Small Business Contracting: Concerns About the Administration's Plan to Address Contract Bundling Issues

Published by the Government Accountability Office on 2003-03-18.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                            United States General Accounting Office

GAO                         Testimony
                            Before the Senate Committee on Small
                            Business and Entrepreneurship

For Release on Delivery
Expected at 9:30 a.m. EST
Tuesday, March 18, 2003     SMALL BUSINESS
                            Concerns About the
                            Administration’s Plan to
                            Address Contract Bundling
                            Statement of David E. Cooper
                            Acquisition and Sourcing Management

Madam Chair and Members of the Committee:

Thank you for inviting me to participate in today’s hearing on the Office of Federal
Procurement Policy’s (OFPP) October 2002 plan to increase federal contracting
opportunities for small businesses. OFPP’s plan is aimed at eliminating unnecessary
contract bundling and mitigating the effects of necessary contract bundling.1
Specifically, it calls for a series of actions to

•   hold federal agency managers accountable for improving small business contracting
•   strengthen the Federal Acquisition Regulation and Small Business Administration
    (SBA) regulations governing contract bundling; and
•   use SBA and agency small business resources to improve oversight and mitigate the
    effects of bundling.

If successfully implemented, OFPP’s plan could be a positive step toward addressing
longstanding concerns about opportunities for small businesses to compete for federal
contracts. My comments today will focus on two implementation concerns: (1) the
measures and information that will be used to monitor agencies’ progress in eliminating
unnecessary contract bundling and mitigating the effects of necessary bundling and (2)
the ability of SBA’s Procurement Center Representatives and agencies’ Small and
Disadvantaged Business Utilization offices to meet the added responsibilities laid out in
the plan. My testimony is based primarily on prior GAO reports.

Measures and Information Needed to Monitor Agencies’
Contract Bundling Efforts Not Identified

Over the last several years we have been asked to review acquisition reforms and
initiatives to determine whether they are achieving desired outcomes. All too often, we
have been unable to make such assessments because measures and information
requirements were not established. Without reliable measures and information, the
Congress and the President will not be able to ensure agency accountability for
improving small business participation in federal procurement.

OFPP’s plan calls for holding senior agency managers accountable for improving
contracting opportunities for small businesses. According to the plan, agencies will be
required to periodically report to the Office of Management and Budget’s (OMB) Deputy
Director for Management on the status of agency efforts to address contract bundling
issues. While the plan recognizes that timely and accurate reporting of contract bundling
information is needed to monitor agency efforts to address contract bundling, it is
unclear at this time what information will be reported and how the information will be
used to measure agencies’ progress in meeting the plan’s goals. The first reports were

 The Small Business Reauthorization Act of 1997 defines contract bundling as “consolidating two or more
procurement requirements for goods or services previously provided or performed under separate, smaller
contracts into a solicitation of offers for a single contract that is unlikely to be suitable for award to a small
business concern.”

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due January 31, 2003, but we understand there has been a delay by many agencies in
submitting the reports.

To ensure OMB, agencies, and SBA can monitor the status of agency efforts to address
contract bundling concerns, we believe that OFPP should establish and communicate the
measures and information that are required for such monitoring. For example, measures
and information on the number of consolidated contracts subject to bundling reviews
and the results of those reviews would greatly support monitoring efforts. Measures
could also include some quantitative analysis of how mitigation efforts (teaming
arrangements and subcontract opportunities) have affected small business participation
in agency acquisitions.

SBA and Agency Offices of Small and Disadvantaged Business Utilization
May Have Difficulty Meeting Added Responsibilities

On January 31, 2003, SBA proposed to amend its regulations governing small business
contracting assistance to implement the recommendations in OFPP’s plan. SBA’s
proposed rule would expand responsibilities assigned to agency Offices of Small and
Disadvantaged Business Utilization and SBA Procurement Center Representatives.
While the expanded requirements are critical to ensuring successful implementation of
OFPP’s bundling plan, we are concerned that they will further burden a workforce that is
already struggling to accomplish its mission.

In line with the plan’s call for more oversight over agencies’ contract bundling activities,
agency Offices of Small and Disadvantaged Business Utilization would be required under
the proposed rule to conduct periodic reviews and submit their assessments to the heads
of their agencies and the SBA Administrator. These reviews are to include assessments

•   the extent to which small businesses receive their fair share of federal procurements;
•   the adequacy of bundling documentation and justification; and
•   the adequacy of actions taken to mitigate the effects of necessary and justified
    contract bundling, including the agency’s oversight of prime contractor compliance
    with subcontracting plans.

With respect to Procurement Center Representatives, SBA’s proposed rule calls for them
to have greater involvement in agency acquisition planning activities and in efforts to
mitigate the effects of agency contract bundling. Specifically, the proposed rule would
require Procurement Center Representatives to

 SBA assigns Procurement Center Representatives to major contracting offices to implement small
business policies and programs. Responsibilities include reviewing proposed acquisitions and
recommending alternative procurement strategies, identifying qualified small business sources, reviewing
subcontracting plans, conducting reviews of the contracting office to ensure compliance with small
business policies, counseling small businesses, and sponsoring and participating in conferences and
training designed to increase small business opportunities.

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•   identify alternative strategies early in the acquisition process to maximize small
    business participation for acquisitions not set-aside for small businesses,
•   work with cognizant small business specialists and Offices of Small and
    Disadvantaged Business Utilization to identify opportunities for small business teams
    to participate as prime contractors, and
•   review an agency’s subcontracting program to ensure that small business
    participation is maximized.

These expanded requirements, while necessary to ensuring successful implementation of
OFPP’s bundling plan, will likely burden SBA’s small business contracting workforce,
which we have found is already struggling to accomplish their missions. For example:

    In March 2000, we reported to this Committee that SBA lacked assurance that
    Procurement Center Representatives were reviewing all proposed contracts to
    identify possible bundling. According to SBA officials, budget constraints prevented
    SBA from having sufficient staff (Procurement Center Representatives) at
    government procurement centers to conduct required bundling reviews on proposed
•   In November 2002, we provided this Committee information on the number of small
    business set-asides issued and successfully challenged over the past 10 years. We
    found that the number of small business set-asides recommended by Procurement
    Center Representatives has declined by almost one-half since fiscal year 1991.5 SBA
    officials attributed the decline to several factors, including (1) the overall downsizing
    of the number of Procurement Center Representatives and (2) the assigning of
    Procurement Center Representatives to other roles, such as Commercial Marketing

We found similar conditions when we reviewed SBA’s Subcontracting Assistance
Program, which aims to increase subcontract awards to small businesses and to provide
maximum practicable business opportunities to small businesses. The program is also
one of the key aspects of OFPP’s plan to mitigate the effects of contract bundling.
However, we reported in December 2001 and November 2002 that declines in staffing
and travel funds have affected the way SBA monitors prime contractors’ compliance
with subcontracting plans. For example:

  Small Business: Limited Information Available on Contract Bundling’s Extent and Effects (GAO/GGD-
00-82, Mar. 31, 2000).
  Information on the Number of Small Business Set-Asides Issued and Successfully Challenged (GAO-03-
242R, Nov. 1, 2002).
  SBA’s Procurement Center Representatives work on federal agency procurement activities by reviewing
proposed acquisitions to determine whether they can be set aside for small businesses. If the Procurement
Center Representative believes that the agency or activity should set aside the procurement for small
business, the representative may issue a formal request to the contracting officer. Should the contracting
officer reject the recommendation, the representative may appeal the rejection to the Head Contracting
Authority for the agency or activity.
  Small Business Administration: The Commercial Marketing Representative Role Needs to Be
Strategically Planned and Assessed (GAO-03-54, Nov. 1, 2002), and Small Business Subcontracting
Validation Can Be Improved (GAO-02-166R, Dec. 13, 2001).

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•   We found that instead of conducting on-site reviews to validate how well contractors
    are implementing their subcontracting plans, SBA personnel were conducting “desk
    reviews” which consisted of only reviewing reports submitted by the contractors.
    There are varying views within SBA about which method is the most effective.
•   We also found that SBA personnel responsible for conducting the reviews were
    assigned substantial additional roles and responsibilities that often took priority over
    their subcontract surveillance duties.

Given our findings, we recommended that SBA strategically assess, evaluate, and plan
the number of staff needed to meet their contract bundling and subcontract surveillance
responsibilities—including assessing the impact of assigning multiple roles to its staff,
identifying training needs, and assessing the effectiveness of its compliance-monitoring

Applying a similar strategic planning approach would benefit SBA and agency Offices of
Small and Disadvantaged Business Utilization as they approach the task of implementing
OFPP’s plan to address contract bundling issues. Successful implementation of the plan
will depend on SBA and agency Offices of Small and Disadvantaged Business Utilization
staff playing a significant role early in the acquisition process to promote small business
contracting opportunities, ensure contractors’ compliance with subcontracting plans,
and provide effective oversight of agency efforts to address contract bundling issues.


Madam Chair, this concludes my prepared testimony. I would be happy to respond to
any questions you or other Members of the Committee may have at this time.

Contact and Acknowledgments

For further information regarding this testimony, please contact David E. Cooper at
(617) 788-0500. Ronald J. Salo, Enemencio Sanchez, Karen Sloan, Hilary Sullivan, and
Ralph O. White also made key contributions to this testimony.


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