SBA, House panel seek to limit use of bundled contracts

The Small Business Administration issued final regulations this week increasing its oversight of large bundled federal contracts, and Thursday a House committee approved a bill that would curtail the use of such contracts.

SBA's regulations, finalized Wednesday after almost a year of comment, solicitation and fine-tuning, clarify the conditions under which the agency may intercede to prevent other agencies from bundling their contracts. The authority to do so was included in the 1997 Small Business Reauthorization Act and recodified on Wednesday.

Additionally, agencies will now be required to remove barriers faced by small businesses pursuing prime contracts and to avoid "unnecessary and unjustified bundling of contracts." The regulations define bundling as "the consolidation of two or more...smaller contracts into a single contract...that is likely to be unsuitable for award to a small business concern."

SBA could block a proposed contract if agencies failed to document savings of at least ten percent in costs for contracts valued at less than $75 million. For contracts exceeding $75 million, documented savings must be either $7.5 million or five percent, whichever number is bigger.

According to a study released earlier this month by Rep. Nydia M. Velázquez, D-N.Y., the ranking minority member of the House Small Business Committee and a leading critic of contract consolidation, some of the federal government's most conspicuous consumers have failed in reaching their small business procurement targets. This has occurred despite the fact that the government as a whole has consistently, if barely, fulfilled its pledge to purchase 23 percent of goods and services from small businesses.

Velázquez has filed a bill (H.R. 4890) that would tie agencies' ability to bundle contracts to compliance with the SBA-mandated targets. Although the bill goes beyond the steps taken thus far by SBA, it stops short of removing small business contract oversight from the agency, a step suggested in the Velázquez report.

Instead, the bill would tighten the bundling approval process and prohibit bundling by any agency that failed to meet its small business procurement goal for the remainder of the fiscal year in which a report documenting such a failure is issued. The bill also amends the appeal process for SBA bundling rejections, allowing the rejected agency to seek redress from the Office of Management and Budget. At a Small Business Committee markup on the bill Thursday, Velázquez decried the current process.

"The SBA must appeal the decision [on a proposed bundling] to the same agency that made the initial decision," she said. "Does this make sense to anyone?"

The bill won approval on a voice vote at the hearing's conclusion, as did a proposal by Chairman James Talent, R-Mo., to study the effect of bundling on small businesses and the federal bottom line. A committee source indicated full House action on the bills was expected this session.