This is the accessible text file for GAO report number GAO-03-559T 
entitled 'Small Business Contracting: Concerns About the 
Administration's Plan to Address Contract Bundling Issues' which was 
released on March 18, 2003.



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Madam Chairwoman and Members of the Committee:



Thank you for inviting me to participate in todays hearing on the 

Office of Federal Procurement Policys (OFPP) October 2002 plan to 

increase federal contracting opportunities for small businesses. OFPPs 

plan is aimed at eliminating unnecessary contract bundling and 

mitigating the effects of necessary contract bundling.[Footnote 1] 

Specifically, it calls for a series of actions to:



* hold federal agency managers accountable for improving small business 

contracting opportunities;



* 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, OFPPs 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 SBAs 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.



OFPPs 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 Budgets (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 plans goals. The first reports were 

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 OFPPs plan. SBAs proposed rule would expand responsibilities 

assigned to agency Offices of Small and Disadvantaged Business 

Utilization and SBA Procurement Center Representatives.[Footnote 2] 

While the expanded requirements are critical to ensuring successful 

implementation of OFPPs bundling plan, we are concerned that they will 

further burden a workforce that is already struggling to accomplish its 

mission.



In line with the plans 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 of:



* 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 agencys oversight of prime 

contractor compliance with subcontracting plans.



With respect to Procurement Center Representatives, SBAs 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:



* 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 agencys subcontracting program to ensure that small 
business 

participation is maximized.



These expanded requirements, while necessary to ensuring successful 

implementation of OFPPs bundling plan, will likely burden SBAs small 

business contracting workforce, which we have found is already 

struggling to accomplish their missions. For example:



* In March 2000,[Footnote 3] 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 acquisitions.



* 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.[Footnote 4] 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.[Footnote 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 Representatives.



We found similar conditions when we reviewed SBAs 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 OFPPs 

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.[Footnote 6] For example:



* 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 methods.



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 OFPPs 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 Chairman, 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.



(120229):



FOOTNOTES



[1] 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.



[2] 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.



[3] Small Business: Limited Information Available on Contract 

Bundlings Extent and Effects (GAO/GGD-00-82, Mar. 31, 2000).



[4] Information on the Number of Small Business Set-Asides Issued and 

Successfully Challenged (GAO-03-242R, Nov. 1, 2002).



[5] SBAs 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.



[6] 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).