Federal Agencies To Dismantle Contract Bundling

President demands reform aimed at boosting competition among small businesses

For several years, small and minority-owned businesses have struggled to get their fair share of the federal procurement pie.

One of the biggest obstacles is contract bundling, which combines several smaller contracts into one huge package too big for small and minority-owned companies to handle. In a decade-long, David-and-Goliath struggle, these companies are receiving fewer and fewer contracting opportunities. But that may all change by year’s end.

In response to a request by President George W. Bush, the Office of Management and Budget (OMB) issued a directive to federal agencies in October 2002, ordering them to reverse the bundling trend and to boost competition among small businesses. Agencies were given a Jan. 31 deadline to submit status reports on bundled contracts.

Contract bundling costs small businesses $13 billion in federal contracts in fiscal 2001 (the most recent data available), according to the Small Business Administration’s Office of Advocacy. Contract bundling became popular after the federal government streamlined its acquisition procedures in the mid-1990s, reducing the number of procurement officers. To make their jobs easier, procurement officers combined previously separate contracts into larger deals, locking out the smaller players.

According to Angela Styles, administrator of OMB’s Office of Federal Procurement Policy, the plan has three important elements. The first holds senior management accountable for eliminating unnecessary contract bundling and mitigating the effects of necessary and justified bundling. “There are a lot of laws on the books right now dealing with bundling,” says Styles. “The problem is they haven’t been implemented at the agencies, so that takes a commitment from the political leadership to follow the laws and make sure they’re properly implemented.”

The second element is designed to monitor the status of agency efforts through timely and accurate reporting of contract bundling by members of the president’s management council—deputy secretaries and administrators from the 26 major executive branch departments and agencies. The third element requires the agencies to make sure there are opportunities for small businesses to bid for subcontracts and to team up or form joint ventures to compete for bundled contracts.

Rep. Al Wynn (D-Md.) is cautiously optimistic about the mandate. “I think it’s a good start and seems to indicate there’s a realization that there’s been a steep decline in the number of small businesses getting government contracts, but I’d like to see them do more.” While Wynn says the reporting and accountability aspects of OMB’s plan will be helpful, he questions whether the reviews will actually take place.

Nydia M. Velázquez (D-N.Y.), the ranking Democrat on the House Committee on Small Business, says she was disappointed in the plan, claiming the current procurement system is fatally flawed. “The debundling strategy the administration has developed doesn’t even acknowledge how procurement reform of the 1990s created a federal contracting system in disrepair,” Velázquez said in a statement.

In the meantime, what can small business owners looking to land government deals do? A good place to start is the Federal Business Opportunities Website (www.fedbizopps.gov), which offers information on available contracts. In addition, the Department of Defense Business

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