No. 221

October 2002

SMALL BUSINESS

RESEARCH

SUMMARY

The Impact of Contract Bundling on Small Business,

FY 1992–FY 2001

by Eagle Eye Publishers, Inc.,

2002. [60] pages. Fairfax, Virginia.

under contract no. SBAHQ-01-M-0352 

This Small Business Research Summary (ISSN 1076-8904) summarizes one of a series of research papers prepared under contracts

issued by the U.S. Small Business Administration’s Office of Advocacy. The opinions and recommendations of the authors of this study do

not necessarily reflect official policies of the SBA or other agencies of the U.S. government. For more information, write to the Office of

Advocacy at 409 Third Street S.W., Washington, DC 20416, or visit the office’s Internet site at www.sba.gov/advo.

Purpose

Federal agencies have looked to contract bundling—

consolidating two or more contracts for goods or

services previously requisitioned under separate

smaller contracts—in an effort to reduce the government’s workload. However, previous studies by

Eagle Eye Publishers for the Office of Advocacy

have found that contract bundling can have the effect

of shutting small firms out of the contracting process. This limiting of potential bidders will hamper

competition. The purpose of the research was to

determine whether contract bundling is continuing

and what related trends might be occurring.

Overall Findings

The number and sizes of bundled contracts are

reaching record levels as agencies add dissimilar

tasks to existing contracts. This practice gives a competitive advantage to a select group of large businesses already contracting with the federal government at the expense of small businesses unable to

gain access to the system.

Highlights

• Between FY 1992 and FY 2001, government

agencies reported 1.24 million prime contracts worth

$1.89 trillion. Eagle Eye found bundling in 8.6 percent

or 106,387 of these contracts, valued at a total of

$840.3 billion—44.5 percent of reported prime contract dollars over the period.

• The number of bundled contracts increased 19

percent from FY 1992 to FY 2001.

• Existing contracts are more likely to be bundled

as they are renewed. As contracts age, not only are

more contracts bundled, but more dollars are put into

the contracts already bundled.

• Mathematical analysis shows that for every

increase of 100 bundled contracts there is a decrease

of 60 contracts to small business; and for every additional $100 awarded in bundled contracts there is a

decrease of $12 to small business.

• Much of the bundling occurs in defense contracts.

• Of the major categories of products and services,

the largest growth is in the catch-all category of

“other services.”

• A new definition of contract bundling was created in the 1997 Small Business Reauthorization Act.

The definition continues to be refined.

Scope and Methodology

A first step needed to conduct this research was to

define contract bundling. Eagle Eye used a conservative definition and adopted the concept “explicitly

bundled contract” (EBC) to identify bundling. An

EBC is a contract that, over any three-year period

includes industries, places of performance, or types

of contracts that are dissimilar. The study looked at
contracts active over the FY 1992–FY 2001 period

and used a dollar threshold of $1 million to define a

large contract.

After defining contract bundling, Eagle Eye

reviewed data from the U.S. General Services

Administration Federal Procurement Data Center’s

Form DD-350 (defense) and Form SF 279 (civilian)

Individual Contract Action Reports from FY 1992 to

FY 2002. Using these data, Eagle Eye created tables

to show trends and conducted regression analysis to

determine the impact of the trend in contract

bundling on small firm procurement.

Ordering Information

The full text of this report and summaries of other

studies performed under contract to the U.S. Small

Business Administration’s Office of Advocacy are

available on the Internet at www.sba.gov/advo/research.

Printed copies are available for purchase from:

National Technical Information Service

5285 Port Royal Road

Springfield, VA 22161

Tel. (800) 553-6847

TDD: (703) 487-4639

www.ntis.gov

Order number: PB2003-100132

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