10 million in revenue. As Amazon grows and takes market share from other retailers, the result is a decline in jobs.”

As it rolls out the provision, GSA is required to seek suggestions and guidelines regarding implementation via a public comment period.

The AIB member groups that signed the public comment include: the American Booksellers Association; the American Specialty Toy Retailing Association; Brixy, Inc; the Institute for Local Self-Reliance; the North American Retail Hardware Association; and the Running Industry Association.

The comment can be read in full below.

AIB Public Comment in Regards to Section 846 of the National Defense Authorization Act

Thank you for providing the Advocates for Independent Business the opportunity to express our thoughts on the implementation of the purchasing platform as outlined in Section 846 of the National Defense Authorization Act of 2018.

On behalf of our independent retailer and business members across the country, we believe it is crucial that the general program design take into account the positive fiscal impact that shopping locally has on the economy. Small businesses are the engine of our national economy; so, a program that could facilitate purchasing at the local level would be a win-win for the General Services Administration (GSA) and communities throughout the country.

In regard to the number of contracts awarded, we oppose exclusive contracts and think it would inhibit competition if the GSA limited any overlap of product categories and/or awarded a single portal provider a particular product category. We also urge GSA to factor in more than simply a product’s retail price. There are other factors to consider, whether it is shipping costs, sales tax collection, time of delivery, or quality of customer service. We believe that the procurement process should provide an agent a choice, so that the GSA can find the best value, as opposed to simply the cheapest option.

It is widely known that Amazon lobbied vigorously for Section 846 in the hopes that it would hand them significant government purchasing power. And we remain concerned that, in the end, this could still be the case since Amazon is the leading e-commerce portal. Legal expert Lina Khan, Director of Legal Policy at the Open Markets Institute and a visiting fellow with Yale Law School, has warned that the “Procurement through Commercial e-Commerce Portals” provision could very well crown Amazon as an official gatekeeper to government purchasing. If that were to become the case, government spending that was “previously dispersed across hundreds of distinct companies,” would, in turn, “now instead all be channeled through one company, with Amazon collecting a tax,” Khan noted.

This is why we stress that implementation of the procurement process take into account how important small businesses are to job creation and the fiscal health of states and communities nationwide.

Bricks-and-mortar retailers employ 47 people for every $10 million in sales, according to an analysis by the Institute for Local Self-Reliance of U.S. Census data. (Excluding chains and looking at just independent businesses, the figure is even higher — 57 jobs.) But Amazon employs only 14 people per $10 million in revenue. As Amazon grows and takes market share from other retailers, the result is a decline in jobs. 

With that in mind, as implementation is rolled out, we do hope it is designed with these figures in mind.

We also urge the GSA to look closely at the conflict-of-interest that’s inherent in both administering a purchasing platform and being a direct retailer on that platform. In particular, we have concerns about how companies that both administer platforms and sell directly on them use the data generated by the platform, and concerns about who owns and controls that data. As Sec. 846 is implemented, we urge the GSA to disallow any company that administers the e-commerce portal from also being a direct retailer through that portal.

We would be happy to consult further with you on this issue at your convenience.

Sincerely,

Stacy Mitchell, Coordinator
Advocates for Independent Business
Co-director, Institute for Local Self-Reliance

David Grogan, Director, ABFE, Advocacy and Public Policy
American Booksellers Association

Kimberly Mosley, CAE, CPE, President
American Specialty Toy Retailing Association 

Mark Simon, Executive Director
Brixy, Inc (representing independently owned baby gear and accessory retailers)

Dan Tratensek, Executive Vice President
North American Retail Hardware Association

Terry Schalow, Executive Director
Running Industry Association