Amazon-opoly: Jeff Bezos May Be About To Control $53 Billion In Federal Government Spending
Jeff Bezos spends a lot of time directing the newspaper he owns, The Washington Post, to criticize President Donald Trump in every way imaginable. But for some reason, the federal government cannot stop giving Amazon — the retail empire Bezos also owns — a slew of taxpayer-subsidized subsidies. Now, Congress is considering a new federal purchasing plan that could result in Amazon’s most lucrative government handout yet.
The technology giant is no stranger to sweetheart deals that line its pockets at taxpayer expense. The U.S. Postal Service, for instance — which has lost $60 billion since 2007 — handles last-mile shipping for two-thirds of Amazon’s deliveries. This means overtime for workers and a good incoming revenue number on the USPS’s balance sheet, but it’s a financial bonanza for Amazon.
According to media reports, USPS delivers Amazon packages for $2 per package — even though it costs USPS $3.46 per package to make these deliveries. And that’s before you get into the $200 million three years ago for 270,000 handheld scanners to process the packages or the $5 billion or more to replace USPS vehicles with ones better suited to carry Amazon’s packages.
But even this cozy arrangement pales in comparison to the deal Amazon is now trying to push through Congress.
Buried deep in this year’s defense spending bill is a provision that would move Defense Department purchases of commercial off-the-shelf products to online marketplaces.
A summary of the proposal, which was inserted into the legislation by House Armed Services Committee Chairman Mac Thornberry, argues it is needed to save money over the burdensome and expensive current system.
It pointed to a report from the Inspector General of the Government Services Administration that found some IT equipment could be purchased more cheaply on the open market than through the GSA’s “schedules.”
In response, the plan calls for developing an online marketplace platform through which federal agencies can buy products such as paper clips, bottled water, computers, office furniture and more — just as any business would do.
But it also calls for this platform to be designed to “enable government-wide use of such marketplaces.” This means the government is looking only for a procurement and supply management firm big enough to offer multiple suppliers for the same product with constantly changing selection and prices and serve the entire U.S. government.
That leaves just one likely possibility – Amazon Business – for basically monopoly control of $53 billion in federal purchasing, much of the supplies for which comes from no-bid contracts.
Amazon provides a platform for e-companies to sell through to their own customers. It receives 15 percent to 20 percent of the proceeds from such sales, which means a huge revenue stream for Amazon for doing basically nothing while vendors are forced to cough up as much as half their margin.
A government deal with Amazon sets up opportunities for abuse, not to mention control over suppliers. Amazon would get to collect an enormous amount of data on agencies, which could be used to identify top competitors and drive them out of the federal marketplace with increased fees or other rules changes.
And it means any discounts that can be negotiated for the bulk rates of purchasing the federal government does would flow not to the government and taxpayers — but instead into Amazon’s pocket.
Amazon Business, which only started in 2015, already has 1 million customers and $1 billion in sales, and its revenues grew 34 percent in the last year. Adding federal procurement would effectively drive out all competitors for its business service.
It already is moving into position to do this at the local level. In January, Amazon signed a contract with U.S. Communities, a coalition of 90,000 local governments, to provide them with an online marketplace for office supplies and other goods.
The fate of the proposal is unknown. It is in the House version of the defense spending bill but not that of the Senate. This will be resolved in a conference committee, and one solution is to try it as a pilot project before committing the entire government to it.
There certainly ought to be a breathing period before yet another government agency signs yet another deal to use tax dollars to further enrich one of the richest men on the planet.
It’s beginning to get suspicious.