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Tuesday, February 19, 2013

Contract “Bundling” Under the Small Business Act: A Legal Overview

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.”

The 111
th Congress further amended the Small Business Act in 2010 to address concerns about bundling. Among other things, the Small Business Jobs Act (P.L. 111-240) requires 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 subject all federal agencies to limitations upon the “consolidation” of contract requirements similar to those that the National Defense Authorization Act (NDAA) for FY2004 imposed upon defense agencies. The definition of “consolidation” is much like the definition of “bundling,” encompassing 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. Specifically, P.L. 111-240 prohibits agencies from carrying out an acquisition strategy that includes a 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. Subsequently, the 112
th Congress enacted legislation (P.L. 112-239) that repeals the consolidation-related provisions of the NDAA for FY2004 and subjects defense agencies to the same requirements as civilian agencies under P.L. 111-240. P.L. 112-239 also amends the definition of “consolidation” to include certain requirements for construction. In addition, it requires the Government Accountability Office (GAO) to review the extent to which written determinations that the consolidation of contract requirements was “necessary and justified” meet statutory and regulatory requirements.

It is unclear whether or how the provisions on consolidation enacted in 2010 and 2012 may be integrated with the regulations on bundling previously promulgated by SBA and the Federal Acquisition Regulatory Council. SBA has proposed amending its regulations, including those on bundling, to address P.L. 111-240’s restrictions on consolidation. However, final regulations have not been promulgated, and no changes to the Federal Acquisition Regulation (FAR) have been proposed.

Date of Report: February 1, 2013
Number of Pages: 19
Order Number: R41133
Price: $29.95

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