Dec 17, 2025
On December 17, The Capitol Forum held a conference call with Stacy Mitchell, co-executive director at the Institute for Local Self-Reliance, to discuss a new report examining Amazon’s influence over public procurement and its impact on competition, costs and local economies. The full transcript, which has been modified slightly for accuracy, can be found below.
TEDDY DOWNEY: Welcome everyone. I’m Teddy Downey, Executive Editor here at The Capitol Forum. Thank you for joining us for today’s discussion.
I’m so happy to welcome back Stacy Mitchell, Co-Executive Director at the Institute for Local Self-Reliance, to talk about a new report examining Amazon’s influence over public procurement and its impact on competition, costs and local economies. Stacy, thank you so much for doing this.
STACY MITCHELL: Always nice to be with you, Teddy.
TEDDY DOWNEY: And this is a topic near and dear to my heart because I got my career, investigating companies, started by looking into for-profit colleges. So, this idea that companies are stealing from students or engaging in predation in education is very familiar to me. So, the conclusions from the report jumped off the page at me in terms of the cost to students, but maybe we could take a step back. And I would love to know how you thought of doing this report. Like how did it come to be?
STACY MITCHELL: We’ve been aware that Amazon has been making inroads into public sector procurement. And there’s a certain amount of reporting about the stuff at the federal level and about AWS, but they’re also rapidly moving into selling commercial products to local governments and state governments. And that has really flown under the radar. Like there’s been very little attention to it. And, of course, Amazon has been pursuing this quietly. Because this is not something they’re putting press releases out about like all of the cities and school districts they’ve signed up to buy from them.
So, we were aware of that. We actually did a report about six years ago that looked at a very early contract that Amazon had signed with a school district that had then offered nationally. And we sort of found a lot of disturbing things in that contract and we wrote a report about it. And now six, seven years later, we wanted to go back and say, well, what has happened to the landscape?
And so, we did information requests to a lot of cities, school districts, counties, and state agencies across the country. We ended up with information from about 128 local jurisdictions and about 122 state agencies.
TEDDY DOWNEY: That’s amazing. And I want to get into the highlights of the report, but was it hard to get them to cooperate? Because when we’ve tried to do federal FOIAs, the agencies are very defensive and aggressive with us in saying, hey, no. These are sensitive documents. We won’t turn any of it over when it comes to the JEDI procurement and things like that. We had a really hard time getting those documents. We ended up getting some and found some corruption in that process, but it’s really hard work. And I’m curious if the cities and states are more forthcoming, or if it was a struggle.
STACY MITCHELL: My colleague, Kennedy Smith, who did all of this information gathering with help from Nazar Mohamed, an intern with us. They looked like they were in the trenches of a war when this was going on. I mean, it was pretty rough. I mean, some cities were very forthcoming and very cooperative and very transparent. Some cities, there’s a few places that even publish all of this online comprehensively. There are a number of places that publish stuff online that’s not comprehensive, we found, that actually omits a lot of things. But it’s a whole spectrum. And then on the other end of the spectrum, you have places that stonewall, that say it’s going to cost you an enormous fortune for us to provide this information.
One example was the City of New York. We went to the Comptroller’s Office, and they said we can’t provide this information. You would have to FOIA every one of the city’s 62 agencies. And we started doing that, and almost none of them actually replied. And it was just like this is too much work.
And so, we had to kind of abandon that avenue. But it was a lot of back and forth. And we were asking them, not only how much did you spend with Amazon, but also have you signed onto a number of these group purchasing contracts that we’re familiar with? And so, we were also trying to extract that information.
We had trouble, I will say. We also looked at the federal level. So, there’s a section of this report that provides an overview of what Amazon is doing in federal procurement, which is quite disturbing as well. And there, I mean, we had like the USDA, which put on this whole show for small businesses. They invited all these small businesses to come to a thing about selling to the federal government. And it was all run by Amazon. It was all about you should get on Amazon’s platform. And when we asked them how much are you spending with Amazon? They basically refused to tell us.
TEDDY DOWNEY: Wow. I mean, I’m not surprised to be honest. Normally, I would think maybe I’d be surprised. But at this point, sadly, I am not. Now you had some really—there were some very disturbing findings in this report. Can you share with us some of the ones that really stood out to you? What was your takeaway from the investigation?
STACY MITCHELL: Yeah, so we found that almost all of the local governments that we got information from were spending money with Amazon. There are a couple of exceptions and some that were spending very little. But most local governments, cities, schools, and counties were spending with Amazon.
Based on that data, we estimate that in 2023, local governments in the U.S. spent $2.2 billion with Amazon on commercial products. So, this is outside of the AWS contracts. This is just office supplies, school supplies, cleaning supplies, that kind of thing. And that’s up by sort of it’s a four-fold increase from 2016, our estimate for 2016. So, it’s growing quite rapidly.
The other couple of things that I think really stand out is that we found that Amazon has persuaded local governments to abandon competitive bidding and abandon fixed price contracts, and instead sign onto these contracts with Amazon that specify dynamic pricing.
So, traditionally the way procurement works is that you put out an RFP and you have multiple bidders, and they include a price list. Like these are the prices you will lock in for the duration of this say three-year contract. And that ensures that you get appropriate volume discounts, that you’re getting fixed prices in exchange for your business, for the city’s business. And it’s completely transparent. Like anybody can go down to city hall and say, okay, who bid on this? What prices did they offer? And who got awarded of the contract?
And instead, schools and cities are shifting to these prices, these contracts, that specify dynamic pricing that are totally not transparent. And we found that there is functionally no difference between an employee of a school district that has one of these contracts logging onto Amazon business and buying supplies, and you or I logging onto Amazon business and buying supplies. It’s the exact same price. It’s like whatever the price is that day is what the price is.
TEDDY DOWNEY: So, they get no discount by doing the RFP effectively or anything like that?
STACY MITCHELL: No, this happens—I should say, Amazon has a platform called Amazon Business that it’s their corporate and sort of institutional and government buyer facing platform. It is, as far as we can tell, just a different sort of skin on the Amazon consumer platform, essentially. It works the same way. It appears to be run by the same warehousing and logistics system. And it appears to have basically the same prices. We didn’t really find any particular difference between Amazon Business and the consumer site.
There are some opportunities to occasionally get like a volume discount or to do like a custom quote if you’re buying a lot. But in the data, we can see that it’s very rare that a school or a city actually was able to use those features. So, it’s like a very minority very small, share of the actual purchases. For the most part, they are just paying whatever the price is on Amazon Business. And that is very often the same exact price that’s on the Amazon consumer site. And I should say that Amazon Business, you don’t actually have to be a business or an institution to buy. You can go set up an account and buy on Amazon Business as an individual.
TEDDY DOWNEY: So, you got the contracts. But then if it’s dynamic pricing, how did you find out that they’re pricing different things to different people and you’re paying way less for erasers in one municipality than another?
STACY MITCHELL: Yeah, of all the data we got back from the 128 local jurisdictions, there were 23 that provided the data in enough detail that we could see the item they were buying, how much they were paying for it. And we had the ASIN, the Amazon product number, for that item. And so, we could do apples to apples comparisons across those 23 cities and school districts.
And we found that there were tens of thousands of examples of cities or schools buying the exact same product and paying different prices. And in some cases that happened on the very same day. And so, you had one city that bought a 12 pack of markers, Sharpie markers, for $8.99. A school district an hour away bought that same pack of Sharpie markers that same day for $28.63. Like we have a lot of these examples. And in the report, we’ve got a graph. We just took some of the most popular items that schools and cities were buying and showed the price spread of what they were paying on Amazon. And it’s quite dramatic.
TEDDY DOWNEY: It’s crazy. I mean, I’m looking at it right now. Crayola markers, class pack, 256 count, $58 minimum in one municipality, one school’s paying $87. I mean, that’s almost $30. Kleenex, $44 difference, $30 or $75. I mean, these dry erase markers, someone’s paying $13 for the same things. Another school district’s paying $74. I mean, this is just wild, wild stuff. And so, it’s not in the contract. It’s just that’s just the dynamic pricing that’s on Amazon that these schools are signing up for is basically what you’re saying.
STACY MITCHELL: Yeah, they’re signing contracts and buying on contract. I feel like we have to put that in quotes, right?
TEDDY DOWNEY: Yeah, they’re not, yeah. Because there’s no real contract. It’s just like you get the privilege to log on Amazon.
STACY MITCHELL: Right, exactly. And we started to say in the report, like these contracts are meaningless. And then we realized, well, they’re not actually meaningless. What they do is create the appearance of a vetted competitively bid public procurement contract. So, they create a veneer of accountability when in fact they provide none of the protections that are standard practice in public sector procurement.
TEDDY DOWNEY: Does it lock the school district in? Does it prevent them from going out and having a relationship with an office supply company or something like that? Is it an exclusive contract? Or could they theoretically buy it somewhere else? I mean, they’re almost certainly not. But I’m just curious if that’s another constraint.
STACY MITCHELL: Yeah, the contracts do not specify exclusivity. So, a school district can buy from other suppliers. So, you’re not locked into doing business with Amazon. But I think the risk is that you, as an employee, are told like, here are the contracts that we have. And if one of them is Amazon, it’s unclear that the school has any particular reason necessarily to go out and sign other kinds of contracts. And you assume like, oh, this is where I’m supposed to be buying stuff. This has been worked out through the kinds of channels that provide oversight, when in fact it hasn’t.
TEDDY DOWNEY: It’s sort of like a layer on top of Amazon Prime. It’s like Amazon Prime’s there to get you to like, more likely, to just keep buying it from there. This is like the municipal version. Hey, let’s just get a contract that says buy it from us and it’ll lock you into buying from us.
STACY MITCHELL: Yes. And incidentally, while we’re on the subject of Prime, if you are buying from Amazon as a school district, you also have to buy Business Prime if you want the shipping included. Which for traditional suppliers in the office supply industry, they’ve been doing same day and overnight delivery for like 40 years free. It’s part of the service. But with Amazon, you actually have to buy Business Prime, which is about $3,500. And we estimate, or we sort of did the math, if Amazon succeeds in selling Prime to every city, county, and school district in the country, that’s $125 million a year just for being part of Amazon.
TEDDY DOWNEY: That’s wild. And I remember you being an expert on these office supply companies. Because we talked about this when Staples and Office Depot were trying to merge. What is happening there? I mean, typically, they would be the ones getting these contracts. Are they even allowed to bid? I mean, I’m guessing they’re bidding and there’s just like, Amazon just comes in and wins out. But what is that industry like right now? It would seem like it’d be decimated by this type of behavior. But I’m curious.
STACY MITCHELL: It’s shrinking quite rapidly. So, independent office suppliers have declined from about 1,200 nationally to about 900 over the last ten years. And they have shrunk probably even further maybe in terms of market share.
This is kind of an invisible network to most consumers, because these aren’t businesses that typically have storefronts. They operate warehouses and they run delivery trucks and they supply corporate offices and universities and that kind of thing. And they’re often very longstanding businesses within their communities. And they have a lot of jobs they support. And they’re highly efficient because they have been operating in a world of competitively big contracts. They are very well-honed in terms of their efficiency.
So, I think it’s disturbing to see them—and they say that their number one threat is Amazon’s push into this area. We were able to get—sort of using the purchase data that we had from a particular school district in the Rocky Mountain region. We went through that and we took, I think it was, the top 10 brands. And so, we developed a list of about 628 of the most frequently purchased products. It’s like Bic pens and Crayola crayons and the kinds of things that you might imagine.
And we were able to get an independent office supplier in that region to provide their pricing under a current contract that they have with a public sector buyer. And there’s a firm called OP Software that tracks pricing online and office supplies. And we were able to get current Amazon business pricing on these items from them. And we ran a comparison and the local independent supplier was cheaper on 68 percent of the items on that list. And they provide a like high-level of service.
As I said, they pioneered same day delivery long before Amazon existed. And they don’t just like dump everything at the front door. Like they come in and put the copy paper in all the copy rooms. And they’re part of the community. Like we talked to this one El Paso office products in El Paso, Texas. This is really great business. They do these like custom back to school kits for every kid in one of the school districts they work with. Just like the kind of thing what we should have more of, not less of.
And what’s really worrisome about the path that we’re on is that as schools and cities shift to Amazon, they’re killing off the competition. And over time, they’re going to become even more dependent on Amazon and therefore even more vulnerable to Amazon’s high prices and other kinds of abuses.
TEDDY DOWNEY: I imagine those delivery jobs are real jobs, not like gig economy jobs as well.
STACY MITCHELL: Exactly, yeah.
TEDDY DOWNEY: So, you’ve got real jobs, real relationships, with the community. I mean, it’s sad. And obviously, you’re probably saving money by going with them. You’re getting a better service. You’re supporting your local economy and you’re getting a lower cost. I mean, it’s amazing that Amazon is able to just overcome that.
And what do you think it is? Is it lobbying? Is it just like apathy? Is it just the ease of familiarity by the school procurement person? They’re like, okay, I could just do nothing and click Amazon and like not worry I’m covered. Or I could do a real RFP, which is ostensibly more work to like go through the contracts. What’s your take on why Amazon is successful at the municipal level?
STACY MITCHELL: I mean, I think some of what you said about like, it’s very easy, the familiarity is very easy, for public sector employees who are buying from Amazon themselves to just kind of default to that. Like, oh, I need office paper. I’m going to just go over to Amazon. So, there’s that kind of that dynamic going on.
Amazon has hired a ton of former procurement officials, local government folks. They’ve hired people who are kind of the folks who do the presentations at the annual procurement conferences, like the folks that are looked to as kind of leaders in the field. And so, they have this army of folks out there selling governments into signing up with Amazon, into using Amazon. We looked a lot at their marketing material to local governments and they make a lot of claims about you’re going to have access to all this data and information. And they say this is a great way to support your local economy. You can buy local because all those local businesses you love can be on Amazon’s platform and you can buy directly from them.
Of course, they don’t say in any of that marketing material, and by the way, Amazon takes a 50 percent cut off the top in seller fees and it’s actually not possible for your local businesses to survive under those kinds of terms.
But they make this whole pitch to governments and they present it as kind of like modernizing. And I think that that can seem attractive as well. Like this is a sort of modernizing way to go.
I was also struck as we were working on this by how—because local governments and schools have been underfunded and understaffed, they are kind of vulnerable. Like they’re in that position where kind of Amazon’s saying, hey, come do this. And it seems like an easy path, even if it’s the more expensive, less transparent, less accountability, worse for you in the long run because you’re killing the businesses that actually pay the tax revenue that supports the schools, right? So, it’s a bad idea, but it can be expedient in the—it can seem expedient, at least in the short term.
TEDDY DOWNEY: I want to get into the problems with Amazon products in a second. But before we get there, did you guys come up with a ballpark number on how much Amazon is effectively, through their pricing, basically stealing from these municipalities and these students? Did you come up with like a ballpark figure for that?
STACY MITCHELL: Yeah, in terms of the dynamic pricing, it’s impossible to really know if these schools and cities insisted that Amazon offer fixed prices and they did a competitively, a competitive bidding process. It’s hard to know what those numbers would be. I should also say that our data, while it’s fairly extensive—I think had for the dynamic pricing analysis, we had about 300,000 purchases—in many cases, it was a fairly small set of items. So, we had quite a few price observations, but we only had as many price observations as we had.
But within that context, we were able to say that had the school districts in our sample consistently gotten the lowest prices in our data, they would have saved about 17 percent. So, for example, the Denver Public Schools spent about $5.7 million with Amazon Business in 2023, and had they received the lowest prices that we observed on those same products, they would have saved about a million dollars.
TEDDY DOWNEY: That is wild. That is really wild. So, another aspect of this is Amazon—for people who aren’t familiar—is sued pretty frequently for fraudulent goods being sold on their marketplace. You think you’re buying one thing and it’s a knockoff from China or what have you, dangerous products, defective products. You’ve done a lot of work on this. The report goes into that being a problem as well.
Can you walk us through, not only are you getting dynamic pricing where you can be saving 17 percent if you just didn’t use Amazon, you’re also getting ostensibly potentially fraudulent, potentially defective, products, right? Walk us through that because I think that just makes it even more ridiculous. They’re winning these bids, ostensibly a municipality. It’s one thing if someone is like, okay what? I’m just going to roll the dice and hopefully I get what I want on Amazon. I mean, ideally maybe that wouldn’t be something your average citizen would do. But for a municipality, it seems like a huge risk. You put a defective product in a school? I mean, that just seems unconscionable. What was your finding on that front?
STACY MITCHELL: Yeah, I mean, Amazon’s platform is just this wild west, right? It’s like all of these unvetted sellers, there’s this ever-changing catalog. It is ripe for fraud. It’s ripe for counterfeits and even dangerous products. As you said, there’s been a ton of reporting on this, the kinds of things sold on Amazon. And cities and schools are completely vulnerable to this.
And again, sort of in contrast to the traditional way that procurement has worked, where you have a legitimate local supplier or regional supplier who is working directly with the manufacturers of the products and you’re signing a contract just for the items that you actually are going to use, like there’s not a lot of room to go wrong there. With Amazon, there’s a ton of room to go wrong. I mean, we certainly heard from—we talked to one office supply dealer, for example, who was seeing that Avery labels were like super cheap on Amazon. And he goes to Avery and he’s like why is it that you’re charging me more than I’m seeing on Amazon? And they were like, those are all counterfeit. They’re not real. They’re not ours. We’re not selling to Amazon, but they’re just counterfeit. They’re labeled Avery and they’re not.
So, there’s that kind of a problem. And then it can go into dangerous products as well. And not only in the context of schools, but you’ve got cities who are buying stuff for public works departments, who are buying like cleaning supplies, like things where there are real hazards potentially coming into play.
And then the other thing is that this kind of unvetted marketplace opens up the possibility for more risk of employees buying stuff for personal use or things that they shouldn’t be buying. And we found lots of examples of things that didn’t seem like they had any legitimate public purpose, like make up, clothing. I found a Virginia public university spent about $900 on sex toys, one employee. And it’s like, I can’t think of why this is a legitimate —
TEDDY DOWNEY: Very in-depth sex ed class. I mean, that’s pretty implausible, pretty implausible. Yeah.
STACY MITCHELL: Yeah, and there’s been quite a bit of reporting and some court cases of Little Rock school district, a school administrator pleaded guilty to charging nearly $200,000 of personal items onto the Amazon account. I mean, so this is happening. We’re seeing these kinds of cases pop up around the country illustrating that this is in fact a real risk.
TEDDY DOWNEY: This just strikes me as so problematic on so many levels. You have fraud at the user level. You have fraud in the products. You have higher prices than you’re otherwise paying. You’re not supporting the local business, which ostensibly you would think would do well in a local procurement. Has there been a backlash at all? Or is it just like they keep getting more contracts? I mean, you would think that, at some point, there would be some learning by the municipalities, but it doesn’t seem that way. Is there any response yet? Or are we still going in the direction of Amazon winning more business?
STACY MITCHELL: Yeah, I mean, we’re certainly hoping with this report to really shine a spotlight on this. As I said, there’s been no real coverage that any of this stuff is going on. And it’s procurement, which I think people, you know, it sort of seems like a boring topic. And so, I think there is a challenge to get people to look at this.
What we’re hoping with publishing this report, and work that we’re going to be doing in the coming months, is that we will have elected officials at the city level stand up and say this is a bad idea. And in fact, there are a few examples that we found of places where that’s happened.
And that in doing so, other cities will be looking and going, wait a second. What is going on with our procurement? You mean we’ve signed contracts that have dynamic pricing? To just really raise the alarm about this. Cause I think it’s just been happening quietly.
I will say just one of the things that’s so—and this kind of gets into kind of competition policy and thinking. And I think illustrates sort of the failures of sort of public policy discourse around competition and monopoly policy. As far as we can tell, a lot of school districts seem to think that dynamic pricing actually is the way to get the lowest prices. And I’m sure this is what Amazon is telling them explicitly. They are saying—we found in their marketing materials—our marketplace has a lot of sellers. Therefore, it’s like a real market and you’re naturally getting the lowest price.
Even though obviously behind the scenes, Amazon’s algorithms are like a puppet master pulling the strings on who’s shown in the buy box, how are prices being manipulated, how the fees on Amazon are driving prices higher. All of that’s going on. But they’re saying to local officials, this is like a market. You can trust that it’s always the lowest prices.
And we found examples in like a Kansas school board meeting, for example, where the administrator was saying, yeah, we always get that. That’s the nature of this. We get the lowest prices. And so, that kind of myth is something that I think really we need to overcome.
TEDDY DOWNEY: So, would that be false marketing if they’re saying you’re always—I mean, ostensibly they’re—was that in the marketing materials, that they’re always getting the lowest price because it’s a market? Or was that just something that this school board kind of extrapolated from the pitch?
STACY MITCHELL: Yeah, it’s explicitly in Amazon’s marketing material. And I can try to pull up the quote from our report. We did quote some of this marketing material. My guess is that if you read it, it’s been vetted by a lawyer to imply what we’re saying, but not say it so explicitly that you get in trouble.
TEDDY DOWNEY: And maybe talk a little bit more about these communities that have gone a different direction. I always like to think about like what is the example here of doing something differently?
STACY MITCHELL: Yeah, I mean, I think one of the examples that we found was the City of Tempe in Arizona which is sort of part of the Phoenix Metro. There was a bookstore owner, Gail Shanks, who owns the Changing Hands Bookstore, longstanding local business. And she got wind somewhere, I don’t know if it was reported locally, that the city was thinking about signing onto a contract with Amazon. And she started making calls and raised a lot of concerns.
And the city council member, Lauren Kuby, who’s now a state rep, she looked at this and said, no way are we doing this? And the city reversed course. They backed out of signing onto that contract and their purchasing with Amazon plunged. It would have been about $200,000 in 2017. And by 2023, it had fallen to about $30,000. And instead, they really refocused on getting their supplies from local suppliers and local dealers.
Phoenix, right next door, is another example of a city that buys almost nothing from Amazon and really prioritizes local businesses. So, they have an approach where for any contracts under, I think it’s $250,000, they try to get price quotes from at least three local businesses to consider in the mix. And so, they’ve, and they’ve worked really hard to sort of have a pipeline of local suppliers.
A lot of the reason for that kind of knowledge or perspective or framework within Arizona comes from the fact that the local First Arizona—it’s an organization of about 4,000 independent small businesses across the state that has done a lot of education on this topic and just generally on local economy and why local businesses matter. And so, elected officials there are more attuned to this maybe than in other places.
We found a few other examples. I mentioned El Paso office products. One of the schools in Texas that they were selling to was approached by Amazon. And they were like, oh yeah, we’re going to sign on to this Amazon contract. And they said to El Paso office products, oh, you can be a seller on Amazon. So, we can keep doing business with you. And, of course, what Amazon didn’t mention to the school district was their nearly 50 percent fees. And when Sandy Grodin, the owner of El Paso office products, explained that, the school district went, oh, wait a second. And they backed out of that and have continued to do business with him.
TEDDY DOWNEY: And you also have a bunch of policy recommendations for these local and state governments. Let’s talk local and state and then get to federal. What are some of the solutions to going in a new direction here?
STACY MITCHELL: Yeah, I mean, we think that dynamic pricing and public sector contracts should be banned. We think states should ban this practice for municipalities, school districts, state agencies. Like this should just not be part of public sector procurement. You should have fixed price contracts and competitive bidding. And we encourage cities to also take a look at how purchasing cards, which are like credit cards, to make sure that there’s real transparency and how people are using those. Those are often used for kind of unplanned off contract kinds of expenses. And we found in our research that it’s often very difficult to even find out what’s being spent under those cards. Because you’ll just get a line item in the records that says a payment was made to such and such bank for this credit card. But it’s like, well, what was bought under that credit card and from whom? There’s a lack of transparency there and there needs to be more oversight of how that’s happening.
And then we really need to see cities and schools prioritize competitive bidding and to set spending targets that channel procurement towards local businesses and really make sure that you’re supporting your local economy and that you’re creating a healthy competition in the procurement space. So, that you’re not in fact driving towards a monopoly that’s going to ultimately further sort of undermine you.
We have a whole variety of sort of recommendations around transparency and also encouraging governments to think about developing their own online marketplaces. There’s some examples that we have in the report of a company called G-Commerce that has set up marketplaces for local governments. They have one with San Francisco, Long Beach, a few other places in California. And these are platforms where small businesses can sell to the government. It’s an online marketplace. You can sort of sort through and see different kinds of offers, but the fees are much, much, much lower than they are on Amazon. And it’s a neutral marketplace. You don’t have the company itself selling on the same marketplace. It’s a neutral marketplace. So, there are options like that, I think, at the local level that are important.
TEDDY DOWNEY: And I’m constantly dealing with—I have a small company. We’ve got 50 some odd employees. But this ostensibly could be good for companies as well, recommendations for how companies do their procurement. If you’re looking at how to get better pricing, have less fraud in your procurement process. I mean, does this extend to pretty much any big entity that needs office supplies and similar procurement process to what these municipalities do?
STACY MITCHELL: Yeah, you mean like the marketplace, like the G-commerce marketplace? I think that they are—I actually don’t know if they have, I think they are working on—
TEDDY DOWNEY: Or just the report.
STACY MITCHELL: Oh, yeah, yeah.
TEDDY DOWNEY: I mean, just the report generally. It’s just like, ostensibly, if they’re doing this to your municipality —
STACY MITCHELL: Oh, totally.
TEDDY DOWNEY: This is how your corporate procurement is getting ripped off the same way. I mean, yeah, this is more objectionable because it’s stealing from students, from money that’s ostensibly supposed to be buying them stuff. But maybe a slightly less sympathetic cast of characters in your corporate procurement officer, but there are lessons in here for them as well, no?
STACY MITCHELL: Absolutely, absolutely. I mean, there’s an association of independent office suppliers and janitorial, like cleaning supplies called Workplace Solutions Association. And that’s a great place to like find out, do you have a local supplier in your region? And contract with them. You’re going to get better prices, better service. It’s going to just be a different relationship altogether.
TEDDY DOWNEY: That’s super helpful. We have a question from our listeners. So, let’s go to the listener question here. How should contracts be written to avoid this? We already went through a couple, banning, dynamic pricing. What else can someone doing an RFP, writing up a contract, do to avoid this type of ripoff here?
STACY MITCHELL: Yeah, I mean, definitely, you should have fixed price contracts and competitive bidding to award those contracts. I think one of the things that this is bringing to mind, that’s an aspect of the story that we haven’t touched on is there are these group purchasing organizations—and they’re companies in many cases. In some cases, they’re nonprofit. But they’re also big for-profit companies that are in this space. And group purchasing organizations go back a ways. And they have the sort of legitimate purpose, which is, if you’re a busy school district, you don’t necessarily have time to do an RFP process for all of your supplies.
And so, the idea is like, you can be part of a network of school districts where another school district has gone through that process. And you can say, oh, this is a competitively bid, vetted contract. We’ll just piggyback on that and we won’t have to do the process ourselves. So, that’s what group purchasing organizations facilitate.
But what has happened is that there are these for-profit entities, and in particular a company called Omnia Partners, which is a private equity backed company that has rolled up a ton of these group purchasing organizations. And now it’s like the 800 pound gorilla in this space. They dominate it. They count 150,000 local agencies as part of their member network.
And they have been the sort of ally of Amazon’s in this whole thing. And so, there are two contracts that Amazon has with them. One that was originally created through a school district in Virginia and another one with the state of Utah. And so, what happens is like the State of Utah negotiates that contract with Amazon. It includes dynamic pricing and the other things that we’ve been talking about. And then Omnia Partners picks it up and adds it to its catalog. And agencies across the country then sign on, often under the assumption that this is a truly vetted thing. And so, it’s unclear like how much they are really looking at the details of what this is about.
Omnia gets a cut of every dollar that goes through one of these Amazon contracts. And so, the basic deal is like, they kind of offer this veneer of accountability and like they’re a known entity. And Amazon’s army of salespeople go out and peddle these contracts. And everybody profits, or they both profit, at the expense of schools and cities in that context. And so, we are really hoping that elected officials, at the federal and state level in particular, will start to question, take a look at, what is going on with these group purchasing organizations and particularly Omnia Partners.
TEDDY DOWNEY: And another question here. Is there anything to do about this corruption? I think they’re talking about where Amazon is hiring the officials at the state level. Are they doing that at the federal level too? I imagine they are. We’ve done some reporting on that in the past, but I’m curious. Is that going on at the federal level also, what to do about this corruption issue where the procurement officials are being hired and then sort of engaging on behalf of Amazon to get these contracts?
STACY MITCHELL: Yeah, I mean, when Amazon first set its sights on going into public sector procurement, they made their first big move in 2016 when they hired Anne Rung who had been the top procurement official in the Obama administration. So, they brought her onboard and that was the beginning of this whole revolving door thing they’ve been doing. Yeah, I mean, I think this obviously speaks to some accountability around where public officials go. But also, I think it’s on us to demand that our local governments do better and they not be hoodwinked into this.
My colleague, Kennedy Smith, who as I mentioned before, did a lot of this data gathering and research. She’s a Senior Researcher here at ILSR and she’s written a citizen’s guide, which is linked to from the same page as the report. And so, it’s like, if you want to go find out, we’re going to walk you through the steps of is your school district buying from Amazon? How can you get that information? And then here’s a set of steps you can take to then say to your school board or your city, like you need to get out of this and here’s why. And so, we have a stepbystep instruction guide for doing that.
TEDDY DOWNEY: And I have one last question here. We were talking about what can municipalities and the federal government do to sort of facilitate more fair procurement, more competitive procurement? Is there a role for the postal service in this potentially?
I mean, obviously, right, the way it is now, they give volume discounts to Amazon. So, they basically preference Amazon. And Amazon just basically leeches off of the postal service to sort of extend their network and have the postal service take on unprofitable routes and things like that.
But if you’re looking at, you know, there’s reporting that Amazon’s walking away from their contract with the postal service. I question whether or not they’re really willing to do that. But let’s say that the postal service calls their bluff and says, yeah, fine. We’ll go out on our own. Does that create an opportunity to actually have an alternative procurement platform or have the postal service come in and create an opportunity for small business to compete on a level playing field with Amazon more broadly than just at the office supply level where there is that expertise and same day delivery already?
STACY MITCHELL: Yeah, that’s a really interesting question. I know that the postal service does offer—I think it’s sort of under marketed—but they do offer this kind of local package delivery service if it’s within the same city. And so, it’s interesting to think about how that could potentially be expanded and could be a way for governments, as you said, like when it’s not something like office supplies where you have a contract because you’re buying a lot of that sort of stuff. But you have these one-off kinds of needs and you could potentially use that to buy from local retail businesses within your city and have it delivered and be able to bypass Amazon. I think that would be a great idea. I think generally speaking, the postal service is a potentially really powerful set of infrastructure for addressing Amazon’s monopoly power by creating a real alternative.
TEDDY DOWNEY: Anything else that you had in the report that you want to talk about? I mean, there’s a lot in there. You spent years looking into these types of things. I know that the dynamic pricing was the sort of driver of the headlines here. Particularly if you’ve already gotten feedback. If some people have already reached out to you and said, hey, we want to fix our contracts or anything that you want to talk about that we haven’t touched on yet.
STACY MITCHELL: Yeah, well, a couple of things. We are planning an event, a virtual event, probably in February that will have some local officials who’ve rejected Amazon and other speakers. And so, we are hoping, now that this is out in the world, to reach more local elected officials and other folks working in cities and schools. And so, we’d love to get folks to that event because they’ll be able to hear from their peers about ways to address this and ways to adopt different policies that really support the local economy and support competition.
I will also say we that what’s happening at the federal level is disturbing. We’ve got the General Services Administration, which is a sort of hub for procurement at the federal level. The Trump administration is steering even more procurement through GSA now. That’s their policy. And GSA created this commercial platforms program many years ago, and this has been bipartisan. Amazon, during the first two years of that pilot, captured 96 percent of the spending on the commercial platform done by federal agencies. So, we have a number of recommendations in the report and we’re hoping to see folks at the federal level run with some of these things.
For example, right now, agencies that buy from a small business that’s a third-party seller on Amazon, they get to count that toward the 23 percent. There’s a requirement at the federal level that agencies direct 23 percent of their spending towards small businesses. So, they buy off Amazon and they get to count it as small business spending, even though Amazon’s taking a 50 percent cut and is really the one profiting from that.
So, we have a set of recommendations. Like, at this point, Amazon, in terms of selling commercial products, is still relatively small at the federal level, but it is dominating this pilot. And the writing is on the wall in terms of where that could go if there isn’t real intervention.
TEDDY DOWNEY: Is there any timing around like when that pilot is supposed to be expanded? Or is that sort of an ongoing thing?
STACY MITCHELL: Yeah, I misspoke a little bit in the sense that the pilot is over. It was a three-year pilot. There’s data that’s made public for the first two years. And so, now we’ve moved into this other phase and the government has brought in other commercial platforms. So, it is a bit more diverse in terms of the companies participating. But what isn’t clear is whether any of those other companies are actually getting much in the way of sales. And so, one of the things that we’ve called for in the report is some type of cap. So, the federal government says not no single commercial platform can capture more than X percent of the total spending in this commercial platforms program.
We also point out that the federal government has something called GSA Advantage, which is a public platform for multiple vendors. And people say it’s a little cumbersome. I mean, there are things that could be modernized or improved about it, but we should do that. We should invest in improving it because it’s a neutral platform that companies can participate in without Amazon becoming this kind of monopoly gatekeeper between federal buyers and businesses that want to sell to government, sucking out a huge percentage of the revenue. Like that makes no sense. We should make an investment in the public platform.
TEDDY DOWNEY: When it comes to procurement, I mean, we’ve done this with defense contracting where there are integrity rules, right? Rules to ensure that it is a competitively bid contract. And that’s a process, right? Getting bids, that is a process. Reading the contracts, that’s a process. Like reviewing the contract. And for making sure your lawyers take a look at specific clauses and things like that.
So, procurement can be a cumbersome process no matter what. And it’s funny to me that none of the benefits—a lot of the times, when you talk to a procurement official, they just wave away those benefits. And they’re like, look, I just want to click buy or what have you.
And it’s just like, there’s been a sort of intellectual loss of the benefits of having a program with robust integrity measures in this sort of pursuit of almost the illusion of efficiency. Like, well, I can just get the best result really quickly this way. And you lose out on all those other things.
And so, I think that’s how you end up in some respects with this bad outcome that your report goes into—higher prices, ripping off students, defraud in the system. And we’re back to, how do we come up with some integrity rules to ensure that we get what we want, get a good deal for our citizens?
So, I’m excited about your event here in February. I look forward to that. This paper was absolutely amazing. I’m actually kind of jealous that you got all this information. We’ve tried to get this information in the past. We’ve had a tough time. Your team, I’m impressed. They were able to put it all together. Kudos to them. Amazing, amazing work. And thank you so much for doing this, Stacy.
STACY MITCHELL: Thank you. I’m really glad to be here with you. And you all are amazing in the reporting you do. So, it’s really nice to have a chance to be on the podcast.
TEDDY DOWNEY: Thank you, Stacy. And thanks to everyone for joining the call today. This concludes the call. Bye-bye.
