Amazon, the online sales giant with a growing Washington presence, has struck fear in its competitors that it aims to dominate the federal government’s purchasing process.
Now, a top official with Amazon.com Inc.’s business division is fighting back against claims that the company is intent on monopolizing federal online purchases, selling the government everything from pens and paper to computers, televisions, and office furniture.
Amazon Business is content to be viewed as “another option the buyers had in the government space,” Anne Rung, director of government for Amazon Business told Bloomberg Government in a phone interview interview from the company’s Seattle headquarters.
From the beginning, said Rung, Amazon Business has been operating on the assumption its online marketplace may be only one of several such sales vehicles enlisted to sell goods to government agencies, a service that could yield billions of dollars annually.
Amazon Business is just three years old this month, noted Rung, who joined the company in November of 2016 after serving for two years as administrator of the Office of Federal Procurement Policy (OFPP) in the Obama administration.
“We’re in the really early days,” said Rung. “We say we’re at Day 1 here at Amazon Business. We’re really trying to just understand the fundamentals of how can we be more efficient.”
Trump Targets Amazon
Nevertheless, the company has already rattled some in the nation’s capital and even recently become the target of President Donald Trump, who fired off tweets alleging without offering any evidence that the Postal Service loses money shipping packages for Amazon. Trump alleged that the company has an unfair lobbying advantage because its chief executive, Jeff Bezos, owns The Washington Post. Rung declined to address the president’s criticism.
Rung has been charged with bringing Amazon Business government business.
Her unit modified its pitch specifically to public officials, she said, “with the controls and features that business customers including governments require.”
Though Amazon Business sells to all levels of government, from localities, counties and states to federal agencies, the federal government promises to be potentially the most lucrative. The companies the General Services Administration chooses to run online marketplaces—which the GSA refers to generally as “e-commerce portals”—stand to earn, collectively, more than $5 billion annually, estimates the contractor trade group Coalition for Government Procurement, whose members include Boeing Co., Dell Inc., and Oracle Corp. Amazon isn’t a member of the group.
Rung wouldn’t speculate on the accuracy of the Coalition’s estimate, but she said that “I’ve been following their policy issues over the years, and one of the things they’ve talked a lot about are the barriers for their companies in accessing government buyers.”
“I have deep conviction that Amazon Business can solve a lot of the issues that the Coalition has raised as pain points for their members,” she said.
The federal web, layered thick with agencies within agencies and a Federal Acquisition Regulation that stands at 2,300 pages and counting, has been challenging for Amazon to navigate.
Smaller-sized businesses will especially benefit from the e-commerce portal law through easier access to federal agencies, she said.
“(T)oday, a small and medium-sized business has to market themselves to 3,200 different separate procurement units across the federal government,” said Rung. “Highly decentralized. That’s enormously costly and time-intensive.”
Rung, who is not a registered lobbyist, began her job at Amazon soon before House Armed Services Committee Chairman Mac Thornberry (R-Texas) began his work to commercialize much of the federal sales process.
The first stand-alone bill in the House (H.R. 2511), introduced in May of 2017, would have allowed the GSA to select just one provider, without the use of a “full and open competition.” This caused some of Amazon’s competitors to conclude the fix might be in, and spurred them to lobby Capitol Hill for changes to mandate that more companies get a share of the federal sales pie.
Amazon also bolstered its Capitol Hill advocacy efforts, spending $12.8 million on lobbying in 2017 for a range of issues including e-commerce, according to its lobbying disclosure reports filed with the Senate. That was almost $2 million dollars more than the company spent on lobbying in 2016.
The company’s Washington office includes 28 in-house lobbyists, double what it had the previous year, and 15 outside firms with prominent Republican and Democratic ties. It has tapped influential political players for key positions, including in 2015 naming Jay Carney, who was Obama’s White House press secretary, to be senior vice president for corporate affairs.
Amazon’s focus last year, said Rung, was more about building the business and less about political machinations, even as the company’s competitors successfully lobbied Thornberry and others to ensure greater participation. In the end, the final 2018 Defense Authorization Act (Public Law 115-91) called for the GSA to put out bids for “multiple contracts with multiple commercial e-commerce portal providers.”
Rung was reluctant to talk about Amazon’s role in the drafting of Thornberry’s original e-commerce portal bill, or the subsequent defense authorization provision. Under a 2009 executive order signed by President Barack Obama, Rung is subject to restrictions on federal lobbying, and on communicating with employees of her former agency.
She declined to confirm that Amazon will be among those companies, like Walmart Inc., W.W. Grainger Inc., Staples Inc., and Office Depot Inc., that may bid for GSA’s e-commerce portal program.
Rung said the emphasis has been “on our customers, not our competitors. And we know that there are a lot of companies competing in this market segment.”
Industry group leaders that expressed concerns about the formulation of the e-commerce portal law, including the Coalition for Government Growth, were reluctant to directly address Rung’s remarks or Amazon’s role. But that group’s president, Roger Waldron, did reaffirm his belief that after all the debates and lobbying efforts, the e-commerce provision of the defense authorization law, known as Sec. 846, is equitable.
“Section 846 is a balanced and sound and competitive framework for addressing e-commerce solutions,” Waldron told Bloomberg Government. “It establishes the right analytical framework for balancing streamlining with necessary government-unique requirements, including controlled use of data.”
Waldron added that his group “looks forward to working with all stakeholders on this issue.”
Amazon’s Agency Deals
In addition to the possible impacts of Trump’s tweets, there were several topics that Rung was reluctant to talk about in the first media interview she’s given since joining Amazon.
Rung seemed cautious in many of her responses, and on a couple of occasions one of two public affairs officers who sat in on the telephone interview sought to clarify her remarks.
She declined to discuss the Defense Department’s ongoing “JEDI” cloud procurement, which could be worth $10 billion or more. Competitors also believe Amazon has a leg up in the DOD procurement—and may well win it all, given that the Pentagon appears to be leaning toward granting a primary contract to just one cloud provider.
Amazon’s bid for that project would be handled by Amazon Web Services, a component unit separate from Amazon Business.
As of late last year, Amazon had formalized deals with the Department of Homeland Security, involving DHS workers’ use of government purchase cards to buy goods through Amazon Business, and with the U.S. AbilityOne Commission, which engaged with Rung and others at Amazon to discuss expanding the selection of that agency’s products online.
She declined to comment about which federal agencies, or how many, she or members of her team have reached out to since she started.
‘Lack of Transparency’
Though she wouldn’t commit to the notion that Amazon Business will be in the running for the e-commerce program, Rung noted that Amazon has taken an active role in the process by which GSA is determining how the portal program will work. GSA will begin the search for portal providers in 2019.
“It’s too early to speculate, but I will say I appreciate that GSA has taken the time to reach out to industry and many companies to get input on how they’re going to develop the guidance,” Rung said.
One sticking point for industry in the e-commerce portal proposals have been the security of vendor and government purchasing data.
There’s a “lack of transparency about what you’re buying and who you’re buying it from and how much you’re paying,” said Rung. “Today, many government agencies have to turn to suppliers to get that information.”
This is where Amazon’s existing online marketplace expertise comes into play, she said.
Rung said government procurement officials are missing a lot of the type of data that can reveal how many units are purchased, and what specifically is purchased. At Amazon Business, she said, data analytics give governments more than 50 pieces of information on what you’re purchasing—including prices-paid data.
“Governments are using that information to better plan for future purchases; to better track rogue spend against contracts; to think smarter about where they can leverage the spend and gain volume discounts,” she said. “And they’re even using that information also to track and monitor small business spending, which is a goal of most governments.”
Amazon, and Amazon Business, have touted the low prices of their goods as one of the most important reasons to use the services.
That reputation took a hit in January, when a report by the Naval Postgraduate School concluded that GSA’s “GSA Advantage!” online sales platform for federal agencies was in fact a cheaper and faster option for smaller purchases than Amazon Business. The report looked at the prices of 60 common item purchased by the Air Force in fiscal 2015.
But the report’s methodology was flawed, said Rung. The minimum order requirements needed to be “normalized,” she said, to reach a more accurate price comparison conclusion.
“GSA has minimum order requirements for many of the products, sometimes 50 or 100 items, which government buyers did not like,” she said. “Amazon Business does not have that unit requirement, so you’re comparing unit cost of one versus unit cost of 50 or 100.”
At the same time, she said she found several silver linings in the study.
“(T)hey answered questions like, ‘do customers prefer Amazon Business or GSA Advantage!’? I like that they took this approach of talking to customers, and in the end they concluded that a majority of government buyers preferred Amazon Business,” Rung said.
With assistance from Madi Alexander and Jorge Uquillas