July 10th, 2018

Amazon Under Fire Over US Communities Contract

as reported on

An in-depth report released today by the Institute for Local Self Reliance (ILSR) has painted a scathing picture of Amazon Business’s US Communities cooperative contract for local government purchasing.

The award of a marketplace US Communities contract to Amazon Business was first covered on in a February 2017 article titled Amazon Business’s $5.5 billion public-sector land-grab (which is actually referenced in the ILSR report). At the time, it appeared that the contract RFP (request for proposals) had been tailored towards Amazon and there were also question marks over the pricing structure of the contract.

Now, Olivia LaVecchia and Stacy Mitchell of the ILSR have written a report called Amazon’s Next Frontier: Your City’s Purchasing that takes a closer look at how Amazon Business was awarded the US Communities contract and at the e-commerce giant’s push into public sector purchasing.

Below are some of the key points and findings in the report about the US Communities contract:
• The terms of the RFP made it unlikely that anyone but Amazon would be awarded the contract.
• The contract adopts some of Amazon’s owns terms and conditions that override normal local government purchasing provisions and restrict contract transparency.
• The contract does not offer pricing guarantees nor volume discounts.
• Amazon has a trained national sales force selling to local governments.
• A pricing comparison study commissioned by the ILSR and carried out by Rick Marlette of OPSoftware shows that Amazon Business is more expensive for a basket of items than an independent dealer.
• The contract provides slower and more expensive fulfilment terms than the office products industry standard of free next-day delivery.
• There is evidence to suggest that local government spending on Amazon jumped dramatically between 2016 and 2017, although some cities are holding back due to concerns over price transparency.
In addition to Rick Marlette, another well-known office products figure who is prominently featured in the ILSR report is David Guernsey, whose dealership lost some business when Prince William County Public Schools in Virginia – the lead agency on the US Communities marketplace contract – started purchasing from Amazon. In fact, Guernsey – who believes that Amazon is the biggest threat to the existence of independent dealers – is the subject of a two-page epilogue near the end of the ILSR report.

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