Update on Contract Bundling

From GOVSALESWIKI

Installment [ 48 ] Update on Contract Bundling By Eric Aaserud

Nothing too elaborate in this installment of our Doing Business with Government series. Here, we bring you up-to-date on contract bundling, the subject of Installment 44.

Recently, the Bush administration released new reporting requirements and proposed regulatory changes designed to curb the practice of bundling. As we discussed in Installment 44, bundling is defined as the "consolidation of two or more procurement requirements for goods or services previously provided or performed under separate smaller contracts into a solicitation of offers for a single contract that is likely to be unsuitable for award to a small business."

Under the current rules, before a contract can be bundled, federal contracting officers must conduct market research to establish that there will be resulting "measurably substantial benefits," such as improved quality, cost savings or better terms and conditions. 15 U.S.C. 644(e). They also must provide 30 days notice to affected small businesses, justify their findings, and consult with a representative of the Small Business Administration (SBA) on their acquisition strategies.

Are these rules working? The statistics suggest that they're not working well. In 1991, 26,506 small businesses received new contract awards, while, in 2000, only 11,651 received new contract awards.

Office of Management and Budget officials feel that some agencies are failing to follow the current guidelines, bundling contracts that do not have to be, or should not be, combined into one. The Bush administration plan is designed to create more accountability and oversight. The plan calls for the following actions to be taken:

1. Ensure accountability of senior agency management for improving contracting opportunities for small business.

2. Ensure timely and accurate reporting of contract bundling information through the President's Management Council.

3. Require contract bundling reviews for task and delivery orders under multiple award contract vehicles.

4. Require agency review of proposed acquisitions above specified thresholds for unnecessary and unjustified contract bundling.

5. Require identification of alternative acquisition strategies for the proposed bundling of contracts above specified thresholds, and written justification when alternatives involving less bundling are not used.

6. Mitigate the effects of contract bundling by strengthening compliance with subcontracting plans.

7. Mitigate the effects of contract bundling by facilitating the development of small business teams and joint ventures.

8. Identify best practices for maximizing small business opportunities.

9. Dedicate agency Offices of Small and Disadvantaged Business Utilization (OSDBUs) to the President's Small Business Agenda.

A big part of what's going on here is that accountability has been waning with the rise of multiple award schedule (MAS) contracts, in particular GSA schedules. Such buying activity, in the form of task and delivery orders on existing pre-negotiated contracts, falls largely "under the radar." One of the likely FAR changes to come will be explicitly tying contract bundling reviews to activity taking place under these types of contracting vehicles. Another: specific requirements that agencies monitor contractor efforts to comply with subcontracting plans under such contracts.

What does this mean if you're with a small business? Strictly speaking, perhaps not a whole lot in the short term. The specific proposed regulatory changes will not even be prepared until January 31, 2003. It may be a long time before actual FAR and SBA rule changes are implemented.

On the other hand, this initiative is a big signal that the administration believes bundling has gone too far. When you see a bundling coming that will affect your business -- and you make noise about it -- a few more government acquisition folks may be listening this time.

More Information

Contract Bundling -- A Strategy for Increasing Contracting Opportunities for Small Business http://www.whitehouse.gov/omb/procurement/contract_bundling_oct2002.pdf