Small Businesses

Federal agencies have been combining existing government contracts into fewer contracts in order to streamline the procurement process and cut costs. This process is known as contract consolidation. Congress and small business advocates have been concerned that contract consolidation may harm small businesses' ability to compete for contracts. Contracts that are consolidated to such an extent that they present a barrier to small businesses' ability to compete for them are considered to be "bundled contracts." This report discusses (1) whether the government has met the governmentwide goal of awarding 23 percent of its federal prime contracts to small businesses, (2) what the federal government knows about the extent of contract bundling and its effect on small businesses, and (3) the Small Business Administration's efforts to oversee contract bundling by federal agencies.

GAO noted that: (1) data from the Federal Procurement Data System (FPDS) indicated that in fiscal year 1998, federal agencies met the governmentwide goal of 23 percent for prime contract awards to small businesses; (2) the Small Business Reauthorization Act of 1997 amended the Small Business Act of 1953 to set the goal as being not less than 23 percent of the total value of all the prime contract awards for each fiscal year; (3) SBA administers and issues regulations under the Small Business Act and is responsible for determining how the extent of small business participation in governmentwide procurement is to be calculated; (4) there is very little data on the extent of contract bundling governmentwide and its effect on small businesses; (5) SBA had some data on bundled contracts that it had identified, but neither SBA nor the three agency procurement centers GAO contacted had performed definitive studies measuring the extent of contract bundling or its effect on small businesses; (6) the Office of Advocacy's study is the only governmentwide study to be completed to date and it concludes that contract bundling has increased and had a negative effect on small business' share of federal contracts; (7) however, the study's analysis was based on a definition that was broader than the statutory definition of contract bundling and provided no convincing evidence that bundling caused adverse effects on small businesses; (8) SBA is responsible for reviewing potential contract bundling at procurement centers and recommending to agencies ways of increasing small business participation for those contracts, such as breaking up the contracts or identifying subcontracting opportunities; (9) however, according to SBA officials, the effectiveness of these activities has been limited, and it is not clear to what extent agency contracting officers are identifying proposed bundled contracts and notifying SBA's Procurement Center Representatives (PCR) who are to review the contracts; (10) SBA officials acknowledged that they have not assessed the best use of personnel to monitor contract bundling, and they plan to reevaluate the placement of PCRs and determine if existing staff have skills to become PCRs in those geographic areas where PCR coverage is needed; and (11) SBA officials also noted that they were highly dependent on contracting officers' notifying SBA of bundled contracts, and therefore, they had no assurance that all bundled contracts were being identified.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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