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106TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 106–858

SMALL BUSINESS COMPETITION PRESERVATION ACT OF

2000

SEPTEMBER 18, 2000.—Committed to the Committee of the Whole House on the

State of the Union and ordered to be printed

Mr. TALENT, from the Committee on Small Business,

submitted the following

R E P O R T

[To accompany H.R. 4945]

[Including cost estimate of the Congressional Budget Office]

The Committee on Small Business, to whom was referred the bill

(H.R. 4945) to amend the Small Business Act to strengthen existing protections for small business participation in the Federal procurement contracting process, and for other purposes, having considered the same, report favorably thereon without amendment and

recommend that the bill do pass.

PURPOSE

The purpose of H.R. 4945, the ‘‘Small Business Competition Preservation Act of 2000,’’ is to ensure that the United States Small

Business Administration (SBA) and Congress have sufficient information concerning the impact of contract consolidation on small

business participation in the federal procurement process. Access to

adequate data is necessary so that federal agencies can determine

whether they should adjust their procurement strategies in order

to meet the small business participation goals set forth in section

15 of the Small Business Act,

The bill mandates that the Administrator of the SBA develop a

database of bundled contracts. The Administrator is then required

to assess whether contracts whose terms have expired but will be

recompeted as part of bundled contracts have achieved the savings

or improvements in quality that the procuring agency anticipated

when it consolidated the contract requirements initially. This analysis also will be used by the Administrator in determining the

number of small businesses that have been displaced as prime contractors as a result of contract bundling. All of this information will

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be reported on an annual basis to the House and Senate Small

Business Committees.

NEED FOR LEGISLATION

Contract bundling is one of the most important issues facing

small business today. The federal government spends nearly 200

billion dollars a year procuring goods and services. Although Congress has made it a goal for federal agencies to spend at least 20

percent of their procurement dollars with small businesses, the federal government has not met that objective. Federal government

procurement policies apparently place a greater premium on efficiency and the reduction of workload for contracting officers than

the goals of a diverse, competitive industrial base. The ultimate

losers will be the American taxpayer who will face the long-term

prospect of procuring lower quality goods and services at higher

prices.

Bundling of contracts is performed by all federal agencies but one

agency, the Department of Defense, stands out as the agency with

the most adverse impact on small business participation as prime

contractors. To the extent that the Department actually achieves

substantial cost savings or significant improvements in the quality

of goods and services procured, bundling is at least defensible.

However, the Committee has examined a number of contracts and

has not found supportable justifications for these contracts.

For example, the Department of Defense issued a contract for the

provision of telecommunication services to the three largest longdistance carriers in the United States who would provide, on a

competitively-bid task order arrangement, interstate interexchange

(long-distance) circuits for the transmission of voice and data between various Department installations. Ostensibly, the limitation

on the number of firms eligible to bid was necessitated by security

concerns. However, an examination of the task order requests reveals that the need for security was not an issue in many of the

task orders. Thus, the Department, at substantial expense to the

taxpayers (competition under the prior system was significantly

greater resulting in substantially lower prices for telecommunication services), bundled a contract without any clear need to do

so.

The Committee also examined the consolidation of Marine Corps

mess hall services. The Department of Navy currently provides

mess hall services on a base-by-base contract. Many current providers are small businesses. Despite evidence that demonstrates

improvements in quality of both the food and the service, the Department of Navy decided to consolidate these mess hall contracts

into two large regions utilizing central kitchen preparation techniques known as ‘‘cook and chill.’’ The Department of Navy has not

been able to justify that the contract will save money or provide

higher quality meals to Marine Corps personnel.

Numerous other examples of bundling exist both at the Department of Defense and with other government agencies. At a Committee hearing on the Department of Defense’s bundling policies,

the Principal Deputy Under Secretary for Acquisition, Mr. David

Oliver, promised that he would commission a study of the effects

of bundling on small business. Some months later, Mr. Oliver adVerDate 11-MAY-2000 01:41 Sep 19, 2000 Jkt 079006 PO 00000 Frm 00002 Fmt 6659 Sfmt 6602 E:\HR\OC\HR858.XXX pfrm01 PsN: HR858
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mitted that the Department lacked the data needed to conduct an

appropriate study of bundling.

The absence of data on bundling also affects the Administrator’s

ability to implement the Small Business Reauthorization Act of

1997. That legislation required federal agencies not to bundle contracts unless the procuring agency could demonstrate that the bundle would result in measurably substantial benefits, such as cost

savings, quality improvements, reduction in acquisition cycle times,

or better terms and conditions. The procuring agency then must

identify those benefits to be derived from contract bundling and

that the anticipated benefits of the proposed bundled contract justify the use of bundling. Should the Administrator of the SBA disagree with the conclusions of the procuring agency, the Administrator is entitled to file an appeal contesting the procuring agency’s

bundle to the head of the agency. The Administrator has never won

such an appeal. The bill would require the Administrator to perform its own assessment of these measurably substantial benefits

on any bundled contract which will be recompeted as a bundled

contract. In addition, the Administrator will be required to determine the number of small businesses that will be displaced as

prime contractors as a result of contract bundling.

The need for this legislation is great. Federal agencies contend

that contract bundling saves taxpayers money while improving the

quality of goods and services provided to the government. None of

this has been substantiated. The database, analyses and reports to

Congress in this bill will ensure that adequate data exists concerning the benefits and costs of contract bundling. This will enable

federal agencies to reconfigure their procurement strategies to meet

statutory goals for small business participation. Furthermore, Congress will have information needed to modify federal procurement

legislation if agencies are bundling without obtaining concomitant

benefits.

COMMITTEE ACTION

The Committee on Small Business held no separate hearings on

H.R. 4945. During the 106th Congress, the committee held the following hearings on contract bundling: (1) the Department of Defense’s Contract Bundling Policy (Nov. 4, 1999); and (2) Contract

Bundling and Federal Procurement Problems Facing Small Businesses (Aug. 4, 1999). Both hearings provided substantial anecdotal

evidence concerning the adverse impact of contract bundling on the

ability of small businesses to maintain their status as prime contractors. The hearings also revealed the absence of adequate data

within the government on contract bundling.

CONSIDERATION OF H.R. 4945

At 11:30 a.m. on July 27, 2000, the Committee on Business met

to consider and report H.R. 4945. Following brief opening statements by the Chairman and Ranking Democratic Member, the

Chairman declared the bill open for amendment.

No amendments were offered. Chairman Talent then moved the

bill be reported, and at 11:50 a.m., by unanimous voice vote, a

quorum being present, the Committee passed H.R. 4945 and ordered it reported.

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SECTION-BY-SECTION ANALYSIS

Section 1. Short title

Designate the bill as the ‘‘Small Business Competition Preservation Act of 2000.’’

Section 2. Database, analysis, and annual report with respect to

bundled contracts

This section amends section 15 of the Small Business Act by adding a new subsection (p) to establish the requirements for maintenance of a contract bundling database, analysis of bundled contracts, and reporting requirements to the House and Senate Small

Business Committees.

Paragraph (1) defines the term bundled contract. In the Small

Business Reauthorization Act of 1997, the term ‘‘bundled contract’’

was defined as a contract that consolidated existing contract requirements. It is unclear whether this definition includes new contract requirements that permit bundling although the Committee

believes that the definition should be that inclusive. Furthermore,

the regulations promulgated by the Administrator of the United

States Small Business Administration implementing the Small

Business Reauthorization Act of 1997 inappropriately exclude contracts for which a procuring agency performed an analysis mandated by Circular A–76 issued by the Office of Management and

Budget (‘‘OMB’’). Paragraph (1) would clarify the definition of ‘‘bundled contract’’ for purposes of the maintenance of the database and

analysis performed under this new subsection of section 15 of the

Small Business Act.

Paragraph (1) amends the definition of contract bundle as set

forth in section 3(o) of the Small Business Act by including contracts for which an agency performed a study of the effects of the

contract on civilian or military personnel. The definition broadens

the scope of the database maintained by the Administrator to include contracts for which an agency has performed an analysis pursuant to OMB Circular A–76. The modification does not have any

legal effect on the definition of bundled contract in section 3(o) of

the Small Business Act.

Paragraph (1) also modifies the definition of contract bundling,

for purposes of this subsection, by including any new contract requirements that permit the consolidation of 2 or more procurement

requirements. This ensures that the Administrator’s database will

include all bundled contracts irrespective of whether the bundled

contract constitutes a new requirement.

Paragraph (2) mandates that the Administrator establish a database no later than 180 days after the effective date of the statute.

The database will contain information on each bundled contract

awarded by a federal agency as defined in paragraph (1) and the

number of small businesses that used to provide services as prime

contractors but are no longer doing so as a result of the bundled

contract. The Committee expects that the Administrator will receive data from its Procurement Center Representatives as well as

the Directors of the Office of Small and Disadvantaged Business

Utilization. Furthermore, the Committee expects that the Administrator will construct this database with already existing funds and

does not believe that a separate authorization or appropriation is

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needed to maintain this database because maintenance of the database constitutes a vital adjunct to the Administrator’s responsibilities under subsection (a) of section 15.

Paragraph (3) requires that the Administrator analyze bundled

contracts that are recompeted as bundles when their initial terms

expire. The Committee expects that the Administrator will use the

database of bundled contracts established in paragraph (2) to determine which contracts need to be analyzed pursuant to this paragraph. However, if a recompeted bundle somehow is not included

in the database established pursuant to paragraph (2), the Committee expects that the Administrator will undertake the analysis

mandated by this paragraph.

For each contract recompeted as a bundled contract, the Administrator will be required to calculate the amount of savings and

benefits from the bundled contract. The Administrator also will be

required to estimate whether the savings and benefits will continue

and whether such savings and benefits would be greater if the contract was divided into separate solicitations more suitable for

award to small businesses. The Committee expects that the Administrator will utilize this analysis in pursuing any appeal of a bundled contract as set forth in subsection (a) of section 15.

Paragraph (4) requires the Administrator to file an annual report

on contract bundling with the House and Senate Small Business

Committees. The report is required to contain data on the number

of small businesses displaced as prime contractors as a result of

contract bundling sorted by industrial classification. The Committee expects that the report will utilize the new North American

Industrial Classification rather than the old Standard Industrial

Classification.

The report also shall contain a description of the bundling activity for each federal agency during the preceding fiscal year including the number of contracts bundled, the total dollar value of the

bundled contracts, the justification for each bundled contract, the

cost savings realized by the contract, the Administrator’s estimate

of the whether the savings will continue for any recompeted bundled contract, the extent to which the bundled contract complied

with agency’s subcontracting plan, the total dollar value awarded

to small business subcontractors, the total dollar value previously

awarded to small business prime contractors prior to the bundling

of the contract, the impact that bundling has on the ability of small

business to compete as prime contractors, and the effect that has

on the industry, including the decretion of small businesses in the

particular industrial classification. The Committee expects that the

reports will use the new industrial classification system. Further,

the Committee intends that the Administrator translate existing

Standard Industrial Classifications to the new system when submitting its reports with the House and Senate.

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U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, September 8, 2000.

Hon. JAMES M. TALENT,

Chairman, Committee on Small Business,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 4945, the Small Business

Competition Preservation Act of 2000.

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contact is John R. Righter.

Sincerely,

BARRY B. ANDERSON

(For Dan L. Crippen, Director).

Enclosure.

H.R. 4945—Small Business Competition Preservation Act of 2000

H.R. 4945 would amend the Small Business Act to require the

Small Business Administration (SBA) to study and report each

year on the effect on small businesses of federal agencies combining, or bundling, together multiple contracts into a single procurement contract. Specifically, SBA would report on the number

and type of small businesses that were displaced as prime contractors as a result of implementing such larger, combined contracts

and the number and total dollar amount of such contracts. In addition, for each bundled contract, the report would include the agency’s justification for combining the contracts, whether the combined

contract was consistent with the agency’s small business subcontracting plan, any estimated savings for combining contracts, and

the extent to which SBA expects such savings would continue.

The annual cost of implementing H.R. 4945 is uncertain because

no data exist about the number of contracts that agencies bundle

together each year. Agencies, however, are already required to

produce much of the information that SBA would collect under

H.R. 4945 for all of their contracts. In addition, agencies are beginning to submit some of that data to the Federal Procurement Data

System, a database of procurement actions that is maintained by

the General Services Administration. CBO estimates that implementing H.R. 4945 would cost SBA less than $500,000 a year, subject to the availability of appropriated funds, to develop and maintain such a database, as well as report annually to the Congress.

In addition to SBA’s costs, implementing the bill would increase

costs for federal agencies to estimate the accumulated costs of savings each year for each bundled contract. Because we expect agencies would base such estimates on the market research they already perform under current law, CBO estimates that the annual

increase in costs for other agencies would also be less than

$500,000 subject to the availability of appropriated funds. In total,

CBO estimates that implementing H.R. 4945 would cost around

$500,000 a year.

Because the bill would not affect direct spending or receipts, payas-you-go procedures would not apply. H.R. 4945 contains no intergovernmental or private-sector mandates as defined in the UnVerDate 11-MAY-2000 01:41 Sep 19, 2000 Jkt 079006 PO 00000 Frm 00006 Fmt 6659 Sfmt 6602 E:\HR\OC\HR858.XXX pfrm01 PsN: HR858
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funded Mandates Reform Act and would not affect state, local, or

tribal governments.

The CBO staff contact is John R. Righter. This estimate was approved by Peter H. Fontaine, Deputy Assistant Director for Budget

Analysis.

COMMITTEE ESTIMATE OF COSTS

Pursuant to the Congressional Budget Act of 1974, the Committee estimates that the amendments to the Small Business Act

contained in H.R. 4945 will not significantly increase discretionary

spending over the next five fiscal years. The Committee also estimates that H.R. 4945 will not affect direct spending. These estimates concur with Congressional Budget Office (CBO) estimates.

Furthermore, pursuant to clause 3(d)(2)(A) of rule XIII of the

Rules of the House of Representatives, the Committee estimates

that implementation of H.R. 4945 will not significantly increase

other administrative costs.

OVERSIGHT FINDINGS

In accordance with clause 4(c)(2) of rule X of the Rules of the

House of Representatives, the Committee states that no oversight

findings or recommendations have been made by the Committee on

Government Reform with respect to the subject matter contained

in H.R. 4945.

In accordance with clause (2)(b)(1) of rule X of the Rules of the

House of Representatives, the oversight findings and recommendations of the Committee on Small Business with respect to the subject matter contained in H.R. 4945 are incorporated into the descriptive portions of this report.

STATEMENT OF CONSTITUTIONAL AUTHORITY

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House

of Representatives, the Committee finds the authority for this legislation in Article I, Section 8, clause 18, of the Constitution of the

United States.

COMPLIANCE WITH P.L. 104–4

H.R. 4945 contains no unfunded mandates.

CONGRESSIONAL ACCOUNTABILITY ACT

H.R. 4945 does not relate to the terms and conditions of employment or access to public services or accommodations within the

meaning of section 102(b)(3) of P.L. 104–1.

FEDERAL ADVISORY COMMITTEE STATEMENT

This legislation does not establish or authorize the establishment

of any new advisory committees.

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the

House of Representatives, changes in existing law made by the bill,

as reported, are shown as follows (existing law proposed to be omitVerDate 11-MAY-2000 01:41 Sep 19, 2000 Jkt 079006 PO 00000 Frm 00007 Fmt 6659 Sfmt 6602 E:\HR\OC\HR858.XXX pfrm01 PsN: HR858
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ted is enclosed in black brackets, new matter is printed in italic,

existing law in which no change is proposed is shown in roman):

SECTION 15 OF THE SMALL BUSINESS ACT

SEC. 15. (a)***

* * * * * * *

(p) DATABASE, ANALYSIS, AND ANNUAL REPORT WITH RESPECT TO

BUNDLED CONTRACTS.— (1) BUNDLED CONTRACT DEFINED.—In this subsection, the

term ‘‘bundled contract’’ includes—

(A) each contract that meets the definition set forth in

section 3(o) regardless of whether the contracting agency

has conducted a study of the effects of the solicitation for

the contract on civilian or military personnel of the United

States; and

(B) each new procurement requirement that permits the

consolidation of 2 or more procurement requirements.

(2) DATABASE.— (A) IN GENERAL.—Not later than 180 days after the date

of enactment of this subsection, the Administrator of the

Small Business Administration shall develop and shall

thereafter maintain a database containing data and information regarding—

(i) each bundled contract awarded by a Federal

agency; and

(ii) each small business concern that has been displaced as a prime contractor as a result of the award

of such a contract.

(3) ANALYSIS.—For each bundled contract that is to be recompeted as a bundled contract, the Administrator shall

determine—

(A) the amount of savings and benefits (in accordance

with subsection (e)) achieved under the bundling of contract

requirements; and

(B) whether such savings and benefits will continue to be

realized if the contract remains bundled, and whether such

savings and benefits would be greater if the procurement

requirements were divided into separate solicitations suitable for award to small business concerns.

(4) ANNUAL REPORT ON CONTRACT BUNDLING.—

(A) IN GENERAL.—Not later than 1 year after the date of

enactment of this paragraph, and annually in March thereafter, the Administration shall transmit a report on contract bundling to the Committees on Small Business of the

House of Representatives and the Senate.

(B) CONTENTS.—Each report transmitted under subparagraph (A) shall include—

(i) data on the number, arranged by industrial classification, of small business concerns displaced as

prime contractors as a result of the award of bundled

contracts by Federal agencies; and

(ii) a description of the activities with respect to previously bundled contracts of each Federal agency during the preceding year, including—

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(I) data on the number and total dollar amount

of all contract requirements that were bundled;

and

(II) with respect to each bundled contract, data

or information on—

(aa) the justification for the bundling of contract requirements;

(bb) the cost savings realized by bundling

the contract requirements over the life of the

contract;

(cc) the extent to which maintaining the

bundled status of contract requirements is projected to result in continued cost savings;

(dd) the extent to which the bundling of contract requirements complied with the contracting agency’s small business subcontracting plan, including the total dollar value

awarded to small business concerns as subcontractors and the total dollar value previously awarded to small business concerns as

prime contractors; and

(ee) the impact of the bundling of contract

requirements on small business concerns unable to compete as prime contractors for the

consolidated requirements and on the industries of such small business concerns, including a description of any changes to the proportion of any such industry that is composed of

small business concerns.

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