Bush advocates reduction in contract bundling

Federal agencies can generate more opportunities for small companies by holding contracts to a reasonable size, President Bush said in the last of three presidential debates against opponent John Kerry.

"I believe the best way to help our small businesses is not only through small-business loans. . . but to unbundle government contracts so people have a chance to be able to bid and receive a contract to help get their business going," Bush said during Wednesday's nationally televised debate at Arizona State University in Tempe, in a response to a question about affirmative action.

Contracting bundling, or the practice of combining two or more contracts into a large single agreement, might seem like an issue too obscure to mention in a national debate. But Bush long has been concerned that the practice presents obstacles for small businesses, said Angela Styles, head of procurement for the Bush administration until September 2003, when she left the Office of Management and Budget to rejoin Miller & Chevalier, a Washington law firm specializing in contract law.

Bush also mentioned the need to reduce contract bundling in the 2000 debates, Styles said. Shortly after taking office, he set to work on a Small Business Agenda, unveiled in March 2002. The agenda included tax incentives, health care options and regulatory changes to help small companies.

But as part of the agenda, Bush also asked OMB to develop a strategy for unbundling government contracts. Small businesses often have a hard time meeting the requirements of large contracts, and statistics indicated that smaller companies saw government business decline after the Clinton administration encouraged agencies to obtain better deals by consolidating contracts, Styles said.

"[Bush] really grasped the issues, understood them, and tried to grapple with them in Texas," Styles noted. "It's really not just a line in a speech."

In an hour-long meeting to discuss the small business agenda with then-OMB Director Mitch Daniels, Bush reportedly spent half an hour talking about contract bundling, Styles said. "When I would tell people the story, nobody would believe me," she added.

Following Bush's March 2002 request, Styles released a strategy for reducing contract bundling. The plan, described in an October 2002 report, called on the President's Management Council, headed by the OMB deputy director for management, to hold agencies accountable for unbundling contracts where possible.

Styles also asked Offices of Small and Disadvantaged Business Utilization to lead efforts to separate larger contracts, and called for a series of regulatory changes. Despite opposition from critics concerned that smaller contracts might prove less efficient, OMB enjoyed success at implementing the October 2002 strategy, Styles said.

By the next fall, the Small Business Administration issued final rules implementing some of the suggested regulatory changes. The rules took effect in November 2003 and required agencies to review bundled contracts valued at or above specified thresholds.

The regulations also asked agencies to look over multiple award contracts, multi-agency contracts, governmentwide acquisition contracts and general schedule contracts, for opportunities to cut down on bundling. "Recent and significant increases in this type of contracting make contract bundling review essential," Styles wrote in the plan.

Molly Brogan, government affairs manager at the National Small Business Association, a group representing the interests of more than 150,000 small companies nationwide, said it's too soon to tell whether these rules will help efforts to reduce bundling. But she noted that the issue has been "much more in the forefront" since Bush took office.

"I think it's something that people are thinking about and talking about a lot more," Brogan said. She added that in the Senate, Democrat John Kerry has also shown concern about the practice, as have other lawmakers on both sides of the aisle. "I don't think it's a Democrat or Republican issue," she said.

But to some Democrats on the House Small Business Committee, Bush hasn't acted on his promise to reduce bundling. "One of the major barriers locking small companies out of the federal marketplace is the persistence of contract bundling," the Democrats wrote in a report released earlier this month.

"Unfortunately, federal agencies continue to deny that bundling is a problem," the report stated. "Yet small companies continue to cite that the number one issue impeding their ability to provide goods and services to the government is the combining of contracts . . . into mega-contracts."

Steven Schooner, a George Washington University professor specializing in procurement law, said that agencies lack the resources to act on and enforce the administration's strategy for reducing bundling. Following cuts to the federal acquisition workforce in the 1990s, agencies barely have the staff to oversee contracts awarded, let alone review contracts for excessive bundling, he said.

The goal of opening opportunities to small businesses by reducing bundling is laudable but unrealistic given the shortage of resources, Schooner said. "It's a wonderfully attractive policy," he said. "The question is: Is this an efficient use of our already overburdened acquisition workforce?"