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What Is Contract Bundling?
by Vikki Nelson
The Small Business Reauthorization Act of 1997 defines contract bundling as “consolidating 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 UNLIKELY to be suitable for award to a SMALL BUSINESS concern.”
The Act lists several factors that might cause unsuitability for award to a small business. These are:
* The diversity, size, or specialized nature of the elements of the performance specified;
* The aggregate dollar value of the anticipated award;
* The geographical dispersion of contract performance sites; or
* Any combination of these criteria.
The Act requires each federal department and agency, to the maximum extent practicable, to:
1. Structure contracting requirements to facilitate competition by and among small business concerns, taking all reasonable steps to eliminate obstacles to their participation; and
2. Avoid unnecessary and unjustified bundling of contract requirements that may preclude small business participation in procurements as prime contractors.
Prior to bundling any contracts, agencies are required to conduct market research to determine whether contract bundling is necessary and justified. To justify contract bundling, agencies must demonstrate “measurable substantial benefits,” such as cost savings, quality improvements, reduction in acquisition cycle times, or better terms and conditions. The Small Business Administration’s implementing regulations further define “measurably substantial benefits” by requiring agencies to demonstrate -
* For contracts of $75 million or less - benefits equivalent to 10 percent of contract value (including options), or
* For contracts over $75 million - benefits equivalent to 5 percent of contract value (including options) or $7.5, whichever is greater.
Several provisions of the Federal Acquisition Regulations (FAR) establish responsibilities for agency personnel who are considering contract bundling. The FAR places responsibility on agency acquisition planners to structure requirements, to the maximum extent practicable, to facilitate competition by and among small business concerns, and avoid unnecessary and unjustified bundling. Agency contracting officers are required to: perform market research to determine whether bundling is necessary and justified; justify their determinations in acquisition strategy documentation that identified measurable substantial benefits that meet the statutory and regulatory requirements; and consult with SBA representatives on their acquisition strategies.
WHY ARE CONTRACTS BUNDLED?
Increased demands to make the acquisition process quicker and less complex, coupled with reduction in the overall workforce, have driven ACQUISATION MANAGERS to bundle requirements. To meet these demands and increase customer satisfaction agencies have increasingly consolidated contractual requirements into larger contracts and used limited and simplified competition procedures for acquiring products and services.
WHAT IS THE IMPACT?
According to a report prepared for SBA’s Office of Advocacy, for every 100 “BUNDLED” CONTRACTS, 106 individual contracts are no longer available to small businesses. For every $100 awarded on a “bundled” contract, there is a $33 decrease to small businesses. Because these types of contracts run longer and encompass a greater scope, competition is reduced in terms of frequency and the number of opportunities for smaller businesses.
In other words, the bigger contractors and businesses just get BIGGER and the smaller businesses just get smaller or just FADE AWAY!
Small businesses had better stand up and be counted or they will be counted out.
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