Rule Would Require Agencies to Review, Justify Bundling The Bush administration is proposing new rules requiring written reviews and justifications of all bundled contracts above specific dollar amounts, including purchases through GSA Schedules and other multiple award contracts. The rulemaking would implement President Bush’s pledge to “break down large federal contracts” wherever possible. (SAA, 3/22/02) The proposed amendments to the Federal Acquisition Regulation were published in the Jan. 31 Federal Register by the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council. The Small Business Administration proposed changes in its regulations to conform to the FAR amendments. The proposed rule would require agencies to prepare a written justification for any bundled contract above $7 million for the Defense Department; $5 million for NASA, the Department of Energy and GSA; and $2 million for all other agencies. No specific dollar thresholds exist in current regulations. For contracts above those thresholds, agencies would be required to identify “alternative strategies that would reduce or minimize the scope of the bundling, and the rationale for not choosing those alternatives,” the proposed rule says. The rule makers said the dollar thresholds “are based on a comparative analysis of the number and size of the contracting actions of the major procuring activities and are intended to target contracting actions that would most likely involve contract bundling, while at the same time minimize the extent to which the bundling reviews would disrupt the procurement process of the individual agency.” For the first time, the bundling rules would cover GSA schedules and other multiple award contracts. A study by Eagle Eye Publishing for SBA’s Office of Advocacy found that those vehicles were driving the rapid growth in bundled contracts. The analysis found that contracting officers frequently add dissimilar tasks to existing contracts and task orders, such as by combining in a single order more than one product/service code, work at multiple locations and tasks under different Type of Contract codes. The proposed rule would give new responsibilities to Offices of Small and Disadvantaged Business Utilization: “OSDBUs would be required to conduct periodic reviews to assess (1) the extent to which small businesses are receiving their fair share of Federal procurements under the programs administered under the Small Business Act; (2) the adequacy of contract bundling documentation and justification; and (3) the actions taken to mitigate the effects of necessary and justified contracting bundling on small businesses.” The rule would also direct contracting officers to assess a prime contractor’s performance in meeting small business subcontracting goals. The Office of Management and Budget said agencies will use a prime’s subcontracting performance as an evaluation factor in awarding future contracts. The proposed rule continues to rely on the legal definition of bundling established by Congress in the Small Business Act of 1997: a combination of two or more existing contracts into a single one “unlikely to be suitable for award to a small business concern.” The Eagle Eye report said that restrictive definition “masks the harm to small businesses…This definition, which considers only historical spending, covers only those contracts where separate, identifiable, prior-year requirements are combined into a single contract going forward.” Eagle Eye estimated that for every $100 awarded in bundled contracts, there was a decrease of $12 awarded to small firms. Under the FAR amendments, agencies would be directed to coordinate acquisition strategies with their in-house small business specialists before issuing a solicitation above the agency’s dollar threshold. SBA proposes to amend its regulations to require its Procurement Center Representatives to examine planned procurements and “identify alternative strategies to maximize the participation of small businesses in the procurement.” But the number of those representatives has been cut drastically in recent years and many of them have been assigned additional duties, according to a November report by the General Accounting Office. The proposed regulation directs Procurement Center Representatives to work with the small business specialists and OSDBUs early in the acquisition process “to identify acquisitions involving bundling and to revise acquisition strategies to increase the probability of small business participation through small business teams as prime contractors.” Encouraging teaming arrangements was one of the planks in the White House strategy. In announcing the strategy Oct. 30, OMB said, “Senior agency management will be held accountable for eliminating unnecessary contract bundling and mitigating the effects of necessary and justified contract bundling.” OMB is requiring periodic reports on agencies’ efforts to carry out the policy. The proposed FAR amendment is FAR case 2002-029 in the Jan. 31 Federal Register. Comments are due by April 1.