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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: January 31, 2003

SUBJECT: Federal Acquisition Regulation (FAR) and Small Business Administration (SBA); Contract Bundling

SOURCE: Federal Register, January 31, 2003, Vol. 68, No. 21, pages 5133 and 5138

AGENCIES: Department of Defense (DOD), General Services Administration (GSA), National Aeronautics and Space Administration (NASA), and Small Business Administration (SBA)

ACTION: Proposed Rules

SYNOPSIS: It is proposed that the FAR and SBA's regulations be amended to implement the recommendations of the Office of Federal Procurement Policy (OFPP) in its report "Contract Bundling: A Strategy for Increasing Federal Contracting Opportunities for Small Business."

EDITOR'S NOTE: "Bundling" is defined in FAR 2.101, Definitions, as "consolidating two or more requirements for supplies or services, previously provided or performed under separate smaller contracts, into a solicitation for a single contract that is likely to be unsuitable for award to a small business concern due to (1) the diversity, size, or specialized nature of the elements of the performance specified; (2) the aggregate dollar value of the anticipated award; (3) the geographical dispersion of the contract performance sites; or (4) any combination of the factors..."

For more on "Contract Bundling: A Strategy for Increasing Federal Contracting Opportunities for Small Business," see the October 30, 2002, FEDERAL CONTRACTS DISPATCH "Office of Federal Procurement Policy (OFPP); Contract Bundling: A Strategy for Increasing Federal Contracting Opportunities for Small Business."

DATES: Comments on the proposed FAR and SBA regulation changes are due April 1, 2003.

ADDRESSES: Submit written comments on FAR proposed rule to General Services Administration, FAR Secretariat (MVA), 1800 F Street, NW, Room 4035, Attn: Laurie Duarte, Washington, DC 20405. Submit e-mail comments to: farcase.2002-029@gsa.gov. Cite "FAR case 2002-029" when referring to this proposed rule.

Submit written comments on SBA's proposed rule to Linda G. Williams, Associate Administrator for Government Contracting, 409 Third Street, SW, Mail Code 6530, Washington, DC 20416; e-mail: dean.koppel@sba.gov; or facsimile (fax) to 202-205-6390.

FOR FURTHER INFORMATION CONTACT: For the FAR proposed rule: Rhonda Cundiff, Procurement Analyst, 202-501-0044. For the SBA proposed rule: Dean Koppel, Assistant Administrator, Office of Policy and Research, 202-401-8150, or by e-mail to dean.koppel@sba.gov.

SUPPLEMENTAL INFORMATION: On March 19, 2002, President Bush issued his "Small Business Agenda," and one of the items on the agenda was:

"Avoid unnecessary contract bundling. Small businesses bring innovation and lower costs to the government. When contracts are bundled together, small businesses are at a disadvantage if they are not capable of supplying all the contracts. Accordingly, the president has instructed the Director of the OMB [Office of Management and Budget] to prepare a federal government strategy for unbundling contracts whenever practicable."

On October 29, 2002, OFPP (part of OMB) submitted to the president the report "Contract Bundling: A Strategy for Increasing Federal Contracting Opportunities for Small Business." The report listed nine separate actions for unbundling contracts. The proposed FAR and SBA regulation changes address five of the nine actions:

3. "The definition of contract bundling in the FAR [Federal Acquisition Regulation] and SBA regulations will be clarified to require contract bundling reviews by the agency OSDBU [Office of Small and Disadvantaged Business Utilization] for task and delivery orders under multiple award contract vehicles."
   
   
4. "SBA regulations and the FAR will be modified to require contract bundling reviews of proposed acquisitions above agency-specific dollar thresholds. Individual agency review thresholds for acquisitions between $2 million and $7 million should be established based on an agency's volume of contracts and in consultation with the SBA and agency OSDBU."
   
   
5. "SBA regulations and the FAR will be modified to require agencies to specifically identify alternative acquisition strategies that involve less bundling when an agency contemplates a bundled contract above a threshold between $2 million and $7 million. Where a bundled contract is used for an acquisition above the specified threshold, a written justification for using a bundled contract should identify these alternative strategies and the rationale for choosing a particular strategy over alternatives that could involve less bundling."
   
   
6. "To encourage greater small business participation as subcontractors in bundled acquisitions, the FAR will be amended to require agencies to use contractor compliance with subcontracting plans as an evaluation factor for future contract awards. Agencies also will strengthen oversight of contractor efforts to comply with subcontracting plans by establishing procedures that designate personnel responsible for monitoring contractor compliance with subcontracting plans, delineate responsibilities of such personnel, and monitor their performance. These procedures will include specific requirements for agency monitoring of contractor efforts to comply with subcontracting plans for agency multiple award contracts (MACs), multi-agency contracts, governmentwide acquisition contracts (GWACs), and GSA's [General Services Administration's] multiple award schedule program contracts and orders under all of these types of contracts."
   
   
7. "SBA bundling regulations encourage the formation of teams of small business contractors to compete for bundled contracts. However, small businesses face obstacles to forming these teams due to relatively limited time available to respond to agency procurement solicitations, time that could otherwise be used to prepare a proposal in response to the solicitation. Agencies will train and otherwise facilitate early development of teams of small business contractors to compete for upcoming procurements."

To implement these actions, the following are the proposed changes to the FAR and SBA regulations (the two sets of proposed changes are very similar):

FAR

• Action 3:
  
  
  • The definition of "bundling" in FAR 2.101, Definitions, would add that the definition of "single contract" includes: "(i) an indefinite quantity contract awarded to two or more sources under a single solicitation for the same or similar supplies and services (see FAR 16.504(c) [Indefinite-Quantity Contracts]); and (ii) an order placed against an indefinite quantity contract under a (A) Federal Supply Schedule contract; or (B) task-order contract or delivery-order contract awarded by another agency (i.e., governmentwide acquisition contract or multi-agency contract)."
    
    
  • In paragraphs (b)(1), (b)(2),(d), and (e) of FAR 7.107, Additional Requirements for Acquisitions Involving Bundling, the words "or order" would be added after "contract" so it would read "estimated contract or order value.
    
    
  • FAR 7.107(e) would further be amended to revise the "substantial bundling" definition from "any bundling that results in a contract or order with an average annual value of $10 million or more" to "any bundling that results in a contract or order that meets the dollar amounts specified in [FAR] 7.104(d)(2) [General Procedures]." FAR 7.104(d)(2) establishes the thresholds required by Actions 4 and 5. This change is intended to simplify the application of the substantial bundling procedures by using the same dollar thresholds to trigger notification of the agency OSDBU of unnecessary bundling under the proposed FAR 7.104(d)(1).
    
    
  • Paragraph (a)(1) of FAR 8.404, Using Schedules, would be revised to state that the requirement in proposed paragraph (e)(1)(iii) FAR 19.202-1, Encouraging Small Business Participation in Acquisitions, applies to orders placed against Federal Supply Schedules. FAR 19.202-1(e)(1)(iii) would require the contracting officer to provide to the SBA procurement center representative (when the acquisition involves bundling) and the OSDBU (when the acquisition involves substantial bundling) "all information relative to the justification of contract bundling, including the acquisition plan or strategy and, if the acquisition involves substantial bundling, the information identified in [FAR] 7.107(e)." Also, FAR 8.404(a)(2) would be revised to add that orders placed under a Federal Supply Schedule contract must comply with all FAR requirements for a bundled contract when the order meets the proposed FAR definition of "bundled contract" in FAR 2.101.
    
    
  • Paragraph (a)(7) of FAR 16.505, Ordering, would be revised to state that orders placed under a task-order or delivery-order contract awarded by another agency must comply with all FAR requirements for a bundled contract when the order meets the proposed FAR definition of "bundled contract" in FAR 2.101.
  
  
• Actions 4 and 5
  
  
  • A new paragraph (d)(1) would be added to FAR 7.104 which would require the acquisition planner to coordinate the acquisition plan or strategies with the small business specialist (SBS) when the strategy contemplates award of a contract or order meeting the agency dollar amounts in proposed new FAR 7.104(d)(2), unless the contract or order is entirely reserved or set-aside for small business under FAR Part 19, Small Business Programs. Paragraph (d)(1) would require the SBS to notify the agency OSDBU if the proposed acquisition strategy involves contract bundling that the agency has not identified as bundled or includes unnecessary or unjustified bundling of requirements.
    
    
  • New FAR 7.104(d)(2) would require that the acquisition strategy be coordinated with the SBS in accordance with FAR 7.104(d)(1) if the estimated contract or order value is $7 million or more for DOD, $5 million or more for NASA, GSA, and the Department of Energy and GSA, and $2 million or more for all other agencies. (EDITOR'S NOTE: The introduction to the proposed rule states, "The dollar amounts of the three-tier acquisition threshold 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. GSA specifically invites public comment on the proposed three-tier acquisition threshold and on alternatives that would best achieve the intended purposes of Action Items 4 and 5."
  
  
• Action 5
  
  
  • New FAR 7.107(e)(6) would require the acquisition strategy to "identify alternative strategies that would reduce or minimize the scope of the bundling, and the rationale for not choosing those alternatives."
  
  
• Action 6
  
  
  • In paragraph (a) of FAR 42.1502, Policy, which addresses evaluations of contractor performance, the following would be added as the last sentence: "These procedures shall require an assessment of contractor compliance with the goals identified in the small business subcontracting plan when the contract includes the clause at [FAR] 52.219-9, Small Business Subcontracting Plan." (EDITOR'S NOTE: The introduction to the proposed rule states "this proposed change contemplates a more systemic review of an agency's general oversight as well as its individual assessment of contractor subcontracting plan compliance to facilitate greater consistency in agency oversight in the future.")
  
  
• Other Related Actions
  
  
  • New paragraph (d)(11) would be added to FAR 19.201, General Policy, to require the OSDBU to "conduct periodic reviews to assess the (i) extent to which small businesses are receiving a fair share of federal procurements, including contract opportunities under the programs administered under the Small Business Act; (ii) adequacy of contract bundling documentation and justifications; and (iii) actions taken to mitigate the effects of necessary and justified contract bundling on small businesses." The OSDBU would be required to submit a copy of its assessment to the agency head and the SBA administrator.
    
    
  • To FAR 19.202, Specific Policies, would be added a requirement that agencies establish procedures, including dollar thresholds, for review of acquisitions by the OSDBU as to whether a particular acquisition should be awarded under FAR Subpart 19.5, Small Business Programs (that is, small business set-asides), FAR Subpart 19.8, Contracting with the Small Business Administration (The 8(a) Program), or FAR Subpart 19.13, Historically Underutilized Business Zone (HUBZone) Program.

SBA Regulations (Title 13 of the Code of Federal Regulations (CFR), Part 125, Government Contracting Programs, Subpart 125.2, Prime Contracting Assistance)

• Action 3
  
  
  • A new paragraph (d)(1)(iii) would be added, and it would define a "single contract" as including "(A) an indefinite quantity contract awarded to two or more sources under a single solicitation for the same or similar supplies and services; and (B) an order placed against an indefinite quantity contract under a Federal Supply Schedule contract or a task or delivery order contract awarded by another agency (i.e., government-wide acquisition contract or multi-agency contract)."
    
    
  • A new paragraph (d)(1)(iv) would be added, and it would define an "order" as "an order placed under (A) Federal Supply Schedule contract; or (B) task-order contract or delivery-order contract awarded by another agency, (i.e., government-wide acquisition contract or multi-agency contract)."
    
    
  • A new paragraph (d)(1)(v) would be added, and it would define "substantial bundling" as any bundling that meets the dollar amounts specified in proposed paragraph (b)(2). Paragraph (b)(2) would establish the thresholds required by Actions 4 and 5. This change is intended to simplify the application of the substantial bundling procedures by using the same dollar thresholds to trigger SBS reviews under proposed paragraph (b)(2)(i), and to require supporting documentation for substantial bundling under proposed paragraph (d)(7).
  
  
• Actions 4 and 5
  
  
  • A new paragraph (b)(2) would require bundling reviews of proposed acquisition strategies or plans contemplating award of a contract or order of $7 million or more for DOD, $5 million or more for NASA, GSA, and the Department of Energy and GSA, and $2 million or more for all other agencies. (EDITOR'S NOTE: The introduction to the proposed rule states, "The dollar amounts of the 3-tier acquisition threshold 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. SBA specifically invites public comment on the proposed 3-tier acquisition threshold and on alternatives that would best achieve the intended purposes of Action Items 4 and 5."
    
    Proposed paragraph (b)(2) would require the agency to coordinate the acquisition strategy or plan with the SBS as early in the planning process as practicable, but no later than 30 days before the issuance of the solicitation. The SBS would be required to notify the OSDBU if the proposed acquisition strategy or plan includes bundled requirements that the agency has not identified as bundled or includes unnecessary or unjustified bundling of requirements.
  
  
• Action 5
  
  
  • A new paragraph (d)(7)(i)(E) would be added to require agencies to identify alternative acquisition strategies for proposed bundling of contracts and justify the reason for not selecting an alternative that would involve less bundling.
    
    
  • A new pagaraph (d)(7)(ii) would require the procuring agency to provide both the PCR and the OSDBU a copy of the proposed acquisition, including the analysis required under paragraphs (b)(3) and (d)(7) at least 30 days prior to the release of a solicitation.
  
  
• Action 6
  
  
  • Redesignated paragraph (b)(6)(iii) (current paragraph (b)(5)(iii)) would require the PCRs to "work to ensure that small business participation is maximized through teaming arrangements and subcontracting opportunities. This may include: (A) recommending that the solicitation and resultant contract specifically state the small business subcontracting goals, which are expected of the contractor awardee; (B) recommending that the small business subcontracting goals be based on total contract dollars instead of subcontract dollars; and (C) reviewing an agency's oversight of its subcontracting program, including its overall and individual assessment of a contractor's compliance with its small business subcontracting plans." As currently written, paragraph (b)(5)(iii) suggests that PCRs need only review an agency's assessment of a contractor's subcontracting plan compliance under bundled contracts.
    
    
  • Current paragraph (b)(7) would be redesignated as paragraph (b)(8), and would be revised to clarify that PCRs must work with the SBS and agency OSDBU as early in the acquisition process as practicable to identify acquisitions involving bundling.
  
  
• Action 7
  
  
  • Proposed paragraph (b)(8) would require PCRs, the SBS, and the OSDBU to recommend the restructuring of acquisitions as necessary to increase small business prime contract participation through small business teams.
  
  
• Other Related Actions
  
  
  • Paragraph (b)(1) would be revised to require PCRs to identify alternative strategies to maximize the participation of small businesses in the procurement when they review acquisitions not set-aside for small businesses. Currently, paragraph (b)(1) provides only that PCRs must review acquisitions not set-aside for small businesses to determine whether a set-aside would be appropriate.
    
    
  • New paragraph (e) would require OSDBUs to conduct periodic reviews to assess the "(i) extent to which small businesses are receiving their fair share of federal procurements, including contract opportunities under programs administered under the Small Business Act; (ii) adequacy of the bundling documentation and justification; and (iii) adequacy of actions taken to mitigate the effects of necessary and justified contract bundling on small businesses (e.g., review agency oversight of prime contractor subcontracting plan compliance under the subcontracting program)." OSDBUs would be required to submit a copy of their assessment to the agency head and the SBA administrator.

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

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