It never really occurred to us that Government agencies were buying supplies from Amazon.com so we were surprised to read that purchasing supplies from Amazon was a common practice among Government purchasing agents. Someone asked DoD if that was okay. DoD said sure: "GSA's federal supply schedules are not mandatory sources. Ordering officers are encouraged to use them before going on the open market but are not required to". The fact that the Government is ordering from Amazon most certainly mean that their prices beat out the GSA schedules.
FAR (Federal Acquisition Regulations) 8.002, 8.003, and 8.004 contain a hierarchy of mandatory supplies and services sources. These include existing inventories, excess inventories from other agencies, Federal Prison Industries, people who are blind or severely disabled, and wholesale supply sources. Other mandatory sources would include public utility services, printing, vehicle leases, and metals/ores from the national stockpile.
But, if agencies are unable to satisfy requirements for supplies and services from the mandatory sources, they are encouraged to consider satisfying requirements from or through the non-mandatory sources such as the Federal Supply Schedules (also called GSA Schedule). Notice the two qualifiers; "encouraged" and "non-mandatory". The Federal Supply Schedules are not mandatory sources and agencies are not required to buy from them. Agencies are only encouraged to do so.
But if prices are more favorable from sources other than the Federal Supply Schedules, there is every reason for Agencies to use those alternate sources - they're saving taxpayer money. How widespread is this practice. We don't know. Perhaps Amazon could tell us. Can anyone really compete with Amazon's prices any more? Brick and mortar stores are continuing to close at alarming rates. How then are small Government supply contractors expected to compete with the likes of Amazon?
If you are offering supplies on a Federal Supply Schedule, you might want to check the on-line competition. If you sales are flat or dwindling, Amazon could be to blame.