Infotech and the Law

SBA Proposes Changes in Contract Bundling Process

David Nadler

By David Nadler

The Small Business Administration has proposed regulations that would give it the authority to review and challenge contracting plans in which a federal agency seeks to bundle its requirements.

With increasing frequency, federal agencies are combining several smaller contract requirements into a single bundled contract. The thinking behind this is that one large contract is more efficient and less expensive to administer than numerous smaller contracts. The trend toward bundling has been evident particularly in the acquisition of information technology off the General Services Administration schedule.

While contract bundling may reduce the government's administrative costs, many in the small business community argue that they do not have the resources or experience to compete for the larger bundled contracts. As a result, many believe bundling has reduced opportunities for small businesses to compete for federal contracts.

On Jan. 13, the Small Business Administration published in the Federal Register a proposed revision that is intended to protect small businesses from some of bundling's effects. Comments on the proposed regulations must be filed with the SBA on or before March 15.

Under the proposed regulations, bundling occurs whenever an agency seeks to consolidate into a large contract two or more requirements that were previously performed by small businesses, or seeks to include in an existing large acquisition any single requirement previously performed by a small business.In such instances, an SBA procurement center representative is authorized to determine whether the proposed bundling of requirements is appropriate. If deemed not appropriate, the representative must determine whether the requirements can be separated into smaller discrete contracts suitable for small businesses.

If the contracting officer and the SBA representative cannot agree on an appropriate revision to the contracting plan, the SBA official is authorized to appeal the agency's bundling decision to the head of the contracting activity, and ultimately to the head of the agency.

One of the more significant changes proposed by the agency is an amendment to the SBA's size regulations under which small businesses would be permitted to band together to compete on bundled requirements without losing their small business size status. So long as each small business individually continued to meet the applicable size standard, the proposed regulations would permit the resulting joint venture to be considered a small business for purposes of participating in the bundled procurement.

The proposed regulations also require any agency that is considering bundling its requirements to first conduct a market survey to determine whether bundling is "necessary and justified." Bundling would be considered so if it provides the government "measurably substantial benefits," as compared to the benefit that would derive from the award of smaller, separate contracts. To decide this, the procuring agency would be required to consider:

*cost or price savings;

*improvements in quality that would save time or improve performance;

*any reduction in acquisition cycle times;

*better terms of conditions;

*any other quantifiable substantial benefit.

Reducing administrative costs alone, however, would not be sufficient to justify bundling unless the administrative cost savings were found to be substantial.

Once an agency determines a bundled procurement is necessary and justified, the proposed regulations would require the agency to document that determination in writing. The agency must include the analysis justifying the bundling, an assessment of the specific impact bundling will have on small business participation in the procurement, and any actions that can be taken to maximize small business participation in the procurement, either as a prime contractor or as a subcontractor.

The agency also must notify each small business that is performing a contract slated for bundling that the agency is planning to bundle its work. It must give the small businesses the name, telephone number and address of the SBA representative for that procurement.

Finally, the proposed regulations would require an agency conducting a bundled procurement with significant subcontracting opportunities to include in its evaluation criteria factors designed to evaluate each offerer's commitment to participation of small businesses as subcontractors.

The goal of this portion of the proposed regulation is to increase small business participation even in bundled procurements.

David Nadler is a partner in the Washington law firm of Dickstein Shapiro Morin & Oshinsky LLP. He may be contacted at Robert Moss contributed to this article.

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