1. Consolidation vs. Bundling
Associate Director for Small Business
U.S. Army Medical Command

2. President George W. Bush
“And so one of the things we're going to do is we're going to examine the federal government's contracting policies, to make sure that they encourage competition as opposed to exclude competition; to make sure that the process is open; to make sure the process helps achieve a noble objective, which is more ownership in our country. And wherever possible, we're going to insist we break down large federal contracts so that small business owners have got a fair shot at federal contracting.”
President George W. Bush
This is National Policy and does apply to the Department of Defense!

3. Contract Consolidation
Dan E. Shackelford
Associate Director for Small Business
U.S. Army Medical Command

4. Topics What is contract consolidation?
What if it is necessary and justifiable?
Some hints about this presentation:
The graphics may give you a clue about important information.
Important (text) concepts may be highlighted.

5. Contract Consolidation is:
The use of a solicitation to obtain offers for a single contract or a multiple award contract to satisfy two or more requirements of a department, agency, or activity for supplies or services that previously have been provided to, or performed for, that department, agency, or activity under two or more separate contracts.

6. Contract Consolidation is:
The use of a solicitation to obtain offers for a single contract or a multiple award contract to satisfy two or more requirements of a department, agency, or activity for supplies or services that previously have been provided to, or performed for, that department, agency, or activity under two or more separate contracts.
“Single Contract” includes an order placed against an indefinite quantity contract under a—
Federal Supply Schedule contract; or
Task-order contract or delivery-order contract awarded by another agency (i.e.; Government wide acquisition contract or multi-agency contract).

7. DFARS (a)
Agencies shall not consolidate contract requirements with an estimated total value exceeding $5,000,000 unless the acquisition strategy includes
The results of market research;
identification of any alternative contracting approaches that would involve a lesser degree of consolidation and …
DFARS :
“Senior procurement executive” means, for DoD—
Department of Defense (including the defense agencies)—
Under Secretary of Defense (Acquisition, Technology, and Logistics);
Department of the Army—
Assistant Secretary of the Army (Acquisition, Logistics and Technology);

8. DFARS (a)
a determination by the senior procurement executive that the consolidation is necessary and justified. All of this documentation must be included in the official contract file.
AFARS :
Authority to make the consolidation determination prescribed at DFARS (a)(3) is delegated to the HCA where the total value of the consolidated requirements is above $5 million and up to $500 million. (This may be delegated to the PARC for values up to $100 million without further delegation.)

9. AFARS (a)
If circumstances dictate consolidation, written justification supporting this action must be provided by the requiring activity.
The determination that a consolidated requirement cannot be placed under one of the preference programs must be approved by the HCA prior to release of the solicitation.

10. Contract Bundling Dan E. Shackelford
Associate Director for Small Business
U.S. Army Medical Command

11. Topics What is contract bundling?
What if it is necessary and justifiable?
Who is responsible?
QUIZ
Some hints about this presentation:
The graphics may give you a clue about important information.
Important (text) concepts may be highlighted.

12. Contract Bundling is:
Bundling is 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. At least one of the original contracts was performed by, or was suitable, for small business.
Public Law , Small Business Reauthorization Act of 1997

13. Contract Bundling is:
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
According to the Small Business Act of 1997, contract might be unsuitable for small businesses because of
the diversity, size, or specialized nature of the elements of the performance specified;
the aggregate dollar value of the anticipated award;
the geographical dispersion of contract performance sites; or
any combination of these criteria.
This definition does not apply to any contract that will be awarded and performed entirely outside of the United States.

14. Separate Smaller Contract
“Separate smaller contract” as used in this definition, means a contract that has been performed by one or more small business concerns or that was suitable for award to one or more small business concerns.

15. Single Contract
“Single contract”, as used in this definition, includes—
Multiple awards of indefinite-quantity contracts under a single solicitation; and
An order placed against an indefinite quantity contract under a—
Federal Supply Schedule contract; or
Task-order contract or delivery-order contract awarded by another agency (i.e.; Government wide acquisition contract or multi-agency contract).

16. Bundling may provide substantial benefits to the Government.
However, because of the potential impact on small business participation, market research must be conducted to determine whether bundling is necessary and justified. Market research may indicate that bundling is necessary and justified if an agency or the Government would derive measurably substantial benefits.
Bundling is not always BAD.
Bundling may be necessary and justified if market research shows that we can generate MEASURABLY SUBSTANTIAL BENEFITS from bundling.

17. Measurable Benefits Include
Cost savings or price reduction,
Quality improvements that will save time or improve or enhance performance or efficiency,
Reduction in acquisition cycle times,
Better terms and conditions,
And any other benefits.
There are several elements to “Measurably Substantial Benefits.”
First you need to know what to measure. You can consider almost anything involved in the contracts as long as you can QUANTIFY the benefits. Basically, this means anything that can be reduced to dollars and cents.
The agency must quantify the identified benefits and explain how their impact would be measurably substantial.

18. Substantial Benefits Are
Equivalent to –
Ten percent of the estimated contract or order value (including options) if the value is $75 million or less; or
Five percent of the estimated contract or order value (including options) or $7.5 million, whichever is greater, if the value exceeds $75 million.
So now you have quantified the benefits from bundling. How do you know they are “SUBSTANTIAL”?

19. Written Acquisition Strategy/Plan is Required
The Acquisition Plan must:
document the market research and analysis, and indicate the impact on the various elements of the plan.
include consideration of each of the small business categories and the impact of any bundling that might affect their participation in the acquisition.
identify the incumbent contractors and contracts affected by the bundling and the impact of any bundling on each incumbent contractor.
You must consider the impact of the bundling on small business, including any incumbent small businesses, and document this in the Acquisition Strategy.

20. Explain Why Necessary
The contracting officer must include a statement explaining why the --
Proposed acquisition cannot permit offers on quantities less than the total requirement;
Realistic delivery schedules cannot be established that will encourage small business participation consistent with Government requirements;
Proposed acquisition cannot be structured to make it likely that small businesses can compete for the prime contract;
Consolidated project cannot be acquired as separate discrete projects; or
Bundling is otherwise necessary and justified.

21. Coordinate the Acquisition Plan
The acquisition plan shall be coordinated with the cognizant SBA PCR and the ADSB if the estimated contract or order value is $7 million or more.
If the strategy contemplates the award of multiple contracts or orders, the threshold applies to the cumulative maximum potential value, including options, of all of the contracts and orders.

22. Everyone Is Responsible
EVERYONE IS RESPONSIBLE. Some specific responsibilities include the following

23. Agency Head Responsibility
Ensuring that acquisition planners, to the maximum extent practicable –
Structure contract requirements to facilitate competition by and among small business concerns; and
Avoid unnecessary and unjustified bundling that precludes small business participation as contractors

24. Contracting Officer Responsibility
Justify bundling in acquisition plan.
Include an evaluation factor to evaluate past performance indicating the extent to which the offeror attained applicable goals for small business participation under contracts that required subcontracting plans.
Include proposed small business subcontracting participation in the subcontracting plan as an evaluation factor.

25. Contracting Officer Responsibility
Provide all information relative to the justification of contract bundling, including the acquisition plan or strategy, to—
The SBA PCR, and
The ADSB.
If the acquisition is over $7M, a copy will also be provided to the Army ADSBU Office through the MEDCOM ADSB.

26. ADSB Responsibility Work with the SBA PCR to—
Identify proposed solicitations that involve bundling;
Facilitate small business participation
Conduct annual reviews to assess the—
Adequacy of contract bundling documentation and justifications; and
Actions taken to mitigate the effects of necessary and justified contract bundling on small businesses.

27. QUIZ TIME

28. Define Contract Bundling
ANSWER: Bundling is 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. At least one of the original contracts was performed by, or was suitable, for small business.

29. When is bundling necessary and justifiable?
Measurably Substantial Benefit
ANSWER: WHEN THERE IS MEASURABLY SUBSTANTIAL BENEFIT FROM BUNDLING
Market research may indicate that bundling is necessary and justified if an agency or the Government would derive measurably substantial benefits.
Bundling may be necessary and justified if, as compared to the benefits from not bundling, the agency would derive measurably substantial benefits
Measurable usually means reduced to dollars and cents! (MONEY!)
Substantial means equivalent to –
-- Ten percent of the estimated contract or order value (including option) if the value is $75 million or less; or
-- Five percent of the estimated contract or order value (including options) or $7.5 million, whichever is greater, if the value exceeds $75 million.
10%/5%

30. What needs to be done? ANSWER: ACQUISITION PLANNING
The acquisition strategy shall be coordinated with the cognizant small business specialist and the ADSB if the estimated contract or order value is $7 million or more.
The agency must quantify the identified benefits and explain how their impact would be measurably substantial.
The contracting officer must provide a statement explaining why the --
Proposed acquisition cannot permit offers on quantities less than the total requirement;
Realistic delivery schedules cannot be established that will encourage small business participation consistent with Government requirements;
Proposed acquisition cannot be structured to make it likely that small businesses can compete for the prime contract;
Consolidated project cannot be acquired as separate discrete projects; or
Bundling is otherwise necessary and justified.
The Contracting Officer must also
Include an evaluation factor to evaluate past performance indicating the extent to which the offeror attained applicable goals for small business participation under contracts that required subcontracting plans.
Include proposed small business subcontracting participation in the subcontracting plan as an evaluation factor.

31. EVERYONE is responsible.
Who is responsible?
EVERYONE is responsible.
EVERYONE is responsible!

32. Additional Reading
CONTRACT BUNDLING, A Strategy for Increasing Federal Contracting Opportunities for Small Business, OMB, October 2002 (
Acquisition Community Connection, Special Contracting Methods: Contract Bundling (Learning Materials) (acc.dau.mil/simplify/ev.php?ID=1267_201&ID2=DO_TOPIC)
FAR Parts 7.107, (d), and
Are there any questions?

33. SCENARIO 1
You are a contracting officer at the North Central Regional Contracting Office. Your regional hospital housekeeping contracts will expire soon and it is time to start the resolicitation process. The last two solicitations for this work covered the medical facilities in most of the region (a major medical center and five medical treatment facilities). The first solicitation resulted in four IDIQ contracts with a total value of $54M, three to large businesses and one to NISH. The last solicitation resulted in three IDIQ awards with a total value of $65M, two to large businesses and one to a small business. That small business has grown and is now considered a large business. If you plan to issue a solicitation like you did the last two times and expect to award multiple IDIQ contracts, would it be considered bundling? What needs to be done before the solicitation is issued?
It is the combination of two or more requirements, at least one of which was performed by or suitable for small business, into a single solicitation.
Market Research needs to be done first.
If market research reveals that there are small businesses capable of doing the work, it could be considered bundling.
Market research may indicate that bundling is necessary and justified if an agency or the Government would derive measurably substantial benefits.

34. SCENARIO 2
You are a contracting officer at the North Central Regional Contracting Office. Your Region Commander just returned from a conference where the hottest topic was a relatively new method of records storage and retrieval and he wants to implement it throughout the Region as quickly as possible. This method has never been used in the Region before. There are small businesses that might be able to handle some of the Region but certainly not all of it. There are two large businesses that can handle the entire Region easily. There doesn’t seem to be any significant difference in cost if you use large businesses, small businesses, or a combination. If you issue a solicitation requiring implementing this methodology throughout the Region, is this bundling?
Bundling is 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. Since this is a new requirement that has not been contracted for in the past it does not meet the definition of bundling.
However, issuing one solicitation that would not be suitable for small business prime contracting might be considered in violation of the national policy that we break down large contracts into pieces suitable for small business.
“And wherever possible, we're going to insist we break down large federal contracts so that small business owners have got a fair shot at federal contracting.” President George W. Bush
The contracting officer should still provide justification why the requirement cannot/should not be broken down for small business participation as prime contractors. If this is justified, encourage small business subcontracting.