A major new report has raised serious concerns that schools and local authorities across the country are being overcharged for essential supplies due to their reliance on Amazon's controversial 'dynamic pricing' model. The analysis suggests public funds are being wasted on erratic price swings for items like stationery and cleaning products.
Millions in Potential Savings Lost
The report, compiled by the non-profit Institute for Local Self-Reliance, scrutinised government spending data and public records. It found that public entities could have saved an average of 17% on repeatedly ordered items if they had consistently secured Amazon's lowest available prices.
One stark example highlighted was Denver Public Schools in Colorado, USA. The district spent $5.7m with Amazon in 2023. Researchers estimate it could have saved approximately $1m that year alone had it been able to lock in the platform's lowest prices instead of being subject to continuous fluctuations.
On a single day in August 2023, the district placed two separate orders for identical bulk cases of dry-erase markers. It paid $114.52 for one and $149.07 for the other, demonstrating the unpredictable nature of the pricing system.
How Dynamic Pricing Impacts Public Procurement
Dynamic pricing uses algorithms to adjust costs in real-time based on supply, demand, and other market factors. While companies argue this allows for competitive adaptation, critics warn it leads to a lack of transparency and inflated costs for public buyers who have abandoned traditional competitive bidding.
The report argues that Amazon has persuaded cities and school districts to move away from negotiating fixed, low prices with local suppliers. Instead, they adopt Amazon Business, a one-stop procurement portal praised for its convenience but criticised for its opaque and erratic pricing structure.
Spending has soared as a result. The study found that in 2023, school districts and local governments serving over 50 million Americans spent $2.2bn with Amazon – a near fourfold increase since 2016.
Amazon's Rebuttal and Ongoing Scrutiny
In a firm response, an Amazon spokesperson dismissed the report as "flawed and misleading". The company stated it offers "everyday low prices" that meet or beat competitors and provides tools like price ceilings to protect customers. It also emphasised that its platform helps customers find and purchase from certified local businesses.
However, the allegations form part of a wider pattern of scrutiny. In 2023, the US Federal Trade Commission and 17 state attorneys general filed a lawsuit accusing Amazon of using a secret algorithm, codenamed 'Project Nessie', to extract over $1bn from consumers by artificially inflating prices.
The non-profit institute is now calling for local and state governments to ban dynamic pricing in public procurement and to prioritise independent, local businesses to ensure better value for public money and support local economies.
