It’s no secret that Amazon Business has been looking to grow in the US public sector space following the hiring of the US government’s Chief Acquisition Officer Anne Rung in September 2016.
Now public sector purchasing cooperative US Communities has announced that it has awarded Amazon Business a multi-year online marketplace contract, giving Amazon’s B2B arm access to public agencies – schools, school districts, higher education institutions and public sector organisations such as local and state government entities. It is estimated that the deal could be worth up to $5.5 billion.
Readers of OPI will recall that US Communities previously had a long-standing relationship with Office Depot in the office supplies category, a contract that came to an end in 2010 following the landmark award to independent dealer group Independent Stationers (IS). US Communities has not had a specific office supplies contract since that agreement with IS expired.
Now public agencies that use US Communities purchasing contracts – a number exceeding 55,000 agencies with more than 400 registering each month, according to the marketplace contract request for proposals (RFP) that was issued last September – will again have access to office supplies via the cooperative purchasing group, but that is by no means the only product category that Amazon Business will offer.
Whereas US Communities contracts have traditionally involved individual product categories such as office supplies, school and educational items and technology products, the new contract awarded to Amazon Business was bid as a nationwide online purchasing agreement covering a multitude of product categories. These include – but are not limited to – books, office supplies, classroom and art supplies, home and kitchen, musical instruments, audiovisual and electronics, clothing, animal supplies, scientific equipment and lab supplies.
The final product category listed on the Amazon Business website is ‘hard to find items’. This is described as follows: “Our marketplace offers hundreds of millions of products from a wide variety of industries and specialties including 3D printing, commercial espresso machines and coffee makers, cutting tools, material handling equipment, packaging and shipping supplies, pulling and lifting supplies, and much more.”
It suggests that Amazon is able to offer its entire product range to public agencies through this US Communities contract. Indeed, the RFP document states that “the intent is for each offeror to submit their complete product line”.
The lead public agency that put this contract out to bid is Prince William County Public Schools (PWCPS) based in northern Virginia. PWCPS as well as US Communities advisory board members have committed to purchasing through the Amazon Business contract and the RFP estimates the annual contract spend to be around $500 million.
The length of the contract is also interesting. Prior contracts typically tended to be for an initial two-year period with up to three 12-month extensions. This marketplace contract is for a period of five years with the option to renew for up to three two-year periods. That could mean the contract running for 11 years – meaning $5.5 billion in sales to Amazon based on the RFP spending estimates.
The tender process
The contract was put out to competitive bid in September and US Communities said there were a total of nine respondents. Nevertheless, the breadth of the product categories listed in the RFP would suggest that US Communities had at least one eye on Amazon when it put the bid together.
This is not a case of Amazon Business simply getting a foot in the public sector door; the e-commerce giant has barged the door down and is now taking on all those that supply products to educational and local/state government agencies throughout the US – not just office products, but pretty much every workplace supplies category you can think of.