Congress May Be Making the Pentagon Amazon's Next Big Customer

Buried within the 2,000-page National Defense Authorization Act is an amendment that could offload a significant chunk of the $53 billion the Defense Department spends annually on commercial products to an e-commerce platform.

Dubbed the “Amazon amendment," the Defense Acquisition Streamlining and Transparency Act made it through conference negotiations that merged the Senate and House versions of the $700 billion NDAA last week. Lawmakers made changes that eased some—but not all—industry concerns that the House version of the bill stacked the growing defense spending deck in favor of the Seattle-based retail giant.

Instead of immediately offering a no-bid contract that could be worth billions to a single commercial e-commerce provider as called for by the bill’s House version, the modified amendment calls for a phased approach in which the federal government issues multiple contracts to multiple e-commerce portal providers in the coming years. The portals could be used to buy everything from pens and pencils to potentially more complex items, like mobile devices or other technologies.

“I think this approach gives the government opportunities to look at multiple stakeholders in the game, an opportunity to look at e-commerce portals across the board and various types of solutions—not just one,” Roger Waldron, President of the Coalition for Government Procurement, told Nextgov.

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Over the summer, the Coalition for Government Procurement joined other industry groups in lobbying House Armed Services Committee Chairman Mac Thornberry, R-Texas for changes to the amendment, estimating a single e-commerce portal for the Defense Department could generate more than $5 billion in annual revenue for the provider with little vetting of products or oversight of delivery.

The modified NDAA, which both the full Senate and House still need to vote on, also calls for the General Services Administration to develop an implementation plan within 90 days of the measure becoming law. The legislation also tasks GSA and the Office of Management and Budget to research and specify what products and services should be available through the e-commerce platform, as well as tweaks to existing law necessary to ensure its effective implementation.

The conferenced version of the amendment also prohibits any e-commerce platform provider from selling to any third party “any information pertaining to a product ordered by the federal government.” This kind of data is increasingly valuable to companies looking for a competitive edge, particularly within a market as large as the Defense Department’s.

“I think this is a more positive, thoughtful approach to addressing the need for an online marketplace,” Waldron said. “There are so many pieces and I think to the credit of Congress, they recognized how many different pieces of the procurement puzzle this would impact.”

It may take years to realize the legislation’s true impact.

Even after Congress’ proposed changes to the Amazon amendment, the legislation is still geared toward a small cadre of large commercial suppliers that include Amazon, Walmart and Grainger, though large IT resellers like ImmixGroup and Carahsoft are rumored to have an interest in competing.

Mike Hettinger, managing principal at Hettinger Strategy Group and a former Hill staffer, said the government’s determination of what commercial products and services are sold in the e-commerce platform—and how those products and services are vetted—are key questions industry will be paying attention to the most.

“In order for any new platform to be stood up, they’d have to figure out the quality assurance piece and how you go about qualifying to sell a good or service on the platform,” Hettinger said.

The decision to move the Defense Department in the direction consumers have moved toward for years is likely to cause significant fallout.

For example, will technology products be sold in these online portals, and if so, what products will the government deem too complex to be sold in them? These decisions, Hettinger said, could have a major impact on other platforms the government currently uses to buy goods and services, such as the GSA Schedule or reverse auctions.