“Contract bundling” describes the practice of combining several small government contracts into large ones and has expanded in the form of government-wide acquisitions of goods and services.  Contract bundling is usually defended as a means to obtain economies of scale and improve contract management.  Such actions may achieve these goals but still inhibit competition because fewer contractors can bid for such larger contracts forcing smaller firms to not compete or providing their services as subcontractors to a large business.  In response, Congress passed the Small Business Reauthorization Act requiring agencies to justify contract bundling.

 The statue requires agencies to conduct market research before proceeding with a strategy that can result in bundling.  Five factors must be considered in its analyses: (1) cost savings (2) quality improvement (3) reduction in acquisition cycle time (4) better terms and conditions and (5) other benefits. If the agency head determines an acquisition strategy will result in substantial bundling, it must identify the benefits, impediments to prime contracting by small businesses and specific actions to be taken to maximize small business participation.

The decision to bundle two or more prior procurements into one must justify its decision and show that it is “unsuitable” to award to a small business.  Unsuitability can result from a contract’s diversity, size, specialized nature, dollar value, geographical coverage or any combination of these factors.  In addition the agency must justify its decision by identifying sufficient dollar benefits.  Sufficient cost savings are considered 10% for a contract valued at less than $75 million and 5% for a contract over $75 million.  A reduction in administration costs alone will not be sufficient to justify bundling.

The new rules provide two means to assist small businesses to obtain work under bundled contracts.  First, if the procurement offers significant opportunities for subcontracting the agency must make this an important factor in evaluating offers.  The evaluation will include both the offeror’s proposed rate of subcontracting to small businesses and the offeror’s past performance in meeting subcontractor goals in other contracts.  An offeror who is a small business will automatically receive the highest possible score.  Second,  two or more small businesses may submit an offer as a joint venture without regard to affiliation rules.  By qualifying as a small business, the joint venture is exempt from subcontracting requirements but still receives the highest possible score for subcontracting.

{TAG_FORM_TITLE}