June 26, 2003

PROCUREMENT MEMORANDUM 2003-04

MEMORANDUM FOR HEADS OF CONTRACTING OFFICES

FROM: Michael S. Sade

Director for Acquisition Management and Procurement Executive

SUBJECT: Guidance On Contract Bundling and The Revised CD-570 Small
Business Set-Aside Review

The purpose of this memorandum is to provide guidance on contract
bundling (also known as contract consolidation) and the use of the
revised CD-570 Small Business Set-Aside Review form. The "Contract
Bundling Action Plan" (Attachment A) provides guidance to supplement the
Federal Acquisition Regulation (FAR) because the practice of contract
bundling has the potential to reduce contracting opportunities for small
businesses.

The Office of Management and Budget (OMB) issued a report, dated October
29, 2002, that defined a strategy to unbundle federal contracts. The
Office of Acquisition Management (OAM), in collaboration with the Office
of Small and Disadvantaged Business Utilization (OSDBU), developed the
Contract Bundling Action Plan and revised the CD-570 Small Business
Set-Aside Review form based on the OMB report.

The Contract Bundling Action Plan (hereafter referred to as the "Plan")
concentrates on acquisitions that could lead to bundled contracts,
including task and delivery orders under multiple award contracts,
multi-agency contracts, government-wide acquisition contracts,
indefinite-delivery/indefinite-quantity type contracts, and GSA's
multiple award schedule contracts (e.g., federal supply schedules). The
Plan re-emphasizes the process prescribed by the FAR for determining
whether bundling is necessary and justified. The Plan also strengthens
compliance with subcontracting procedures and encourages mentor/protégé
and joint venture relationships with small firms.

The Plan prescribes the process for HCOs to submit required information
to OSDBU for compilation into quarterly reports to OMB on the status of
the Department's efforts to address contract bundling issues.

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In conjunction with the Plan, the CD-570 Small Business Set-Aside Review
form has been revised to capture acquisition planning and marketing
information that could lead to bundled contracts, including task and
delivery orders (Attachment B). If the contracting officer contemplates
awarding a bundled contract, the contracting officer must seek the
approval, via the CD-570, of the bureau small business specialist,
OSDBU, and the SBA PCR before issuing the solicitation.

If a bundling analysis has already been approved based on the initial
contract, it is not necessary for the contracting officer to perform
another bundling analysis before exercising an option. However, for
modifications to existing contracts that add new requirements valued
over \$500,000 or that will increase the total contract cost to over
\$500,000, the contracting officer must submit a CD-570 for approval.
The contracting officer should analyze the procurement history to
determine whether the requirement was previously met by separate,
smaller contracts or if the requirement could have been met by small
businesses.

The following changes were made to the CD-570:

-   **Block 3c -- Subcontracting Plan** -- The contracting officer must
    indicate if the proposed acquisition has subcontracting
    opportunities. The contracting officer must include a source
    selection factor for the offeror's proposed use of small businesses
    as subcontractors and their past performance in meeting
    subcontracting goals in negotiated competitions.

-   **Block 3d** - **Consolidated Requirement** -- The contracting
    officer must address the impact of any bundling on the participation
    by small business, HUBZone small business, woman-owned small
    business, small disadvantaged business, service-disabled
    Veteran-owned small business, Veteran-owned small business, and 8(a)
    business. The contracting officer must attach a written
    determination that bundling is necessary and justified based on
    market research and measurably substantial benefits to the
    government. The contracting officer must indicate that the incumbent
    small business concerns have been notified or will be notified at
    least 30 days prior to the release of the solicitation of the
    government's intentions to consolidate the requirement with one or
    more other requirements.

-   **Block 6 -- Proposed Sources** -- The contracting officer must
    attach a list of potential sources (name, address, phone number, and
    socio-economic category).

-   **Block 7 -- Set-aside Not Recommended** -- The contracting officer
    must attach a written justification for not setting acquisition
    aside for small business (partial and full). The contracting officer
    must also justify the contemplation of a single task or delivery
    order (e.g., federal supply schedule) that aggregates smaller
    acquisitions into a large single lot beyond the reach of small
    contractors.

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For further information, contact Nancy Barrere, Procurement Analyst in
OAM on (202) 482-5519 or T.J. Garcia, Director of OSDBU on (202)
482-1472.

Attachment A - Contract Bundling Action Plan, CD-570 Small Business
Set-aside Review, and Quarterly Contract Bundling Report

Attachment B - Guidance on Approval Levels for CD-570 Small Business
Set-aside Review