Senate OKs DOD bundling limits

Proposed 2004 Defense authorization bill amendment

The Senate today passed with unanimous consent an amendment to the 2004 Defense authorization bill that would limit the Defense Department's use of bundled contracts.

The amendment, introduced by Sen. Susan Collins (R-Maine) and co-sponsored by Sen. James Talent (R-Mo.), Kay Bailey Hutchison (R-Texas) and Olympia Snowe (R-Maine), was first announced earlier in the day.

Bundling, a practice that many government departments use to bring several projects or services together under one contract, has many detractors, who argue the practice eliminated smaller businesses from competing for what were smaller projects. The practice has proven to be a two-sided coin, with some arguing that efficiency increased at the expense of small business.

According to the Office of Management and Budget, the number of small businesses receiving new contracts fell from about 26,500 in 1991 to 11,500 in 2001. But a Pentagon statement issued earlier in May indicated small businesses had won $5 billion more in DOD contracts in fiscal 2002 than they won in fiscal 2001.

In a statement issued May 21, Collins called DOD's use of bundling "prolific" and is looking for more oversight by the Defense secretary and the secretaries of the armed services.

"The proliferation of contract bundling, especially at the Department of Defense, has dramatically reduced the government's contractor base," said Collins, chairwoman of the Governmental Affairs Committee. "It's a losing situation for everyone - for small businesses, for the government and, ultimately, for the taxpayers."

Collins' amendment, calls for the Defense secretary, the secretaries of the services, and head of each defense agency, "to ensure that the decisions made by that official regarding consolidation of contract requirements...are made with a view to providing small-business concerns with appropriate opportunities to participate in Department of Defense procurements as prime contractors...."

It also says the department, armed services and Defense agencies cannot execute an acquisition strategy that includes a consolidation contract in excess of $5 million unless a senior procurement executive first: conducts market research, identifies alternative contracting approaches that involve less consolidation, and determines that the consolidation is "necessary and justified."

As recently as February, others have proposed changes to contracting rules they claim eliminate small businesses from contract competitions.

The controversial proposed change to the Federal Acquisition Regulation (FAR) would force agencies to split large contracts into several smaller ones in many cases. The proposals, published in the Jan. 31 Federal Register, would amend the FAR and the Small Business Administration's rules for small business prime contracting assistance.

One of the proposals includes requiring an agency to coordinate with its small business specialist for contracts beyond specific dollar-value thresholds, setting a goal of $7 million for DOD.