'Bundling' confusion

Contract bundling seems to be a difficult issue for people to understand. The June 16 issue of Federal Computer Week is a case in point. On two successive pages — 18 and 19 — you find squibs relevant to the raging contract-bundling debate.

One article used the expression "contract bundling." It reported results of an FCW.com reader poll that posed the question, "Does contract bundling have a negative impact on small businesses?" The poll tally: 78.8 percent of respondents said yes, 21.2 percent said no.

The other squib was a Circuit item with the headline, "Lessons learned: Smart contracting." The item discussed a new report from the General Accounting Office on the Defense Department's service contracting, titled "Best Practices: Improved Knowledge of DOD Service Contracts Could Reveal Significant Savings." That squib never mentioned the expression "contract bundling."

The GAO report, according to FCW, stated that DOD could generate huge savings if it followed the successful practice "of several large commercial firms that have reduced services costs by analyzing procurement data across different divisions and finding places where they can capitalize on their buying power." This concept, as GAO notes, is called spend analysis, for which a robust nongovernment business exists.

Does anyone want to guess what that money-saving, GAO-endorsed concept means? You guessed it — contract bundling! Companies look for opportunities to consolidate, or bundle, smaller contracts into larger ones because they know that doing so capitalizes on their buying power.

Anyone who buys giant economy sizes at the supermarket instead of single-servings knows the underlying common sense of this approach. Yet this runs afoul of the anti-bundling mantra.

FCW's poll question was misleading. With all due respect, asking this question is similar to asking if the automobile had a negative impact on small-business buggy whip manufacturers or horse manure sweepers, and then using the results to make conclusions about the overall impact of the auto on small business. It is probably true that contract bundling has a negative impact on the volume of small-business contracting with the government, though even that statement is somewhat controversial.

Even though small businesses held certain contracts in the past, there is no guarantee that those contracts will continue. If small businesses are losing ground on bundled contracts, they are gaining ground elsewhere in the system.

Friends of small business in the federal marketplace should concentrate their efforts on promoting the ability of small business to sell to the government in areas where they are competitive. They should not prop up uneconomic ventures kept alive only by contracting decisions made on shaky business grounds.

Kelman is a professor of public management at Harvard University's Kennedy School and former administrator of the Office of Federal Procurement Policy. He can be reached at steve_kelman@harvard.edu.