Government-Sponsored Monopolies Won't Fix Procurement

Cutting red tape to save taxpayers money is a core conservative principle. So a Republican proposal to simplify how federal agencies buy their office supplies should be welcome news to those who worry about how government spends our tax dollars. But the plan’s fine print should sound alarms among conservatives. Though intended to cut costs, the plan would in fact result in a massive government giveaway to the powerful tech giant Amazon.

This year, Republicans have wisely taken aim at arcane federal procurement processes in order to close loopholes, cut wasteful spending, and increase efficiency. In April, President Trump ordered all agencies to assess procurements as part of his “Buy American, Hire American” executive order. And Commerce Secretary Wilbur Ross is scheduled to release a report this month identifying how existing procurement practices can be strengthened. 

However, the new Republican-led proposal to modernize federal procurements should raise serious questions from conservatives. The plan, inserted into the House defense spending bill by Rep. Mac Thornberry (R-TX), would allow the General Services Administration (GSA) to establish online marketplaces through which contractors can sell commercial items to government agencies. Under the provision, the GSA would not be required to conduct an open bidding process for a marketplace provider contract. 

Thornberry’s goal — to run the government more like a business — is laudable. Establishing online marketplaces for federal purchases could cut costs and reduce wait times for supplies. But the details of Thornberry’s provision suggest that it will create a new problem: Only Amazon would likely be capable of facilitating this federal online marketplace while complying with various regulations required by the legislation. In other words, it could lead to a de facto federal purchasing monopoly for Amazon, which is why some have named Thornberry’s proposal the “Amazon amendment.”

In a recent analysis, the Coalition for Government Procurement found that if one company controlled such a marketplace for federally purchased commercial items, the value of that contract could be worth nearly $6 billion. It would also make that company one of the top 20 federal contractors — all without having to pass through a typical contract competition. 

The government should never be in the business of picking winners and losers, and no company needs a federal handout less than Amazon. Jeff Bezos’ empire already accounts for about 43 percent of all U.S. online retail sales and raked in nearly $44 billion in revenues during the last quarter alone. All told, Amazon’s market cap has ballooned more than 30 percent this year and is now worth a staggering $530 billion.

More to the point, Amazon also receives more than $1 billion in taxpayer-funded subsidies and incentives to operate in local communities, allowing it to continue spreading its reach into new industries such as health care and real estate. The government should not be further tipping the scales in a way that allows the company to dominate the federal spending market as well.

Federal procurement processes badly need reform to shed unnecessary bureaucratic layers and save taxpayers money. And it’s encouraging that Republicans are looking closely at new ways to accomplish this goal. But reforming the system also means ensuring a fair and open process that gives as many companies as possible a shot at tapping into the lucrative federal spending market. Simply handing the keys to Amazon is not a recipe for reform; it’s a recipe for a government-sponsored monopoly. The result? Even higher cost for American taxpayers. 

Drew Johnson is a Senior Scholar at the Taxpayers Protection Alliance.