The Amazon-ization of Federal Procurement : Using the Uniform Commercial Code to Moderate an Inevitable Innovation

Lauren Olmsted (lolmsted@law.gwu.edu) is a third-year law student at The George Washington University Law School and the Editor-in-Chief of the Public Contract Law Journal. She would like to thank Hon. Kyle Chadwick for his continued guidance and insight. Most importantly, she would like to thank her loving boyfriend for his unwavering encouragement and patience throughout the writing process.

I. Introduction

The “Amazon effect” is coming to Washington, D.C.¹ As Amazon and other e-commerce giants continue to disrupt the retail market, both online and in traditional brick-and-mortar stores, the commercial sector has undergone tremendous rapid technological advancement for nearly two decades.² For the American consumer, digital marketplaces expand consumer choice, deliver product value, and offer near-instant gratification.³ In the first quarter of 2018 alone, the Census Bureau estimated U.S. retail e-commerce sales to be $123.7 billion.⁴ Yet despite spending over $50 billion annually⁵ to procure commercial goods, the government has largely been left sitting on the sidelines.⁶ With an e-commerce provision included in the recently enacted  National Defense Authorization Act (NDAA) for Fiscal Year 2018 (FY18),⁷ Congress signaled its readiness to similarly disrupt the federal acquisition regime.

The NDAA FY18, Section 846, Procurement Through Commercial E-Commerce Portals (“Section 846”), directs the  General Services Administration (GSA) in coordination with the Office of Management and Budget (OMB) to establish a federal  procurement program for commercial-off-the-shelf (COTS)  items⁸ using commercial e-commerce portals.⁹ Endeavoring to  harmonize federal buying power with commercial innovations  and best practices,¹⁰ Section 846 effectively welcomes Amazon  and other e-commerce behemoths with open arms. The  legislation represents a radical transformation from existing yet  outdated procurement policy in multiple ways, but particularly compelling is the mandate that the GSA strive to adopt the  standard terms and conditions of the e-commerce portals in  lieu of traditional government contract provisions. This  initiative belies a congressional desire to move away from  government-unique requirements in search of the proverbial Moby Dick of federal contracting-commercial efficiency. To  succeed, it is critical that the government implement Section  846 intelligently.

Buying commercially is not a novel idea in federal  procurement.¹¹ As the GSA navigates this $50 billion crossroad in acquisition reform,¹² it provides a timely opportunity to reexamine the application of the Uniform Commercial Code (UCC) to government contracts. Against the backdrop of Section 846, this Note examines the practicality and pitfalls of eliminating government-unique requirements in favor of  unfamiliar e-commerce provisions. Part II introduces the  concept of COTS acquisitions and discusses the legislative evolution of Section 846. Part III carefully compares the  standard terms and conditions of federal procurement  contracts with those of Amazon and Walmart, arguably the two  most well-known e-commerce platforms. Part IV posits key  challenges likely to arise from these e-commerce terms and the potential impact on federal procurement interests. Finally, Part  V proposes the GSA and the OMB should instead consider the  Uniform Commercial Code (UCC) as a moderated approach to  reforming the COTS acquisition scheme. This Note suggests the  UCC better meets the underlying intent of Section 846 and best  preserves the government’s unique procurement interests.