Officials: Unbundling can work under a watchful eye

The Bush administration's effort to unbundle contracts when possible and mitigate the effects of necessary bundling on small businesses could work if implemented and monitored properly, government executives said today at a hearing before the Senate Committee on Small Business and Entrepreneurship.

"We believe the plan, if successfully implemented - and that's a big if - will be effective," said David Cooper, director of acquisition and sourcing management for the General Accounting Office.

Bundling is the consolidation of two or more contracts for goods or services previously provided under separate, smaller contracts. The bundled contract is unlikely to be won by a small business because it is often not large enough to handle the requirements.

According to OMB's October contract bundling report, for every 100 bundled contracts, 106 individual contracts are no longer available to small businesses; and for every $100 awarded on a bundled contract, there is a $33 decrease to small businesses. In addition, OMB found the number of small business contractors receiving new contract awards declined from a high of 26,506 in fiscal 1991 to a low of 11,651 in fiscal 2000.

Proposed regulatory changes that would implement the administration's plan to reduce bundling include:

*Requiring contract bundling reviews for task and delivery orders under multiple-award contract vehicles.

*Requiring agency contract bundling reviews of proposed acquisitions above agency-specific dollar thresholds, set between $2 million and $7 million.

*Requiring acquisitions above the dollar thresholds to be coordinated with a small-business specialist unless they are entirely set-aside for small businesses. The thresholds are $7 million or more for the Department of Defense; $5 million or more for NASA, Department of Energy and General Services Administration; and $2 million or more for all other agencies.

*Strengthening compliance with subcontracting plans where bundling is justified.

To make the unbundling effort work, "we need a uniform standard by which we can measure results at the outset, not years from now," said Sen. Olympia Snowe, R-Maine, chairwoman of the committee.

The Office of Federal Procurement Policy needs to collect concrete data from agencies that will show whether changes are being made and the results of such changes, Cooper said.

"If we are really going to hold agencies accountable, we really need to have output measures: how many contracts were reviewed, how did the action taken result in opportunities for small businesses. We'd like to see more quantitative results," he said. "I'd like to see in six months what actions have been taken and if they are getting results."

OFPP Administrator Angela Styles said she agreed that concrete measurements are needed, and said future quarterly reports from agencies to OFPP will include extensive quantitative data on their efforts to reduce bundling and mitigate its effects.

For the first reports, which were due Jan. 31, agencies were to report on actions taken and planned before the issuance of the regulations, largely qualitative data, Styles said.

Only about half of the 26 major federal agencies have submitted their first reports, Styles said. Departments not reporting yet include Commerce, Education, Interior, Justice, State and Health and Human Services, she said. Agencies may be taking longer than expected because it's a new report, Styles said.

"That seems to me an indication an agency is not taking this requirement seriously," Snowe said.

Cooper also said he's concerned that the plan puts additional responsibilities on Small Business Administration staff that already struggles to get their jobs done.

"Successful implementation of the plan will depend on SBA and agency Offices of Small and Disadvantaged Business Utilization staff playing a significant role early in the acquisition process to promote small business contracting opportunities, ensure contractors' compliance with subcontracting plans and provide effective oversight of agency efforts to address contract bundling issues," he said.

SBA Administrator Hector Barreto said agency officials don't plan to ask for more staff to carry out the agency's new requirements.

"We are exploring ways to use technology to have a broader reach," Barreto said. "Our intention is to support [existing staff] more," he said. "Every year we are identifying how our people are doing and what kind of tools we need. We are doing it even more now."

Officials said procurement reforms undertaken in the 1990s led to increased bundling of requirements in an effort to make government more cost effective and efficient. However, those efforts have come at the expense of opportunities for small businesses, Snowe said. She said she believes the competing goals, such as providing opportunities to small businesses and increasing government efficiency and effectiveness, can be reconciled.