Contract Bundling

The number of bundled contracts awarded by federal agencies has reached a 10-year high, hurting small businesses, according to a recent report by the Small Business Administration (SBA).

The problem with bundling is that it involves cramming multiple tasks into single contracts in such a way that small businesses cannot submit competitive bids. This practice began its ascent after Congress passed the Federal Acquisition Streamlining Act in the mid-1990s.

Know the Rules

An example of bundling: Your company provides landscape maintenance services at a local army base. Nine months before the end of your contract, you learn that contracting officers are in the planning stages for a new RFP that will seek one contractor to perform nearly all the base's facilities services, including building maintenance, janitorial, laundry, food and, yes, landscape services. Although you've been a model contractor with a stellar performance record, your company has no chance of winning the contract because it has no experience beyond landscape services.

What can you do?

Unfortunately, your battle, should you choose to put on the gloves, could be a costly one, ultimately ending up in front of a hearing examiner or a court of law. The decision to bundle is usually the result of a long process of agency meetings and discussions. There's especial scrutiny in this area now, and increasingly these decisions are made after careful thought and justification. (That's a generalization of course.) In most cases, one business isn't likely to change minds that have been made up. On the other hand, if you know the rules, you're in a better position to influence decisions before the final ones have been made.

Definition/Bundling Procedures

The first thing to consider is whether or not the new procurement falls under the definition of "bundling."

Bundling is defined as the "consolidation of 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 likely to be unsuitable for award to a small business." A number of factors are considered in determining whether the single contract is "unsuitable" for a small business, including the nature of performance requirements, the size of the contract, and geographic dispersion of performance sites. 15 U.S.C. 632(o)(2); FAR 2.101; 13 CFR 125.2(d).

Given this definition, an important threshold question to ask is whether two or more original procurement requirements were consolidated into the new contract. The answer is not always obvious.

That was the issue in a recent hearing before the General Accounting Office (GAO). There the agency argued that nine original container leasing contracts constituted one "procurement requirement" because, among other things, they all involved the same general service. GAO acknowledged that, while two or more previous contracts might in some case constitute one procurement requirement, in the case at hand the nine contracts were too varied in scope to be deemed a single requirement. GAO concluded that the definition was met and found in favor of the protestor. TRS Research, B-290644, September 13, 2002,

An important note to take from the case is that bundling isn't just the consolidation of disparate, unrelated goods and services into one contract -- the "classic" way to look at it. Bundling can involve the consolidation of the same or similar goods and services. In the above example, a new multi-facility landscaping contract, bringing together services performed under smaller landscaping contracts, could be deemed a bundling if a small business is not likely to win.

On the whole, GAO tends to find against agencies in bundling cases. When agencies win, they generally do so under one of three grounds:

  1. The requirements to be bundled all relate to a single integrated system.

  2. The agency’s administrative burden will be overwhelming if the tasks are not bundled.

  3. The agency provides a well-documented justification based on considerations of national security or military readiness.

See "What is a Bundled Procurement? And When is It Improper?" Kilcullen, Wilson & Kilcullen,

When an acquisition strategy could lead to a contract bundling, agencies must follow strict procedures. Among other things, they must:

  • Conduct market research to determine whether bundling of the requirements is necessary and justified.
  • Provide 30 days notice to affected small business.
  • Document the acquisition strategy to include a determination that the bundling is necessary and justified, when compared to the benefits that could be derived from meeting the agency's requirements through separate smaller contracts.

13 CFR 125.2(d).

What You Can Do

If you see a bundling coming, certainly talk to program managers and contracting officers and voice your concerns. Talk to your SBA Procurement Center Representatives (PCRs). They're generally located at federal agencies and buying activities that have major contracting programs. The agency has been an aggressive opponent of bundling. Fill out the SBA "Bundling Report" page and see what happens. You can find that here:

If a bundling can't be stopped, make friends with one or more likely awardees. Find out who is bidding on the upcoming procurement and introduce yourself to their subcontracting coordinators. In the above example, if you've been performing landscape services well and have good contacts at the base, you'll be a feather in an offeror's cap. You'll want to use that to your advantage and try to win business as a subcontractor next time around.

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