Small Business Contracting:

Concerns About the Administration's Plan to Address Contract Bundling Issues

GAO-03-559T: Published: Mar 18, 2003. Publicly Released: Mar 18, 2003.

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David E. Cooper
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The Office of Federal Procurement Policy's (OFPP) plan to increase federal contracting opportunities for small business is aimed at eliminating unnecessary contract bundling and mitigating the effects of necessary contract bundling. Specifically it calls for a series of actions to (1) hold federal agency managers accountable for improving small business contracting opportunities, (2) strengthen the Federal Acquisition Regulation and Small Business Administration (SBA) regulations governing contract bundling, and (3) use SBA and agency small business resources to improve oversight and mitigate the effects of bundling. This testimony focuses on two implementation concerns: (1) the measures and information that will be used to monitor agencies' progress in eliminating unnecessary contract bundling and mitigating the effects of necessary bundling and (2) the ability of SBA's Procurement Center Representatives and agencies' Small and Disadvantaged Business Utilization offices to meet the added responsibilities laid out in the plan.

OFPP's plan calls for holding senior agency managers accountable for improving contracting opportunities for small businesses. According to the plan, agencies will be required to periodically report to the Office of Management and Budget's (OMB) Deputy Director for Management on the status of agency efforts to address contract bundling issues. While the plan recognizes that timely and accurate reporting of contract bundling information is needed to monitor agency efforts to address contract bundling, it is unclear at this time what information will be reported and how the information will be used to measure agencies' progress in meeting the plan's goals. In line with the plan's call for more oversight over agencies' contract bundling activities, agency Offices of Small and Disadvantaged Business Utilization would be required under the proposal rule to conduct periodic reviews and submit their assessments to the heads of their agencies and the SBA Administrator. These reviews are to include assessments of (1) the extent to which small businesses receive their fair share of federal procurements; (2) the adequacy of bundling documentation and justification; and (3) the adequacy of actions taken to mitigate the effects of necessary and justified contract bundling, including the agency's oversight of prime contractor compliance with subcontracting plans. With respect to Procurement Center Representatives, SBA's proposed rule calls for them to have greater involvement in agency acquisition planning activities and in efforts to mitigate the effects of agency contract bundling. Specifically, the proposed rule would require Procurement Center Representatives to (1) identify alternative strategies early in the acquisition process to maximize small business participation for acquisitions not set-aside for small businesses, (2) work with cognizant small business specialists and Offices of Small and Disadvantaged Business Utilization to identify opportunities for small business teams to participate as prime contractors, and (3) review an agency's subcontracting program to ensure that small business participation is maximized. These expanded requirements, while necessary to ensuring successful implementation of OFPP's bundling plan, will likely burden SBA's small business contracting workforce, which we have found is already struggling to accomplish their missions. For example: in March 2000, we reported to this Committee that SBA lacked assurance that Procurement Center Representatives were reviewing all proposed contracts to identify possible bundling. According to SBA officials, budget constraints prevented SBA from having sufficient staff (Procurement Center Representatives) at government procurement centers to conduct required bundling reviews on proposed acquisitions. Further, in November 2002, we provided this Committee information on the number of small business set-asides issued and successfully challenged over the past 10 years. We found that the number of small business set-asides recommended by Procurement Center Representatives has declined by almost one-half since fiscal year 1991. SBA officials attributed the decline to several factors, including (1) the overall downsizing of the number of Procurement Center Representatives and (2) the assigning of Procurement Center Representatives to other roles, such as Commercial Marketing Representatives.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: In response to GAO's testimony, the Office of Federal Procurement Policy (OFPP) issued bundling metrics requirements to agencies in June 2003. GAO testified on March 18, 2003, that the OFPP should establish metrics for agencies to report regularly on their contract bundling activities. Contract bundling is a concern because bundling consolidates contracts in a manner that can preclude small businesses from winning contract awards. Without metrics, OFPP would be unable to assess progress of agencies' efforts to address contract bundling. In response to GAO's recommendation, OFPP established metrics and, in June 2003, directed agencies to provide to the Office of Management and Budget the specified data in quarterly reports on their contract bundling actions.

    Recommendation: To ensure OMB, agencies, and SBA can monitor the status of agency efforts to address contract bundling concerns, we believe that OFPP should establish and communicate the measures and information that are required for such monitoring. For example, measures and information on the number of consolidated contracts subject to bundling reviews and the results of those reviews would greatly support monitoring efforts. Measures could also include some quantitative analysis of how mitigation efforts (teaming arrangements and subcontract opportunities) have affected small business participation in agency acquisitions.

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of Federal Procurement Policy


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