Government Contracting Database

The Small Business Administration (SBA) counsels and assists small business concerns and assists contracting personnel to ensure that a fair proportion of contracts for supplies and services is placed with small business.

The Small Business Act, enacted in 1954, declared that it was the policy of Congress “to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair and construction) be placed with small-business enterprises . . . .” 15 U.S.C. §631(a) (emphasis supplied). Section 631(j) similarly requires governmental agencies to foster the participation of small business enterprises, as both prime and sub-contractors, “to the maximum extent possible,” and to take “all reasonable steps to eliminate obstacles to their participation.” 15 U.S.C. §631(j)(1)-(2).

In aid of this policy, there are specific provisions of the Act which contain explicit prohibitions against unnecessary “packaging,” “consolidation” or “bundling” of contract requirements which could otherwise be procured as discrete, separate projects, into larger, combination procurements which are beyond the reach of small business concerns. Section 631(j)(3), for example, directs government agencies to “avoid unnecessary and unjustified bundling of contract requirements that precludes small business participation in procurements as prime contractors.” Section 644(a)(B) elaborates that:

With respect to proposed procurements described in subparagraph (A), at least 30 days before issuing a solicitation and concurrent with other processing steps required before issuing the solicitation, the contracting agency shall provide a copy of the proposed procurement to the procurement center representative of the contracting agency (as described in subsection (l)) along with a statement explaining–

(i) why the proposed procurement cannot be divided into reasonably small lots (not less than economic production runs) to permit offers on quantities less than the total requirement;

(ii) why delivery schedules cannot be established on a realistic basis that will encourage the participation of small business concerns in a manner consistent with the actual requirements of the Government;

(iii) why the proposed procurement cannot be offered to increase the likelihood of the participation of small business concerns;

(iv) in the case of a proposed procurement for construction, why the proposed procurement cannot be offered as separate discrete projects; or

(v) why the contracting agency has determined that the bundling of contract requirements is necessary and justified.

Section 644(e)(1)-(3) goes on to repeat the same policy considerations and to require that a decision to “bundle” contract requirements must be based upon market research, and upon a reasoned, documented conclusion, after considering certain enumerated factors, that there are “measurably substantial benefits” to the consolidation sufficient to justify the disadvantage to small businesses, and that “bundling” is in fact “necessary and justified.”

See also FAR §7.107 (largely repeating the statutory language, and establishing a bright-line rule allowing “bundling” where the “measurably substantial benefits” are equivalent to 10% of the estimated contract value, including options, in a contract valued at $86 million or less, or 5% if the contract value exceeds $86 million); FAR §19.202-1 (requiring submission of necessary justification for proposed bundled procurements to the SBA procurement center representative 30 days prior to issuance of solicitation); DFARS §207.170-3 (tracking the statutory language).

Updated: July 5, 2018