Amazon already has a deal to supply US local governments with everything from computers to toilet paper. Now, the tech giant is moving to capture federal procurement as well. Amazon’s potential dominance over government procurement has provoked consternation among critics who say that it will devastate small retailers, erode local tax bases, and lead to higher prices in the future.
Brett Bachman wrote about Amazon’s drive to take over government procurement for Vox:
According to the Governing Institute, a Washington, DC-based think tank that studies government spending, city and state agencies spend close to $3.25 trillion annually, making local government the second largest US industry behind manufacturing. Two years ago, the Seattle-based tech giant signed a deal with the cooperative purchasing group US Communities, which serves more than 55,000 of these agencies across the country. This marked the company’s first large-scale foray into the government procurement market, and the contract is estimated to be worth some $5.5 billion over its potential 11-year life span.
With that deal serving as a proof of concept, Amazon is now pushing to become the vendor of choice for the federal government as well, which would allow the company to collect fees on a large chunk of the more than $500 billion spent annually on federal procurement.
This shift in government purchasing is having devastating effects on small-business owners like Gayle Shanks, who runs an independent bookstore in Tempe, Arizona, called Changing Hands. The city, and the school district in particular, had been a reliable customer, buying thousands of dollars in library books, toys, and other items every year. Now that lifeline is drying up.
“Because of Amazon entire industries are dissolving,” said Shanks, who successfully pushed her local government last year to stop buying from the company. “At a certain point, we have to ask ourselves, how big are we going to let Amazon get?”