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Monday, August 22, 2011

Contract “Bundling” Under the Small Business Act: Existing Law and Proposed Amendments

Kate M. Manuel
Legislative Attorney

“Bundling” refers to the consolidation of two or more requirements for goods or services previously provided or performed under separate smaller contracts into a solicitation for a single contract that is likely to be unsuitable for award to a small business because of its size or scope. Although bundling can potentially reduce costs or improve performance for federal agencies, it can also limit opportunities for small businesses to receive federal prime contracts. For this reason, Congress amended the Small Business Act in 1997 to require that procuring activities comply with certain procedures before issuing a bundled solicitation. Specifically, the 1997 amendments require that procuring activities (1) conduct market research to justify acquisition strategies that could lead to bundled contracts, (2) provide advance notice of bundled solicitations to the Small Business Administration (SBA) and incumbent small business contractors, and (3) implement certain procurement strategies when solicitations involve “substantial bundling.” These steps are intended to ensure that any bundling is “necessary and justified.” Only “unnecessary and unjustified” bundling is prohibited under the 1997 amendments.

The 111th Congress further amended the Small Business Act in 2010 to address concerns about bundling. The Small Business Jobs Act (P.L. 111-240) amends the Small Business Act to require that (1) agencies include in each solicitation above the “substantial bundling threshold” provisions inviting bids from teams or joint ventures of small businesses; (2) SBA promulgate regulations establishing a government-wide policy on contract bundling to be posted on each agency’s website; (3) agencies publish listings of and rationales for bundled contracts on their websites; and (4) SBA report periodically on the activities performed by its procurement center representatives (PCRs) and commercial market representatives (CMRs). PCRs and CMRs are SBA employees that work with procuring activities and private firms, respectively, to promote contracting with small businesses.

P.L. 111-240 also amended the Small Business Act to create a new section on “consolidation” of contract requirements. The definition of “consolidation” established by P.L. 111-240 is much like the definition of “bundling.” It encompasses the use of a solicitation to obtain offers for a single contract that satisfies two or more requirements previously provided or performed under two or more separate contracts that were lower in cost than the contract for which offers are solicited. P.L. 111-240 prohibits agencies from carrying out an acquisition strategy that includes consolidation of contract requirements valued in excess of $2 million unless the agency makes a written determination that consolidation of the contract requirements is necessary and justified, among other things. It is presently unclear whether or how the new provisions on consolidation will be integrated with the existing provisions regarding bundling, especially in the SBA regulations and the Federal Acquisition Regulation (FAR). SBA has indicated that a notice of proposed rulemaking will be issued in 2011, but no such notice has been issued to date.

Members of the 112th Congress have introduced several bills addressing contract bundling, including legislation that would expand the definition of “bundling” to include new requirements and construction, as well as strengthen the authority of the Administrator of Small Business in working with contracting agencies to restructure bundled procurements (e.g., H.R. 2424, S. 1334). Other legislation would require reporting on bundled procurements issued by particular agencies (e.g., H.R. 2000).

Date of Report: August 9, 2011
Number of Pages: 18
Order Number: R41133
Price: $29.95

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