Opinion: Amazon Government contracts become Amazon's new target market
( ugh )
Companies complain that the tech giant may take their business as it has in retail
Rana Foroohar
May 26, 2019
Should Amazon be the US government’s Everything Store? It’s a question being raised as a small but seismic tweak has made its way into the legislation governing how the federal government buys its annual $50bn-worth of commercial goods — from machinery, to potato chips, to toilet paper.
Thanks to what has become informally known as the “Amazon Amendment” to the 2018 National Defense Authorization Act, government officials must come up with an ecommerce solution for all purchasing — and wholesalers are complaining it will allow Amazon to eat their lunch, just as it has in retail.
Amazon started courting government business a few years ago, and in 2017 signed a lucrative deal with 1,500 local public agencies, which was criticised by non-profit advocacy groups like the Institute for Local Self-Reliance, alleging that the deal would leave the public sector paying more, rather than less, for goods. Last year, Amazon almost nabbed a $10bn Pentagon cloud computing contract before the deal was squashed, in part due to complaints from competitors that Amazon had hijacked the bidding process. It is now a run off between Microsoft and Amazon.
The National Association of Wholesaler-Distributors, a group that represents the biggest companies in a sector worth $5.6tn in sales a year, is waging a public relations war to try and ensure that its members don’t lose government contracts to Amazon. In particular the trade group is upset that the General Services Administration, the part of the government tasked with figuring out which ecommerce model to use, is piloting only an “e-marketplace” version that they, and a number of others, including ILSR, believe will favour a single player. Other ecommerce options, such as a government-managed portal for multiple suppliers, were discarded.
“By designating one, and only one, channel to reach the government customer, core antitrust and broad competitive precepts are assailed,” wrote NAW president Dirk Van Dongen in a February letter to lawmakers. His members’ businesses could be under threat, too. The GSA has said nothing about capping the fees Amazon could charge sellers. Wholesalers and the ILSR worry that sellers could be hit with as much as a 15 per cent fee on the value of goods sold. Amazon would not confirm or deny that number, saying that “fees vary”.
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