Proposed rules would limit contract bundling

Proposed FAR changes

Two proposed rules published in the Federal Register Jan. 31 would limit the ability of agencies to bundle contracts in an effort to bring more small businesses into the federal procurement arena.

The controversial practice increases government efficiency, say its champions, but limits opportunities for smaller players, according to its critics.

Under current rules, agencies can often consolidate multiple requirements for goods and services into a single award that small businesses are less able to compete for. The proposed new rules would place more restrictions on such bundles and subject them to more reviews.

The proposal is based on the Bush administration's Small Business Agenda, which was unveiled in March 2002.

An Office of Management and Budget report issued last fall reported that each 100 bundled contracts takes 106 contracts out of reach of small businesses and that small businesses lose $33 for every $100 awarded on a bundled contract.

The proposed rules would amend the Federal Acquisition Regulation (FAR) and Small Business Administration regulations to implement four points of a nine-point action plan spelled out in the fall report. The other elements of the plan can be accomplished without amending rules, according to the proposals.

Specifically, the proposed rules would:

* Require bundling reviews of multiple-award contract vehicles and task and delivery orders issued under those vehicles.

* Require the agency to coordinate with its small business specialist for contracts beyond specific dollar-value thresholds: $7 million for the Defense Department; $5 million for NASA, the Energy Department and the General Services Administration; and $2 million for all other agencies. If the specialist finds unjustified bundling or bundling not properly identified, the specialist will notify the agency's Office of Small and Disadvantaged Business Utilization (OSDBU).

* Require the OSDBU to periodically review its agency's track record for using small businesses, for documenting and justifying bundling, and for mitigating the effects of justified bundling on small businesses.

* Require contracting officers to assess contractor compliance in subcontracting to small businesses. The current FAR requires such a review of the contractor's subcontracting history only in solicitations that offer a significant opportunity for subcontracting. The proposed rule would make such reviews more consistent.

* Amend SBA's regulations to require SBA procurement center representatives to identify alternative strategies to increase small business participation when reviewing any acquisition not set aside for small businesses. Currently, the regulation requires that the representatives consider only whether a small business set-aside would be appropriate.

Comments are due on both proposals by April 1. DOD, GSA and NASA issued the proposed rule recommending changes to the FAR, and SBA issued the proposed changes to its own regulations.