When contract bundling is justified

When contract bundling is justified

Bundling presents a dilemma in contracting, often excluding small businesses from acting as the prime contractor at a time when agencies are failing to meet their small business contracting goals. However, bundling can also include substantial savings to the agency, and won’t likely face much scrutiny if agencies play by the rules.

Protesting contractor: CYIOS, D.C.

Contracting agency: Department of Defense, Defense Information Systems Agency (DISA)

Issue: Whether a decision to bundle violated small business set-aside requirements.

GAO decision July 13, 2012: Denied.

Post-mortem: Having previously contracted with three businesses for information technology support services, DISA experienced difficulty in integrating the separate functions from vendors into one cohesive program. It made the decision to combine the three separate contracts into one, a process known as bundling. Subsequently, DISA determined that the requirement was “not suitable for small business only competition.”

CYIOS alleged in its protest that DISA improperly bundled the requirements into one contract and that DISA violated procurement law by not setting aside the procurement for small businesses. According to the Small Business Act, bundling is when two or more smaller contracts previously serviced or suitable to be serviced by a small business are combined into a single contract “that is likely unsuitable for award to a small business concern.” CYIOS argued that the bundling of these three contracts by DISA was “unnecessary and unjustified.”

In making the determination to bundle, DISA claimed that it would not only be more efficient but would save the agency $5 million over the life of the contract. In addition, the Small Business Administration concurred with the decision. The GAO found that there was nothing objectionable about the agency’s decision, which was well documented and in compliance with the relevant laws.

Also worth noting, the prior three separate contracts had been with large companies, so while the increase in size might have shouldered out smaller companies from competing, it didn’t eliminate opportunities that previously had been set aside.

The government is under increasing pressure to find ways to stretch budgets and bundling is a way it can achieve significant savings. While bundling will remain a very real issue for small businesses in the years to come, as long as agencies follow the steps established in the law, the decisions won’t likely be disturbed.

The best tactic for small businesses? Establish teaming arrangements with large bidders to win work through subcontracts.