We all know online marketplaces are very popular among consumers, so it’s no wonder that federal agencies would want to get in on the action too. But a federal agency is different from an ordinary consumer because the federal government is required to purchase goods and services according to a vast array of federal statutes and regulations. When an agency tried to set up an online marketplace in violation of acquisition rules, GAO didn’t let it fly.
GAO’s recent decision in Mythics, Inc., B-418785 (Sept. 9, 2020) involved a Library of Congress solicitation for cloud computing services. LOC would issue one IDIQ award for the contractor to provide 13 products or services from Amazon Web Services, Google Cloud Platform and Microsoft Azure. The protester argued the Solicitation was overly restrictive of competition in large part due to the requirement for online marketplace for cloud services.
The protester argued that it was impermissible for the solicitation to require an “online marketplace” for third-party software applications. Specifically, “the cloud service provider essentially is performing an inherently governmental function because the cloud service provider acts as a ‘gatekeeper’ for what third-party software is available to be purchased” and such a marketplace will
eliminate many of the basic responsibilities for agencies to acquire goods
and services using full and open competition, including, for example, evaluating the products being offered, determining whether the prices offered are fair and reasonable, determining whether the firms providing the products are responsible, and determining whether the third-party vendors have improper conflicts of interest.
GAO noted that it was the first time it had considered this online market place concern. But GAO was persuaded by a U.S. Court of Federal Claims case, Electra-Med Corporation, v. United States, 140 Fed. Cl. 94 (2018), aff’d and remanded, 791 Fed. Appx. 179 (Fed. Cir. 2019). In that case, “the VA
effectively avoided numerous legal and regulatory requirements pertaining to the federal government procuring goods or services.”
GAO had the same concerns with LOC’s online marketplace: it is “populated entirely with software offerings selected by the cloud service providers”; the “selection process for these third-party software products is unknown; and it’s “not subject to any of the bedrock requirements for competition applicable to federal agencies[.]” The agency won’t be selecting software based on the best solution, reasonable prices, responsible vendors, or compliance with any legal requirements.
GAO ultimately sustained the protest by Mythics. This decision highlights an important aspect of federal procurement: unless there is an exception, the government must ultimately make the decision about which supply or service is the best value or the best option for the government. That decision cannot be outsourced to a separate contractor. If faced with a similar procurement in the future, GAO may come to the same conclusion and sustain a protest to the terms of the solicitation.
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