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Tuesday, August 6, 2013

Bundling (and The Government Contracts Law Report -- a new link to other resources)

I was doing some research into the restrictive effects of "bundling" in contract solicitations, and came across this illuminating article (which I've chopped and paraphrased) by Pat Wittie (once?) of the law firm Kilcullen, Wilson & Kilcullen:

 What is a “Bundled” Procurement? And When is It Improper?
Regardless of how the term is defined, bundling’s effect is to group a variety of segregable requirements into a single solicitation, so that all bidders/offerors must be able to satisfy all of the requirements. Offerors that can provide only some are excluded from the competition.

The backdrop for this discussion is the Competition in Contracting Act, which requires full and open competition and states clearly that solicitations may contain restrictive provisions and conditions only to the extent necessary to satisfy the needs of the agency, or as authorized by law. 10 U.S.C. § 2305(a)(1)(B)(ii); 41 U.S.C. § 253a(a)(2)(B). Over the years, GAO has evaluated bundled procurements in a variety of contexts, and with a few important exceptions, it has come down squarely on the side of competition and against bundling.

[After discussing cases declaring this general principle, the article continues:] Bundling, then, is strongly discouraged, carefully scrutinized, and seldom upheld in a protest. There are, however, a few situations in which bundling has been adequately justified, at least in GAO’s view. Most of those situations fit into one of three categories:

(i) Design integrity/interoperability: the requirements to be bundled all relate to a single integrated system, where design integrity and interoperability are critical.

(ii) Overwhelming administrative burden: the agency’s administrative burden will be truly overwhelming if the work is not bundled. (Although agencies often defend solicitations that involve bundled requirements on grounds of administrative efficiency, they seldom win. GAO’s threshold for administrative convenience is low, and its tolerance for inconvenience to the agency is high, at least when balanced against the statutory requirement for competition.)

(iii) National security: the agency can provide a well-documented justification based on national security or military readiness considerations.

IDIQ Contracts Are Governed By Slightly Different Considerations. Historically, the “bundling” issue has arisen in garden-variety supply, service, or construction contracts, but more recently the concept has spilled over into IDIQ and task order contracts. In fact, amendments to the Competition in Contracting Act (CICA) that were passed in 1994 as part of the Federal Acquisition Streamlining Act created: (i) a scheme for “multiple awards” under IDIQ procurements, which is effectively a statutory preference in favor of unbundling, and (ii) a requirement for unbundling on task order contracts for advisory and assistance services where the amount is expected to exceed $10 million over 3 years. Legislative history clearly focuses on the benefits of constant, head-to-head competition among multiple awardees as tasks or delivery orders are identified and released.

These statutory provisions have been implemented through the FAR at 16.500 et seq. FAR 16.504(c)(1) establishes the general preference for multiple awards on IDIQ contracts, but identifies six situations in which multiple awards “should not” be made. With IDIQ contracts, bundling into a single award is likely to be permitted when an agency can demonstrate that only one contractor can provide the requirement, or if administrative costs of multiple awards are overwhelming, or if design integrity or interoperability are critical, or if “more favorable terms and conditions” will prevail with a single award.

The analysis does not stop there, however, since GAO has grafted a “void for vagueness” standard onto IDIQ solicitations. In fact, in connection with a protest that it dismissed as untimely last year, GAO took the extraordinary step of writing a letter to the Air Force and the Army, chastising those agencies for violation of CICA and FAR 16.504 even though it did not address the protest on the merits. (Letters to the Air Force and Army Concerning Valenzuela Engineering, Inc., B-277979, Dec. 9, 1997, Jan. 26, 1998, 98-1 CPD ¶ 51.) GAO reviewed the statement of work in this IDIQ solicitation and concluded that it was so broad that it did not “reasonably describe the scope of services needed,” thus failing to provide potential offerors notice of the work that would be within the scope of the resulting contract. GAO took pains to point out that:
inclusion of broad categories of work in one statement of work constitutes a form of bundling, since different kinds of work (or tasks in different geographical or technical areas) are combined into one procurement, and an overly broad statement of work can unjustifiably diminish competition, just as bundling does, by deterring businesses, particularly small businesses, from competing for a contract, notwithstanding their ability to perform some of the work at issue.
Thus a solicitation with a broad, vague, undifferentiated statement of work can constitute a prohibited form of bundling, at least in connection with IDIQ contracts. GAO has not addressed whether this would be true even if the agency could make persuasive arguments in favor of a single, bundled award on grounds of quality, design integrity, or national security.

[And then there are] amendments to the Small Business Act passed in 1997 [which] are driving the SBA’s proposed regulation. The approach taken by Congress in the statute and by SBA in the proposed regulations, however, shows only passing interest in competition as a principle. Instead, the primary consideration - the principal focus - is on process, i.e., maximizing small business access to federal procurements. Toward this end, the proposed regulations impose a strict quantitative analysis requirement. The exercise of judgment and discretion by an agency-to which GAO typically defers-is far more tightly circumscribed than it has been in the typical GAO decisions. Under the proposed regulation, the effect of bundling must be quantified and its justification must involve “measurably substantial benefits.”
Impressed by the comprehensiveness of the paper (even if dated), I looked around for its source, and discovered this new procurement resource link, actually more of a link of links:
The Government Contracts Law Report
Sometimes even an old link can prove to be a rich vein to mine.

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