Ask the Expert: Contract Consolidation and Bundling—Good for Government but Bad for Small Businesses?

Question: Are contract consolidation, contract bundling
 and the Federal Strategic Sourcing Initiative good for the government but bad for small businesses?

Answer: Consolidating and bundling contracts may result in unintended bad consequences for small businesses. The extent of these consequences
is immeasurable due to government
information systems’ reported data limitations.
 

The U.S. federal government spends in excess of $500 billion annually to procure goods and services. In facing reduced budgets, the government is increasingly consolidating, bundling and strategically sourcing contracts that were previously set aside for small businesses. The size and scope of the new contracts can make it difficult for a small business to win, and by definition, when consolidation results in a contract likely to be unsuitable for small business award, the consolidated contract also is considered bundled. In all cases of consolidation, bundling and strategic sourcing, agencies must justify their actions for contracts above certain monetary thresholds and agencies must coordinate acquisition strategies with their small business specialists for substantially bundled contracts.

Federal government agencies have used contract bundling for more than 20 years, but leaders have recognized that it oftentimes makes it more difficult for small businesses to enter into prime contracts. In 1997, a House Committee on Small Business report stated that a reduction in small business participation in federal procurements was the result of the prevalence of anti-competitive procurement practices, most notably the practice of contract bundling, which the Office of Federal Procurement Policy freely admits has significantly reduced the procurement opportunities available to small businesses. For this reason, over the past 15 or more years, Congress has introduced increasingly stringent rounds of legislation to curtail the increase in, and effects of, contract bundling.

The legislation mandates various actions federal agencies must take to justify the use of consolidated and bundled contracts. Over the years, amendments added new requirements for agencies to identify any negative impacts that consolidation could have on small businesses and certify that steps would be taken to include small businesses in the acquisition strategy. However, a November 2013 Government Accountability Office (GAO) report revealed the U.S. Defense Department and the General Services Administration (GSA)—which accounted for more than 80 percent of the consolidated contracts reported by all federal agencies in fiscal years 2011 and 2012—do not know the full extent to which they are awarding consolidated contracts. The report cites the reason for this inaccuracy as contracts being misreported in the federal procurement data system.

Federal law also requires the Small Business Administration (SBA) to take several actions for bundled contracts, including reporting annually to the small business committees on the extent of bundling; maintaining a database to track small business impacts; and determining if benefits were achieved through bundling. This same November 2013 GAO report also found the SBA does not collect complete information on bundled contracts and has not reported to congressional committees as required. SBA officials said they have not sent reports to the committees since 2010 because of an administrative oversight. Further, the SBA has not collected all required information, such as the number of small businesses affected by bundled contracts. SBA officials explained they cannot fulfill some requirements because of limitations in existing data sources, such as the Federal Procurement Data System–Next Generation (FPDS-NG)—the federal government’s current system for tracking information on contracting actions—which does not collect the information needed to meet reporting requirements.

When it comes to the Federal Strategic Sourcing Initiative, that data integrity also is questionable. A January 2014 GAO report revealed that the GAO’s review of agency documentation indicates that, although agencies generally consider small businesses and small disadvantaged businesses in their strategic sourcing initiatives, agency data and performance measures that would provide a more precise understanding of the inclusion of small businesses in strategic sourcing are limited. For example, the FPDS-NG cannot be used to track the extent of strategic sourcing across the federal government and its effects on small businesses because there is no strategic sourcing category or designation in the system. As a result, each individual agency must maintain data on its own strategic sourcing initiatives if it wants to track them.

When considering contract consolidation, federal laws require agencies to identify any negative impacts that consolidation could have on small businesses. Until the agencies can overcome the current data limitations, it is not possible to tell how many small businesses have been affected by the unintended negative consequences of contract consolidation, bundling or the FSSI. Many of the federal laws concerning contract consolidation and bundling are currently under review. Perhaps Congress should consider a moratorium on contract consolidation, bundling and the FSSI until government agencies can fix these critical information systems used to help determine procurement strategies impacting small businesses.

Staci Redmon is the president and CEO at Strategy and Management Services Incorporated (SAMS). She is a U.S. Army Signal Corps veteran and a project management professional with more than 30 years of experience supporting federal agencies.