[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
   BUNGLING BUNDLING: HOW CONTRACT BUNDLING AND CONSOLIDATION REMAIN 

                  CHALLENGES TO SMALL BUSINESS SUCCESS

=======================================================================



                                HEARING

                               before the

               SUBCOMMITTEE ON CONTRACTING AND TECHNOLOGY

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS

                             UNITED STATES

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                            OCTOBER 10, 2013

                               __________

                               [GRAPHIC] [TIFF OMITTED] 
                               

            Small Business Committee Document Number 113-041

              Available via the GPO Website: www.fdsys.gov




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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                       BLAINE LUETKEMER, Missouri
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                   JAIME HERRERA BEUTLER, Washington
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                       DAVID SCHWEIKERT, Arizona
                       KERRY BENTIVOLIO, Michigan
                        CHRIS COLLINS, New York
                        TOM RICE, South Carolina
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                        BRAD SCHNEIDER, Illinois
                          RON BARBER, Arizona
                    ANN McLANE KUSTER, New Hampshire
                        PATRICK MURPHY, Florida

                      Lori Salley, Staff Director
                    Paul Sass, Deputy Staff Director
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director


                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Richard Hanna...............................................     1
Hon. Grace Meng..................................................     2

                               WITNESSES

Juanita Beauford, President, Association of Procurement Technical 
  Assistance Centers, Newark, DE.................................     4
Robert A. Burton, Senior Partner, Venable LLP, Washington, DC....     6
Gloria Larkin, President, TargetGov, Baltimore, MD, testifying on 
  behalf of Women Impacting Public Policy........................     8
Margot Dorfman, CEO, U.S. Women's Chamber of Commerce, 
  Washington, DC.................................................    10

                                APPENDIX

Prepared Statements:
    Juanita Beauford, President, Association of Procurement 
      Technical Assistance Centers, Newark, DE...................    25
    Robert A. Burton, Senior Partner, Venable LLP, Washington, DC    30
    Gloria Larkin, President, TargetGov, Baltimore, MD, 
      testifying on behalf of Women Impacting Public Policy......    43
    Margot Dorfman, CEO, U.S. Women's Chamber of Commerce, 
      Washington, DC.............................................    51
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    Associated General Contractors of America - AGC..............    54
    National Association of Surety Bond Producers - NASBP........    64


                    BUNGLING BUNDLING: HOW CONTRACT 

              BUNDLING AND CONSOLIDATION REMAIN CHALLENGES TO 

                         SMALL BUSINESS SUCCESS

                              ----------                              


                       THURSDAY, OCTOBER 10, 2013

                  House of Representatives,
               Committee on Small Business,
        Subcommittee on Contracting and Technology,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 11:31 a.m., in 
Room 2360, Rayburn House Office Building, Hon. Richard Hanna 
[chairman of the Subcommittee] presiding.
    Present: Representatives Hanna, Bentivolio, Meng, Chu, and 
Clarke.
    Chairman Hanna. Thank you, everyone, for being here. This 
morning we are here to talk about contract bundling and what 
consolidation means for small business, specifically what 
unjustified consolidation means for small business. In this 
Subcommittee we look at a lot of different procurement tools 
and have always been careful to say that no one type of 
contracting methodology is inherently good or bad. But that it 
is how government uses a tool that matters. In no case is it 
truer than in bundling and in consolidation.
    In the Small Business Act, Congress tells agencies how to 
determine whether bundling and consolidation--whether or not 
they are being appropriately used. The law provides definitions 
of the methodologies, explains what benefits would justify the 
use of the strategy, and requires agencies to mitigate 
justified bundling and consolidation and prohibits unjustified 
bundling and consolidation.
    When bundling and consolidation are justified, they deliver 
real benefits for the taxpayer. However, unjustified bundling 
unnecessarily excludes small businesses from competing for 
Federal contracts, which results in higher prices for 
taxpayers. Thus, this system only works if agencies correctly 
identified contracts as bundled and consolidated.
    While we don't have all of the data yet, agencies are 
reporting bundling of 38 contracts, worth $2.8 billion in 
fiscal year 2013, and consolidating another 98 contracts worth 
$29 billion. This would mean that about 6 percent of the 
dollars we spend are bundled or consolidated, and that amounts 
to 136 of 10 million-plus contracts awarded that were actually 
bundled.
    Unfortunately, we know this number is significantly 
underreported. For example, during our June hearing on 
strategic sourcing we heard that agencies are turning more and 
more to consolidating and bundling contracts for goods and 
services normally procured from small businesses. However, the 
strategic sourcing contracts are not being reported as bundled 
or consolidated.
    Likewise, while agencies did not award all of the top 20 
contracts predicted for fiscal year 2013, of those awarded none 
included a bundling or consolidation. None included a bundling 
or consolidation justification, even though these contracts 
were expected to exceed $105 billion.
    While it is easy to point out large omissions, it is often 
the smaller contracts, those in tens or hundreds of millions of 
dollars that represent the greatest loss of opportunity for 
small business. I hope to hear from our witnesses today on how 
large this problem is, what we can do about it, and frankly, at 
this time to see what consequences we might apply to the 
agencies and how we can correct this circumstance.
    Further, I am concerned other aspects of the law are not 
being enforced. For example, after a bundling contract is 
awarded, the government is supposed to report back on the 
anticipated savings or benefits that justified the bundling and 
explains what those benefits were. To date, not one, not one 
such report has been completed.
    I am hoping our witnesses today will help us understand the 
scope of the problem, what we need to do to get reliable data 
on bundling and consolidation. I am also looking for their 
ideas to hold agencies accountable for unjustified bundling and 
consolidation since the current statutory provisions are being 
observed in the breach. Finally, I am seeking their opinions on 
other ways we can improve the law to ensure that small 
businesses have a piece of this pie.
    At a time when we are focused on the financial health of 
the country, I believe that part of the solution is to find 
ways to improve competition, and thereby reduce prices. Small 
businesses are a critical part of that solution since their 
participation in competition creates jobs and encourages 
innovation. I look forward to your testimony, and thank you all 
again for being here today.
    I turn to my friend, Ms. Meng, Grace Meng, ranking member 
for her opening comments.
    Ms. Meng. Thank you, Mr. Chairman. Thank you to our 
witnesses for being here today.
    Today small businesses are looking for opportunities to 
expand and to grow stronger. As the catalyst for nearly two-
thirds of employment gains, small business expansion is 
essential for the economy.
    One way Congress can increase the job-creating power of 
small firms is through the Federal procurement marketplace. In 
fact, during the last decade the government has doubled its 
contracting efforts to more than $500 billion per year. This 
makes the U.S. Government one of the largest single buyers of 
goods and services in the world.
    In order to ensure that small firms successfully compete 
for these Federal contracts, several tools and resources have 
been put in place. This includes the 23 percent small business 
procurement goal, as well as protections that help level the 
playing field for smaller enterprises.
    Programs at the Small Business Administration provide a 
foundation for many entrepreneurs to enter the Federal 
marketplace and provide a springboard for growth. Together, 
these goals, policies, and programs have encouraged agencies to 
recognize that small businesses can provide high-quality goods 
and services at a competitive price to the taxpayer.
    For many small firms, however, these resources are simply 
not enough to overcome one of the biggest hurdles they face: 
contract bundling. Although we must be cognizant of the cost to 
Federal agencies, we must ensure that bundling does not limit 
the accessibility of small businesses to Federal contracts, 
especially while the government is falling short of its 23 
percent goal.
    Last year, more than $50 billion or 10 percent of total 
contracting dollars was awarded through bundled or consolidated 
contracts. As a result of bundling, small businesses missed out 
on contracting opportunities worth more than $15 billion. By 
bundling large contracts such as these, the government 
effectively shuts out many smaller companies from competing for 
work that they have the skills and the expertise to perform.
    Splitting these megacontracts into smaller pieces would 
enable more small businesses to compete for Federal agency 
work. By doing so, the government would be able to increase 
competition, accessing qualified companies and the high-quality 
service they bring to the table.
    At the forefront of this battle are procurement center 
representatives, small business specialists, and procurement 
technical assistance centers, whose already depleted ranks have 
been further reduced by sequestration. Unfortunately, they are 
fighting an uphill battle. Last year, SBA's CCR challenged just 
28 bundled contracts out of more than 17 million contracting 
actions and only 6 were actually unbundled. This is simply not 
enough oversight to make a difference. Ensuring that these 
bundled and consolidated contracts are more thoroughly examined 
is critical to giving small businesses an equal opportunity in 
this marketplace.
    These challenges, while significant, pale in comparison to 
the impact that the shutdown is having on small business 
contractors. With the government typically spending $1.4 
billion on contracts per day, the shutdown is causing severe 
disruption and confusion for small businesses. For many firms 
it is unclear when they will be paid for their work, which in 
turn is causing uncertainty for their employees.
    In 2012, my district received an average of $117,000 a day, 
or $2 million a month, in loans from the SBA. These loans are 
not being processed. As a result, small businesses are left 
without access to the opportunities and resources they have 
come to depend on for their livelihood.
    Given the shutdown, I am not only looking forward to 
testimony about contract bundling today, but also concerning 
the impact that the government's closure is having on our small 
firms. I am hopeful that we can reopen the government and in 
the future take steps to reduce the prevalence of bundling 
across Federal agencies.
    With that said, I want to thank all of the witnesses in 
advance of their testimony again and their input on these 
important issues. Thank you Mr. Chairman. I yield back.
    Chairman Hanna. Thank you.
    It is my job to explain the lights. It is a little like 
your stewardess explaining how the seat belts work. So red is 
bad, green is good. We are pretty flexible, so we want to hear 
what have you to say.
    In any event, our first witness today is Juanita Beauford, 
president, Association of Procurement and Technical Assistance 
Centers, called PTACs, and director of the University of 
Delaware PTAC program. There are currently 94 PTAC programs 
across the country operating at 300 locations, and these 
individuals assist small businesses with Federal contracting as 
Ms. Beauford is uniquely situated to speak to the experience of 
small contract bundling and small businesses and consolidation.
    Ms. Beauford, thanks for being here, and you may begin.

   STATEMENTS OF JUANITA BEAUFORD, PRESIDENT, ASSOCIATION OF 
PROCUREMENT TECHNICAL ASSISTANCE CENTERS, NEWARK, DE; ROBERT A. 
  BURTON, SENIOR PARTNER, VENABLE LLP, WASHINGTON, DC; GLORIA 
  LARKIN, PRESIDENT, TARGETGOV, BALTIMORE, MD, TESTIFYING ON 
 BEHALF OF WOMEN IMPACTING PUBLIC POLICY; AND MARGOT DORFMAN, 
     CEO, U.S. WOMEN'S CHAMBER OF COMMERCE, WASHINGTON, DC

                 STATEMENT OF JUANITA BEAUFORD

    Ms. Beauford. Thank you, Chairman Hanna, Ranking Member 
Meng, and distinguished members of the Subcommittee. Thank you 
for the opportunity to testify here today. I am honored to 
speak before you on behalf of the Association of Procurement 
Technical Assistance Centers, APTAC, and the small businesses 
we serve, and to express our gratitude for your leadership on 
their behalf. As you said, my name is Juanita Beauford, 
president of APTAC and the professional organization of now 97 
procurement centers nationwide.
    Created by Congress in 1985, PTACs assist local businesses 
at little or no cost by preparing them to become capable 
government contractors, believing that a broad base of small 
business suppliers provide the highest quality and best value 
to our government while creating a strong and vibrant economic 
base for our communities. Last year we helped over 70,000 small 
businesses win more than 112,000 government contracts, valued 
at over $14.1 billion.
    We applaud your efforts to reexamine the issue of bundling 
and consolidation. Many of our members report frustration about 
dwindling bid opportunities as agencies increasingly rely on 
large acquisition mechanism such as strategic sourcing, 
government-wide acquisition contracts, multi-agency contracts, 
omnibus ``single solution'' contracts, and multiple year 
indefinite delivery indefinite quantity contracts, as well as 
bundling and consolidation.
    There is a clear perception that the number of 
solicitations appropriate for small businesses is shrinking 
significantly, while small businesses are additionally 
disadvantaged by the lack of access to contracting officers and 
the trend away from Best Value tradeoffs and towards lowest 
price technically acceptable.
    We cannot quantify the extent to which perceptions are 
accurate. As you know, the data is incomplete and difficult to 
find. And we hear little about efforts to challenge or mitigate 
consolidation practices. Agencies strive to be good stewards 
over tax dollars, often with underfunded acquisition offices. 
Streamlined vehicles are attractive because they are easy and 
promise cost savings.
    I suspect there is confusion both about what constitutes 
bundling and that there are requirements to make solicitations 
accessible to small businesses. Enforcement of such 
requirements is simply not happening in many cases. Simplifying 
definitions could be an important place to start. Having 
different definitions for bundling and consolidation is itself 
difficult. Select one term and define it simply; for example, 
two or more requirements that would reasonably be provided or 
performed under two or more separate contracts.
    To bring this under the umbrella, all vehicles that present 
barriers to small businesses while making communication about 
and measurement of the issue easier, then define the criteria 
under which consolidated contracts may be appropriate or 
require review or justification. This would make clear the 
newer mechanisms, such as Strategic Sourcing, GWACs, et cetera, 
indeed constitute consolidated solicitation, which is the first 
step in determining their prevalence and impact. Simplifying 
the reporting process and identifying a better platform for 
making the information available to TCRs and the public could 
also be helpful, and we have included an example in our 
addendum to our written testimony.
    Also intended to provide accountability, it appears that 
requirements are often sidestepped. This information must be 
tracked and analyzed so that effective strategies for 
protecting the ability of small businesses to participate in 
the Federal marketplace can be developed and implemented. But 
finding realistic enforcement triggers and providing adequate 
resources to implement them is also critical. The fact that 
enforcement actions are rare undermines existing regulations.
    But the real challenge is to convince government buyers 
that their interests can be well served by small businesses. To 
this extent, we encourage the Subcommittee to consider 
initiatives to educate agency acquisition staff about statutory 
and regulatory provisions with regards to bundling and 
consolidation, while emphasizing the importance of a robust 
base of small business suppliers and the specific benefits 
small businesses can bring to agency requirements.
    Contracting officers may not be aware of these benefits, 
much less best practices for accessible contract vehicles and 
small business outreach. There are success stories out here. 
Highlighting them while training contracting officers on how 
and why to contract with small businesses could be critical to 
overcoming the trend towards consolidation. Buying from small 
businesses must be seen as an appealing option.
    To the extent that APTAC or the PTACs can help, please call 
upon us. PTACs are proud to collaborate with local Federal 
offices, and APTAC has partnered with agencies for national 
outreach. We would gladly work with additional agencies to open 
more opportunities to small businesses. Thank you.
    Chairman Hanna. Thank you.
    Our second witness is Robert A. Burton. Mr. Burton is a 
senior partner in Venable LLP in Washington, D.C., where he is 
a nationally recognized Federal procurement attorney. Prior to 
joining Venable, Mr. Burton spent 7 years at the Office of 
Federal Procurement serving as Deputy Administrator, as well as 
Acting Administrator for 2 years.
    Mr. Burton, thank you for being here.

                 STATEMENT OF ROBERT A. BURTON

    Mr. Burton. Chairman Hanna, Ranking Member Meng, and 
members of the Subcommittee, I very much appreciate the 
opportunity to testify today and discuss how contract bundling 
and consolidation remain difficult challenges for small 
businesses and why increased congressional oversight is needed.
    Prior to joining the Venable law firm in 2008, I did serve 
as the Deputy Administrator of the Office of Federal 
Procurement Policy, oftentimes referred to as OFPP. While 
serving in this capacity I worked on initiatives to increase 
contracting opportunities for small businesses and assisted 
with the development of the 2002 Office of Management and 
Budget report on contract bundling, which ultimately resulted 
in amendments to the Federal Acquisition Regulation and the 
regulations issued by the Small Business Administration.
    The bundling report was part of the President's small 
business agenda and focused on increasing agency reporting on 
bundled contracts and mitigating the negative effects of 
justified bundling on small businesses.
    The 2002 report also resulted in the regulatory requirement 
for bundling reviews of task orders under the GSA schedules and 
other multiple award contract vehicles, which was a significant 
step forward because the majority of our Federal procurement 
dollars are actually awarded through task orders under umbrella 
contracts.
    In my testimony today, Mr. Chairman, I would like to focus 
on three factors that in my view have undermined the 
effectiveness of the regulations and the laws passed by 
Congress that were intended to mitigate the effects of contract 
bundling and contract consolidation. And these three factors 
are, one, the lack of accurate and reliable data on bundled and 
consolidated contracts; two, the lack of agency accountability 
for not following applicable laws and regulations on this 
subject; and three, the lack of recourse for small businesses 
harmed by unjustified contract bundling or consolidation.
    With respect to the first issue, the unavailability of 
accurate data, it appears that agencies simply have failed to 
report their use of bundled requirements as required under the 
procurement regulations. Indeed, the SBA Web site that tracks 
agencies' bundling reports which must be filed on an annual 
basis does not provide any reports for fiscal year 2010. 
Further, many agency Web sites do not maintain a list of 
bundled procurements as required under the 2010 Small Business 
Act amendments.
    And finally, by statute, the Federal Procurement Data 
System, otherwise known as FPDS, must collect data regarding 
bundling of contract requirements when the contract price 
exceeds $5 million, including all options. However, the FPDS 
data is unreliable and incomplete, primarily because of lack of 
agency reporting and differing agency interpretations and 
applications of the word bundling.
    The second factor is the agency's failure to comply with 
the bundling and consolidation regulations. This failure is 
nowhere more apparent than in agencies' failure to prepare the 
required written justification for both contract bundling and 
consolidation as mandated by law.
    For example, just recently I had a client who was one of 
five small businesses that provided a specific set of services 
to a Federal agency. The agency decided to recompete their 
contract and converted a multiple-award contract into a single-
award contract. All five incumbents lost the recompete, which 
has had a significant negative impact on their financial 
health.
    The agency's justification for the single-award 
consolidated contract was requested, but my understanding is 
the agency never prepared a justification analyzing the 
potential negative impact the consolidation might have on small 
businesses. In similar consolidation cases that I have 
personally worked on, the agencies have simply been unable to 
provide the required written justification for the bundling or 
consolidated procurement.
    Finally, I would like to address the third factor that in 
my opinion has hindered the implementation of the bundling and 
consolidation regulations. This is the lack of recourse for 
small businesses that have been negatively impacted by agency 
noncompliance with the applicable regulations. In this regard, 
I recommend that Congress provide for an independent review of 
agency contract bundling and consolidation actions. This review 
should be conducted by an independent review board or office 
within the government which does not have any incentive to 
justify unsupported agency contract consolidations.
    Arguably, the Government Accountability Office, GAO, may be 
in the best position to provide this type of unbiased and 
independent review. This administrative review should be 
separate from the formal bid protest reviews currently 
conducted by GAO, and should be housed in a different GAO 
office. At a minimum, third-party independent reviews will 
highlight the fact that most agencies are not preparing the 
required justifications for bundled or consolidated 
procurements. Moreover, this type of review is critical in the 
face of the growing trend toward consolidation through new 
government-wide strategic sourcing contracts and related 
initiatives.
    In conclusion, I think it is evident that agency 
noncompliance with the bundling and consolidation laws and 
regulations will simply require increased congressional 
oversight. This is critical to ensure that small business 
participation in the Federal procurement process is protected 
and that agencies justify the growing number of contract 
consolidations.
    Mr. Chairman, this concludes my statement, and I will be 
pleased to answer any questions that you or members of the 
Subcommittee may have. Thank you.
    Chairman Hanna. Thank you, thank you.
    Our third witness today is Ms. Gloria Berthold Larkin, 
testifying on behalf of Women Impacting Public Policy, or WIPP, 
where she serves as Educational Foundation vice chair. WIPP is 
a nationally nonpartisan public policy organization advocating 
on behalf of its coalition of 4.7 million businesswomen. Ms. 
Larkin is also president of TargetGov, a company that helps 
small businesses sell to government customers.
    Ms. Larkin, thanks for being here and you may begin.

                   STATEMENT OF GLORIA LARKIN

    Ms. Larkin. Thank you, Chairman Hanna and Ranking Member 
Meng and distinguished members of the Subcommittee. I 
appreciate this opportunity to testify this morning. My name is 
Gloria Larkin, and I am president of TargetGov. And I also 
serve as the vice chair of the Educational Foundation of Women 
Impacting Public Policy.
    I have been in business since 1997, and my firm helps 
companies of all types pursue, propose, and win Federal 
Government contracts. As a result, we do have specific 
experience in the challenging world of bundled and consolidated 
contracts.
    I am here today representing Women Impacting Public Policy, 
or WIPP, a national, nonpartisan public policy organization 
advocating on behalf of its coalition of 4.7 million 
businesswomen nationwide, including 75 business organizations. 
WIPP plays a key role in developing women-owned businesses into 
successful government contractors through our Give Me 5 and 
ChallengeHER programs.
    In our view, bundling and consolidation continues to hamper 
small business in the Federal marketplace. We believe that 
contracts that can be serviced by small business should not be 
subject to any form of consolidation.
    It is our recommendation the following actions be taken to 
minimize unnecessary and unjustified consolidation. First, we 
would like to improve the collection of statutorily required 
data on consolidation. Second, complete the related regulatory 
actions. And three, increase training and outreach to small 
business vendors.
    What are these actual barriers to success? According to 
WIPP members, these are the key reasons that they are wary of 
pursuing these large contracts.
    First, it is the time and cost required. It is not unusual 
for large businesses to invest nearly $250,000 in preparation 
to win these government contracts. The timeline is equally 
large. Vendors must enter the market 12 to 18 months ahead of 
time before the contract is actually competed. At that same 
time, small businesses must choose between going to vendor 
outreach or industry days or making money on their existing 
contracts so that they can simply pay their employees.
    Second, size and bonding questions are major concerns. As 
an example, let's take an engineering firm with a size standard 
of under $14 million in annual revenue. Let's say they are 
pursuing a consolidated contract worth $100 million as a prime 
contractor. They are unlikely to win because the Federal 
Government requires that they show past performance of a 
similar size contract. If they could do a $100 million 
contract, they would not be small business.
    Bonding requirements present similar barriers. As these 
consolidated contracts increase in size, far exceeding the size 
standard for small business, there is only one real alternative 
to competition, and that is teaming. But teaming itself is 
fraught with cost, risk, and dangers to all parties. The costs 
involved in teaming must be borne directly by the small 
business, and those costs are not allowable in the contract 
accounting process.
    And third, winning does not mean that you have actually won 
anything. Should a business or a team be successful and 
actually win a bundled contract, it is only the first step. No 
money is actually paid on products or services until each 
awardee further pursues individual task orders on a competitive 
basis. Therefore, the winners have simply won the right to 
compete over and over and over again with other winners.
    The growth of consolidated contracts essentially force 
small businesses to form complicated teaming agreements with a 
wide variety of partners. All told, these enormous bundled 
contracts inherently limit small business from competing.
    I will wrap up with WIPP's following recommendations to the 
Committee. Number one, improve the collection and sharing of 
bundled data. It seems to be a common thread here. To be the 
honest, I don't think we actually know how much bundling and 
consolidation is really happening, and that can't be good for 
anyone.
    Let's complete the regulatory process for bundling 
regulation. We do applaud SBA's recent October 2nd final rule, 
but my understanding is that it could take years to implement 
even after FAR Council adoption.
    And number three, let's increase education efforts of small 
business vendors regarding the consolidation and bundling 
process. More partnerships are needed between agencies and our 
business community. As new rules and regulations are released, 
small businesses need to understand the consolidation process, 
as well as the appeal and protest processes for possibly 
unjustified or unnecessary consolidation or bundling.
    It is our hope that our identification of these barriers 
and recommendations are helpful to your efforts to assist small 
businesses to become successful Federal contractors, thereby 
supporting the economy with the jobs across the Nation that we 
desperately need right now. Thank you, and I am very happy to 
answer questions.
    Chairman Hanna. Thank you.
    I will now yield to Ranking Member Meng to introduce the 
minority witness.
    Ms. Meng. Thank you. It is my pleasure to introduce Ms. 
Margot Dorfman. Ms. Dorfman is the founder and CEO of the U.S. 
Women's Chamber of Commerce. The Women's Chamber represents 
500,000 members, three-quarters of whom are small business 
owners and Federal contractors. Through her leadership this 
organization has championed opportunities to increase women's 
business, career, and leadership advancement. Additionally, Ms. 
Dorfman has extensive background in business, including over 10 
years in executive positions with General Mills and other 
Fortune 500 firms.
    Welcome, Ms. Dorfman.

                  STATEMENT OF MARGOT DORFMAN

    Ms. Dorfman. Thank you. And Chairman Hanna, Ranking Member 
Meng, and members of the Subcommittee, I greatly appreciate 
being here today, and I am here to testify on behalf of the 
U.S. Women's Chamber of Commerce and of the millions of women 
that we represent across the United States, along with our 
500,000 members, three-quarters of whom are American small 
business owners and Federal contractors.
    Whenever I am asked to provide testimony on key issues 
impacting business, I first go directly to our members to 
receive boots-on-the-ground input. Here is what I heard this 
week. From Eileen Pannetier, Comprehensive Environmental: The 
Air Force periodically puts out worldwide environmental 
contracts encompassing almost all of their environmental work. 
Given the size of these bundled solicitation they are 
unattainable for small business.
    Jennifer Dickerson of EnRep: The Department of Energy 
continues to bundle scopes of work stating they do not have the 
resources to manage smaller contracts and that the risk is too 
great. If smaller scope of work is not segregated out DOE will 
continue to receive an F grade from the SBA in meeting their 
small business goals. There is not accountability by the SBA, 
the DOE, the primes, and unfortunately, the small business 
contractors suffer.
    Cheryl London with Cherco: Because of bundling we have been 
precluded from any profitable business that the government has 
for our type of work. The jobs are contracted out by agency and 
facility and cover any aspects of construction at those 
facilities, often for years.
    Lynn Sutton of Advantage Building Contractors: The project 
we choose to pursue is the most important decision we can make 
for our business. This economy has left few standing. Bundling 
contracts is an extreme hardship, especially for the 
construction industry.
    And I have another member: Contract bundling is more 
expensive than direct contracting. Fee, G&A, and engineering 
hours are added to the prime's contract to, quote/unquote, 
``manage the sub.'' The sub was working independently and 
directly with the government prior to the bundling at a lower 
total cost.
    While this Committee has been active in seeking to 
eradicate bundling and consolidation of Federal contracts, our 
members make it clear. The issues of bundling, consolidation, 
and the ever-popular euphemism strategic sourcing are alive and 
well in the Federal marketplace due in part to the following.
    One, there was a systematic lack of accountability in 
Federal contracting. Year after year, the Federal Government 
misses the required 23 percent mark and also the paltry 5 
percent goal for women-owned firms and does nothing to end the 
charade of what acquisitions get counted as eligible for small 
business target, underfunds the procurement center 
representatives, and fails to hold senior acquisition and 
agency leaders accountable for the systemic failures.
    Two, congressional leaders fail to understand that bundling 
and consolidation actually represent decreased competition as 
many competitive vendors are left out due to the size and scope 
of single competition.
    Three, now we have legislation and rulemaking that claims 
to be the solution for ending bundling and consolidation, but 
when we look at it from our view, these rules simply detail the 
basis for providing a legal paper trail to justify bundling and 
consolidation.
    And four, posting an agency's intent to bundle or 
consolidate 30 days ahead of publishing the offer may look like 
transparency and may make for a nice rebuttal to complaints, 
but if you are trying to be a small business keeping up with 
yet another Federal Web site, taking on an agency at the last 
minute, potentially incurring legal fees and potentially 
running agency-level relationships--or ruining them--then when 
agency acquisition leaders have made their strategic plans 
long, long ago, this is simply just not feasible.
    If you truly want to prevent bundling and consolidation, 
then just say no rather than provide the blueprint for how to 
justify it. Increase the number of and clout of the procurement 
center representatives, get more influence at the agency's 
strategic planning stage, require the SBA to provide annual 
reporting that goes much further than the woefully inadequate 
small business goaling reports, and last but certainly not 
least, stop shutting down the government.
    I guarantee you the sudden stops and starts, the lack of 
certainty in agency funding, and the lack of accountability 
that follows this sort of mess will absolutely lead acquisition 
professionals to do whatever they can to just let out contracts 
as fast as possible to all the big businesses lined up at their 
doors ready to take our tax dollars as fast as possible.
    And while I am on the subject of shutdowns, you need to 
stop this nonsense. You are killing our businesses. Our members 
were just getting their feet on the ground, and you pulled the 
rug out again. My members have started laying off employees 
already. They have no way to recover the cost of the lost 
revenues from the shutdown. You are hurting their businesses. 
You are hurting their families. You are hurting their 
employees, their employees' families, and you are hurting 
ultimately their local economies. I ask that you stand down and 
open the government today. Thank you.
    Chairman Hanna. Thank you, and I appreciate your frankness.
    Now, we have almost unanimity here, so that is also nice. I 
am going to give Mr. Bentivolio first crack at this, and you 
may begin.
    Mr. Bentivolio. Thank you very much, Mr. Chairman.
    And thank you all for being here today. This is very 
important, specifically since I went back to my district not 
long ago and talked to some businessmen who--business folks--
who said that the government gave a big contract to an 
organization and they couldn't bid on that even though they 
originally were part of the bidding process, but they were shut 
out. And then they had a product that they could make cheaper, 
better quality, but they weren't authorized because the general 
contractor didn't--I guess they didn't meet those 
qualifications for that general contractor.
    And my question is, I guess, does the general contractor 
get to pick and choose who he wants basically? I mean, we like 
to think they go to the lowest bidder, but that is not always 
the case. It would naive to think so, right?
    So what I am asking I guess is, the government has 
protocols for giving minorities preference, veterans 
preference, those kinds of things, but when it goes to a 
general contractor are they still obligated or can they follow 
their own rules, make up their own rules? Anybody?
    Ms. Dorfman. I could speak to our members and their 
experience in this. Essentially what often happens is the prime 
contractor has to come up with a subcontracting plan to include 
the women, minorities, whatever the goals are. Once they go get 
the contract, they come back, they often take that work in-
house and do not use the firms that they had go through a very 
expensive process of providing them a quote of how much the 
work would go.
    Mr. Bentivolio. Wow, I can see your point. I can see your 
point. It is pretty unfair.
    Mr. Burton, I had a question for you, but I can't remember 
exactly what it is, but I got the impression, somebody said 
something about strategic sourcing, and, Mr. Burton, have you 
noticed anything in the process where a government bureaucrat, 
for instance, you know, likes to pick and choose winners and 
losers, or something along those lines? I am trying to think 
something you said. I made a note here, but I can't remember 
exactly the rest of the note.
    Mr. Burton. Well, strategic sourcing is clearly a very 
popular initiative right now, and there is nothing wrong with 
strategic sourcing. When I was in the government I led an 
initiative on strategic sourcing back in the 2005 timeframe.
    The problem is, I think the government is pressing rather 
aggressively to do everything in a consolidated fashion. It may 
have short-term savings, and that is appealing, but I am 
convinced that strategic sourcing, if it is not done correctly, 
will actually result in higher prices for the taxpayers in the 
long run.
    For example, there are many vehicles that are being used 
right now where the small business participation rate will 
decrease dramatically once the contracts are consolidated. In 
the long run, I think there will be fewer small business 
participants and less competition when these contracts are 
recompeted, say 5 years from now. And I think, as you know, 
less competition usually results in higher prices.
    So I think in the long run, the strategic sourcing effort 
taken to the degree it is being taken will actually increase 
costs for the American taxpayers and less opportunities for 
small businesses.
    Mr. Bentivolio. Okay. And I do remember now. You found some 
abuses in the program. And there are protocols to remedy when 
somebody hollers foul, there was something you said about a 
limit on finding justice in the system, I guess.
    Mr. Burton. Well, small businesses really have no recourse. 
And yes, agencies are simply not following the rules. I was 
actually, when I moved to the private sector, rather startled 
by how much noncompliance there is. And when I asked for 
written justifications from agencies that they need to do by 
law to support their consolidated procurements, they were 
unable to provide those justifications. They don't exist. And I 
think this is rampant throughout all of the agencies. That is 
disturbing.
    Second, small businesses when confronted with that type of 
situation really have no choice but perhaps to file a pre-award 
bid protest, which is very expensive, and oftentimes they don't 
want to do it. They feel like it is going to irritate the 
agency. They probably, if they irritate the agency, won't get 
the award in the final analysis. So they don't really want to 
do a pre-award bid protest.
    That leaves them without any recourse. And I do think there 
needs to be some type of more informal independent review 
available just to look at whether or not the consolidated 
procurement is justified and whether or not it has a negative 
and unjustifiable impact on small businesses.
    That review could be limited, fairly narrow in scope, where 
the GAO bid protests usually get involved in a number of 
different issues. And quite frankly, the pre-award bid protest 
usually results in a negative finding for contractors in 
situations such as this.
    Mr. Bentivolio. Thank you very much.
    I see my time has expired, Mr. Chairman. Thank you.
    Chairman Hanna. Ms. Chu.
    Ms. Chu. Thank you, Mr. Chair.
    I want to commend all of the panelists because you gave a 
very clear picture of a system that seems to have broken down.
    And, Mr. Burton, I wanted to follow up on some of the 
things that you said about lack of reliable data and lack of an 
enforcement mechanism. You said that there was a lack of 
reliable data on how much bundling and consolidation is going 
on and that the agencies are not even giving their 
justification for bundling, and it is hard to even fix the 
problem when we don't even know how much of it is going on.
    So moving forward, how can we incentivize agencies to 
accurately report the data? Is self-reporting the best way to 
do it? How can we accurately measure the extent of bundling and 
consolidation that has occurred in the last 15 years?
    Mr. Burton. I think it is a very difficult challenge. The 
data in FPDS has always not been terribly accurate. What 
strikes me on this topic is that there is in many cases no 
data, and I think as far as data is concerned, this area has 
some of the worst data of anything in the Federal Procurement 
Data System. So we are dealing with a very significant problem. 
FPDS probably will never have 100 percent accurate data, but 
the problem here is the total disregard for the requirements to 
report bundling.
    And I think, first, we need to have the responsibility and 
accountability in agencies centralized in one office. I would 
recommend that be the senior procurement executive. Right now, 
there are different people in the agencies responsible for 
bundling versus consolidated procurements. It makes no sense 
whatsoever.
    So I would recommend, A, just one definition. I don't think 
we need two definitions of bundling and consolidated 
procurement. And then I think that you need to centralize 
within the agency somebody to be accountable. And what we did 
in some instances was actually hold their feet to the fire and 
have this as an element of their performance appraisal. In some 
instances that did get attention.
    And I think this is serious enough that I would actually be 
that prescriptive if I were Congress, I would be that 
prescriptive with respect to holding accountable officials. 
First of all, having someone that is a single point of contact, 
and if it is not the senior procurement executive, it still 
should be a very high-level official within the government. And 
then to have that official responsible to report to Congress, 
to have that official maybe judged by their performance in this 
area for purposes of their performance appraisal.
    I think that is certainly a place to start. I will say that 
I think this is going to be a very difficult problem to 
correct, though, no matter what oversight Congress exercises. 
But the need for oversight I think is very clear.
    Ms. Chu. And what is really evident is that there is really 
no enforcement mechanism whatsoever at this point. That is what 
I understand, right? And what kind of enforcement mechanism 
would there be to ensure that agencies comply on this?
    Mr. Burton. You know, one thing I think is a real 
challenge, and I noticed this when I was in the government. 
Certain agencies don't necessarily like to say that other 
agencies are doing a poor job. And I found that true with the 
Small Business Administration, which is actually, as you know, 
headed by a political appointee, and the other agencies in the 
Federal Government are headed by political appointees. And one 
thing I found that was very difficult was to get agency 
political appointees to criticize agencies headed by other 
political appointees.
    That is why I am recommending that the review and the 
identification of problems in this area be housed somewhere 
else. And I think you need to get it out of SBA in the final 
analysis, and I think it needs to go, and I can't think of any 
other organization that is viewed as independent and as 
objective as GAO. And that is why I think GAO needs to set up a 
separate office to actually conduct these reviews and in 
appropriate cases hold the agencies accountable. They do a 
pretty good job on them.
    Ms. Chu. And I was also shocked by the fact that small 
businesses have so little ability to appeal these actions or to 
challenge any decision; that they have to demonstrate. It is 
hard to demonstrate standing or protest in a timely fashion or 
have a lack of jurisdiction on the part of the protest. Could 
you expand on that, on how we could fix this?
    Mr. Burton. That is very true. Your points are very well 
taken. And really the only recourse that is available to a 
small business would be what is called a pre-award bid protest. 
But oftentimes in that situation the small business does not 
have a lot of information necessarily to challenge the agency 
decision to consolidate the procurement. Some people will tell 
you, though, well, they do have recourse. They can take it to 
GAO in a pre-award bid protest. These tend to be very 
expensive. As I mentioned, small businesses are reluctant that, 
you know, they are worried that there might be some type of 
retribution if they did file such a formal procedure, which is 
very public. And it is very expensive.
    And what is really disturbing is that the cases that I am 
familiar with have resulted in negative decisions for small 
businesses because an extraordinary amount of discretion is 
afforded the agencies in making these determinations whether to 
consolidate or not. And even if the agency can show savings, 
and they might be able to show savings, I don't think the 
savings are significant in many cases, and I think that the 
interests of small businesses should be paramount and should be 
actually weighted heavier than any secondary savings that might 
be realized by the agency.
    Ms. Chu. Thank you. I yield back.
    Chairman Hanna. Ms. Clarke.
    Ms. Clarke. I thank you, Chairman Hanna and Ranking Member 
Meng.
    And I would like to thank our witnesses today for sharing 
your expertise and your testimony.
    I would like to take a moment to say that I understand the 
significance and the gravity of this extremely important issue 
facing our small business community and have myself been very 
vocal on the need to address the inherent disregard for small 
business opportunities in bundling, especially on minority and 
women-owned, veteran-owned small businesses. Given the 
seriousness of this issue, I truly wish this hearing were 
occurring under normal circumstances, however, with our Federal 
contracting and procurement agencies present here today to hear 
your testimony.
    However, the current congressional climate we are 
confronted with could not be any less ideal, indeed harmful for 
our small business community and our Nation. With all due 
respect, Mr. Chairman, we are now in the 10th day of a 
Republican-forced government shutdown, which has already cost 
our still recovering economy $1.6 billion to date at a rate of 
$160 million daily.
    In my district alone, the Republican-forced shutdown has 
cost my small business constituents nearly $800,000 in SBA 
approved 7(a) loans and 504 real estate and equipment loans. 
These are loans that are needed to sustain and grow small 
businesses that are the engines of our local, State, and 
national economy.
    So I find it ironic that we are having a hearing regarding 
issues in the bundling process when the very Federal Government 
that is at the heart of this discussion is essentially 
nonoperational. Bids that have been submitted are not being 
processed; payments for completed work are not being processed; 
and smaller contractors who don't have the cushion to survive a 
prolonged shutdown are laying off workers and dipping into 
lines of credit just to survive.
    So again, while I understand that this is a very important 
issue, I am having a bit of trouble concentrating on the trees 
for the forest. So perhaps you are prepared to discuss this 
today, but I have a question, a very simple one. Given the 
current environment, it is critical that we hear and understand 
what you are hearing regarding the impact of this shutdown on 
your membership and the damage that it is doing to our small 
business community.
    And I thank you, Ms. Dorfman, for including at least your 
understanding in your comments. But I am open for our other 
folks who have testified here today to just share with us, 
because I think it is critical we put this in context.
    Ms. Larkin. May I? Gloria Larkin, representing WIPP. We are 
in our conference, our annual conference right now, so 
yesterday we had the advantage of having a room full of 
businesswomen raise their hands and indicate how many companies 
had received stop-work orders, putting their staff, their 
employees out of work.
    We are living it right now. I have a client in Tennessee 
who has an $8 million payment that they are waiting on from the 
government. They have to lay off their staff because they don't 
have cash flow to run.
    So this is hitting us deeper than anyone imagined. My 
staff, my personal staff in my business, their spouses are 
employed by the government, and they are wondering if they are 
going to be able to make house payments now.
    Ms. Clarke. Thank you.
    Ms. Dorfman. If I could just add, I have a member here 
today who her subcontract was absorbed into the prime because 
it would, quote/unquote, ``be cheaper.'' And the other issue 
that really impacts women especially is that we don't have 
access to capital. We talk about lines of credit, but a lot of 
my members can't get lines of credit or loans for their 
business without the husband's signature, and so they don't 
have that cushion at all. They can't plan.
    When you have a shutdown and you need to fill in the gaps, 
you can't do that if you don't have access to the capital you 
need. So there is just levels and layers of challenges with 
this whole shutdown. Thank you.
    Ms. Beauford. Juanita Beauford, PTAC of Delaware. And I 
think that I speak for all the PTACs across the country, but in 
my State of Delaware we are seeing similar things, termination 
for convenience. We are seeing delay in contract, no task 
orders issued on contracts that have been awarded; layoffs of 
staff people by our small businesses. So I don't think that is 
much different than any other program or PTAC across the 
country, and we assume it is going to just get worse as it goes 
on.
    Ms. Clarke. I thank you. And I yield back.
    Chairman Hanna. Thank you.
    Ms. Dorfman, you said something I found interesting, and 
that is that in your written, and in your testimony here today, 
you mentioned that you thought that the whole idea of bundling 
was somehow misguided, that it might just be let go away. And 
if I have that correct, maybe I do not, but I found it 
interesting, there is almost unanimity in terms of how people 
feel about the way this is handled. Is it the case that if the 
rules were actually followed that there are enough rules in 
place to do what it is we all want to see done? Anybody can 
answer that. Or is it an enforcement issue?
    Ms. Dorfman. Well, I believe a lot of it is an enforcement 
issue and there could be improvements upon the language to 
strengthen the enforcement. What I don't see is a top level-
down commitment. Where are the heads of the agencies? Why 
aren't they saying to their people down below, you must make 
your small business goals, you must make sure there is due 
access to small businesses to gather these contracts and 
perform on them. What people don't really think about is, they 
are thinking, oh, we are going to save money this way, but the 
reality is if you cut out competition, you know, fair market 
trade, then the taxpayer is going to pay more.
    Chairman Hanna. Right. And the word was used task orders, 
by Mr. Burton, I think. Was that you?
    Ms. Larkin. Me.
    Chairman Hanna. Oh, thank you. That is just a different 
word for change order. But it is different for you?
    Ms. Larkin. No.
    Ms. Beauford. No.
    Chairman Hanna. What we are really describing here is a way 
for contract officers--this may be overly simplistic--but to 
make their life easier and actually limit competition by simply 
giving work to the people that are already in front of them, 
people that they have experience with, people they know are 
large enough, therefore providing the least opportunity for 
problems in terms of the work, or maybe in their workload. Is 
that somehow fair?
    Ms. Larkin. I would like to answer that. Gloria Larkin. 
About 10 years ago, we were spending about $220 billion and we 
had over 100,000 people employed in contracting and acquisition 
handling that workload. Today we are spending over $500 billion 
and we have fewer, I believe, than 40,000 people in the 
contracting and acquisition workforce. It is simple math. They 
have to have larger contracts managed by fewer people.
    It is not a fact that these folks aren't doing their job. 
It is a fact that they have too much to do with too large of 
contracts. So one of the solutions to this is to take a look at 
our professional contracting and acquisition staff--who are not 
contractors, by the way. We have gone that route and we have 
contractors making decisions about what other contractors are 
going to get the contracts. Sounds a little crazy in the 
government contracting market.
    So it is a matter of having enough professional contracting 
and acquisition staff employed by the government to manage 
these unbundled contracts.
    Chairman Hanna. Mr. Burton, would you like to speak to 
that? You get the allegation. I don't need to repeat it. And I 
am sure you are right. I just would like your opinion, Mr. 
Burton.
    Mr. Burton. Let me address the task order issue because I 
think this is a very significant issue. Task orders are actual 
contracts, in effect, that are awarded under an umbrella 
contract. We see many, many more of these types of multiple 
award contract vehicles where there is a contract in place and 
agencies then submit task orders for products or services under 
those big umbrella contracts. The GSA schedules are the best 
example of where you have an umbrella contract, and then many 
task orders are submitted by various agencies under that.
    The accountability for task orders is something I am very 
concerned about. In 2010, Congress did address this issue in 
amendments to the Small Business Act, and they made it very 
clear that written determinations for consolidation are 
required. What is not clear is whether written justifications 
are required for task orders under that larger contract.
    And I think that clarity is very important here, because 
some agencies I think are playing games with respect to these 
definitions, contract versus task order, and they are saying, 
well, we can consolidate task orders underneath the umbrella 
contracts.
    Chairman Hanna. What you are saying is that we are 
basically hurting ourselves by eliminating competition and in 
fact even allowing opportunities for corruption, perhaps.
    Mr. Burton. Well, I don't know. But, I mean, I think this 
is something that can be----
    Chairman Hanna. Sure. As an aside, I was in construction 
for 30 years, did over 3,000 projects, and I have seen this 
many, many times. So it is a combination of things, then; it is 
not just understaffing. Lack of accountability. The idea that 
we actually let this happen and there is nobody watching over 
people in a way that makes them accountable for what are 
billions of dollars worth of expenditures.
    I am going to yield to Ranking Member Meng.
    Ms. Meng. This question is for Ms. Beauford, but anyone is 
welcome to answer.
    Your association has staff that works continuously with 
small businesses trying to enter the Federal marketplace. What 
is their experience regarding how bundling affects a business' 
ability to compete for contracts? And if there is a belief that 
a contract has been improperly bundled, what guidance or advice 
do you give them?
    Ms. Beauford. I will give you an example. Aberdeen Proving 
Ground consolidated four commands, their IT, which ended up 
being over $5 billion, something like that. We put a team of 
six small businesses together to go after the small business 
suite under that consolidated contract. We spent 18 months. 
When the contract was finally awarded, it was awarded to the 
large companies, and as of July they had still not awarded the 
small business suites.
    Now, this has been over 2 years for that. What we found is 
that as we went further and further in the process, 
modifications kept coming out on this contract, and it was 
pushing the small business owner further and further away from 
competing for it, making it more and more difficult.
    So they are very aware of the consolidation. I understand 
that Ms. Larkin has spoken about teaming. That is not the 
optimal way we would like to go, but in this environment we try 
to counsel a business more on teaming because it is better to 
get a piece of the pie than none at all.
    And if I can go back and mention what Mr. Burton said, I 
also find that as we are having a mass exodus of contracting 
officers from the Federal Government, we are also having an 
influx of very, very young people taking their place. And 
contracting takes sometimes decades to master, so you are going 
to find an increase in protests because people really don't 
know what they are doing, and with no recourse, as Mr. Burton 
said, for the small business. When they do try to complain, you 
know, it is just a big, if I may say, mess on their part. That 
is an example of what we have dealt with, with consolidation.
    Ms. Meng. A question to Ms. Dorfman. There are various 
factors that are taken into account when determining when 
bundling and consolidation are allowed. However, an agency can 
still bundle or consolidate goods or services if they find that 
it is necessary and justified. While there are still 
requirements to procure goods through these methods, have you 
found that agencies are overusing this tool to circumvent the 
safeguards that exist to prevent abuses?
    Ms. Dorfman. Absolutely. It appears that it has become 
quite textbook to go ahead and set it aside for the big firm 
without consideration for small firms, and so there is definite 
overusage of that.
    Ms. Meng. I yield back.
    Chairman Hanna. Mr. Bentivolio.
    Mr. Bentivolio. Thank you very much, Mr. Chairman.
    You have given me a really good overview of the problem and 
the situation. I have two questions. Once a contract is 
bundled, is there any way to unbundle it? No? Ms. Dorfman?
    Ms. Dorfman. The PCRs are supposed to be looking out for 
those contracts that are coming off that their intention is to 
bundle and pull them down and pick them apart and set aside 
parts of that for small businesses. The challenge that there 
is, there are not enough PCRs for the country, and it is not 
funded well, so if we don't have the right kind of staffing--I 
think part of the conversation here has been we need more 
staff, but we need the funding to go with it. And when you look 
at the IDIQs, that is part of the issue as well, that there 
will be some contracts that are set aside and then suddenly 
there is no funding for that portion of the IDIQ and the small 
business is out contracts. So I definitely see some issues.
    Mr. Bentivolio. Mr. Burton?
    Mr. Burton. Early in the process you can definitely 
unbundle, and that is the whole idea of having the review and 
the justification done upfront. And that is the remedy to, if 
the agency feels there has been unjustified bundling, then it 
needs to unbundle it and uncouple it before the solicitation 
actually goes on the street.
    Mr. Bentivolio. And you need a mediator, it sounds like, 
when a small business is unjustly discriminated against in a 
bidding process, correct?
    Mr. Burton. Well, I think that it would be helpful to have 
an independent reviewer, and I think you could use that word 
mediator, somebody outside of the agency process that does not 
have a vested interest in the procurement process----
    Mr. Bentivolio. Do you have any recommendations for who 
would do that?
    Mr. Burton. Well, I have struggled with that, and the 
General Accountability Office, the Government Accountability 
Office is the one that occurs to me probably is best positioned 
to do that. I am sure there will be some resource issues in 
that regard that will be raised as an obstacle. But I think a 
separate office from the bid protest group at GAO. And there 
are teams within GAO, and I think the acquisition team might be 
a very good one to actually conduct this type of independent 
review.
    Mr. Bentivolio. Okay. Do you think this committee should 
pursue legislation on bundling and consolidation, and what 
should that legislation look like or incorporate?
    Mr. Burton. I think that the answer is yes. I think that 
legislation is required. One thing I found when I was in the 
government, it did seem that agencies paid attention to actual 
statute more so than other memos and regulations even.
    So I do think legislation is required. I think the 
legislation should actually specify the independent review 
board or office that will conduct reviews of bundling and 
consolidation. I think that to simplify things there should be 
just one definition. I would use the word consolidation because 
I think it is broader than bundled. And I think I would just 
have one definition.
    And actually, you know, the definitions are not that 
complicated. They are fairly clear. But to simplify things even 
more, maybe we should just have one definition, and I think 
consolidated procurement is what I would go with. Because 
agencies are trying to argue that this isn't bundling, and so 
therefore we don't need to have a lot of these protections and 
justifications and so forth, this is mere contract 
consolidation, not technically bundling. I think we need to do 
away with that whole distinction because consolidated 
procurements alone are hurting small businesses dramatically. 
It doesn't have to necessarily be a bundled procurement where 
the agency has to show that it is actually unsuitable work for 
small businesses. In most instances work is suitable for small 
businesses.
    Mr. Bentivolio. Would you incorporate in that legislation a 
process where we have that mediator step then in case of a 
protest?
    Mr. Burton. Yes.
    Mr. Bentivolio. Because I am not interested in making the 
government any bigger and putting watchers over watchers, you 
know. I am not interested in doing that. It just costs 
taxpayers money for a job they should be doing anyway, right? 
They should be objective in the way they pursue, and if it is--
well, anyway, would you put that in there?
    Mr. Burton. Yes, sir, I would.
    Mr. Bentivolio. Streamlining that process, make it easier 
for veterans and women and anybody else that wants to protest?
    Mr. Burton. And I would use the word challenge.
    Mr. Bentivolio. Challenge.
    Mr. Burton. I don't think I would use the word protest 
because it immediately brings up the formal process at GAO. I 
think you want this to be much more simplistic. It is just a 
challenge with respect to the agency decision to consolidate 
and reduce opportunities for small businesses. I don't think 
you have to hire a lot of staff in order to do this simple 
review, but I do think it needs to be somewhat independent of 
the actual agency, because my experience is the agency will 
support the contracting official's decision to consolidate.
    Mr. Bentivolio. Great. Thank you very much, sir, and I 
appreciate your time here today, all of you. Thank you very 
much.
    Mr. Burton. Thank you.
    Chairman Hanna. A couple things. You used the word vested 
interest, which opens up a whole number of issues in my mind in 
terms of contracting. And Ms. Larkin, they are understaffed, 
right?
    Ms. Larkin. Uh-huh.
    Chairman Hanna. But yet even though they are understaffed, 
that doesn't necessarily solve the problem if it is a 
fundamental problem in terms of how they view their job and 
perceive the opportunity they have to make their job easier 
rather than harder, so that I don't think you can lay it all on 
that. The numbers suggest that it is a policy that is avoided 
at all costs, that there is no incentive for them to pursue 
unbundling or simpler, easier, more competitive numbers of 
contracts, if that were the case. You don't have to agree with 
me.
    What do you mean, Mr. Burton, by vested interest? Because 
one would assume that somebody awarding a contract would have 
no vested interest, although I personally think that--I want to 
hear your version or anyone's version of why the process is 
naturally going towards this, something other than just a lack 
of number of people to do it. Mr. Burton, am I clear in my 
question?
    Mr. Burton. Yes, sir. I think that the acquisition 
workforce issue is significant. I do think that that is 
certainly a major issue here with respect to having fewer 
contracts to award, having fewer contracts to manage. There is 
enormous pressure on the acquisition workforce to do things 
quickly. Strategic sourcing is something that has been embraced 
by the administration as the number one acquisition reform 
agenda item, and there is a lot of pressure to produce with 
respect to strategic sourcing. That equals consolidated 
procurements.
    And all of this combined is giving contracting officers 
great motivation to justify the consolidation. It is usually 
done on the basis of cost savings, and in some instances there 
may even be some short-term cost savings.
    What is happening, sir, is that agencies, agency officials 
within the procurement community do not necessarily want to 
challenge a contracting officer's determination. They are very 
deferent to the contracting officer. But in most instances I do 
not think there is supporting data, I do not think there is 
actual cost analysis available, and just asking for that 
information to be produced I think will show the seriousness of 
this problem.
    But you are in an environment right now, for a number of 
factors, as you point out, separate and apart, just related to 
the lack of acquisition personnel, but there is a number of 
factors pressing for consolidation, and that is clearly hurting 
small businesses. That is why I think Congress will have to be 
very aggressive on this subject and will have to exercise 
increased oversight.
    Chairman Hanna. Interesting.
    Ms. Dorfman. If I may, I do think there is a challenge with 
the lack of workforce, especially now where we are losing so 
many seasoned professionals. But I would like to remind 
everybody here that an investment in small business, which 
would mean putting funds into some of these mechanisms to 
protect small business and ensure small business growth, you 
know, the SBA, any of the small business, it is an investment. 
When you grow small business, you are going to grow employment, 
you are going to grow your tax base, and it just becomes a win-
win-win.
    So instead of looking at this is going to cost the country, 
I think this is really key that we invest in small businesses 
so that we can grow our tax base, we can ensure that we have 
growth in jobs, and that, I believe, will turn the country 
around from an economic standpoint just alone.
    Chairman Hanna. Sure. So there is a momentum, an inertia 
involved in this that is moving towards the larger, moving 
towards less work for the procurement officer for a whole host 
of reasons that by definition, and we don't have to, I don't 
think anyone would argue this, but we eliminate or reduce 
competition just by tasking. You are actually saying that 
someone gets a project but doesn't have to necessarily have 
competition, and that is a great benefit to the particular 
contractor, but everybody else who might do it cheaper, better, 
faster, or who is smaller, would have that opportunity if we 
just bundled it.
    So in terms of the people it might take or the outside 
board to look at this, people it might take to do this work 
that we would all be happier with if it were unbundled, I would 
suggest that there might be opportunities with the tens or 
hundreds of billions of dollars we spend that just the 
increased competition alone may help pay for an enormous 
portion of that. That is a conjecture, but what do you think of 
that?
    Ms. Dorfman. I agree.
    Ms. Larkin. Increased competition would be a wonderful 
thing. In the SeaPort-e contract, which is the Navy contract, 
largest bundled contract in the history of the United States, 
$50 billion since its inception in 2004, do you realize that 20 
companies have shared $29 billion of that contract? There is no 
competition there.
    Chairman Hanna. I think Juanita mentioned that in her 
testimony, too, or in her written testimony.
    Ms. Larkin. Thank you.
    Chairman Hanna. I could keep you here a lot longer, but, I 
mean, we have kind of run through this. Since we do have a 
couple minutes, would anyone like to say anything else that may 
be a question that I haven't asked or someone else hasn't asked 
that you find germane and would like to get out there?
    Mr. Bentivolio. Mr. Chairman, yeah, may I?
    Chairman Hanna. Yes.
    Mr. Bentivolio. Ms. Dorfman, you said earlier that 
enforcement of subcontracting from a general contractor, they 
had certain protocols that they had to follow, they put a plan 
in on how they are going to fulfill that contract, right, like 
an operational plan or a build plan, a business plan, if you 
will? All right. And they don't follow it. Is there any 
penalties for that, would you suggest?
    Ms. Dorfman. There is no teeth right now in that, so they 
can do that.
    Mr. Bentivolio. Okay. So Mr. Burton suggested legislation, 
some things we should put in some legislation. Would you 
recommend putting some teeth in it to force, what, to force 
the----
    Ms. Dorfman. To ensure that they are following the 
subcontracting plan, that when they have engaged with a small 
business to be part of the contract, and when the contract is 
awarded that they do use that small business for that contract.
    Mr. Bentivolio. Okay. I am on another committee, Oversight 
and Government Reform, and we are investigating government 
agencies for some abuses of their power. Now, it really comes 
down to, though, if a contractor is not fulfilling or following 
his business plan for that particular contract and the 
government agency is not enforcing it, don't you think we 
should have some teeth for that government agency? I mean, it 
makes sense to me, right? I mean, if they look the other way 
and choose not to enforce it, which is happening so often in 
this--well, that has come to light in the last several months--
wouldn't you think that, you know, we should have some 
recourse? Because right now all they do is retire and say, 
thank you, Fifth Amendment.
    Ms. Dorfman. There definitely has to be a mechanism to 
ensure that the small businesses are getting their portion of 
that contract. So I would agree.
    Mr. Bentivolio. So you would recommend that we put some 
teeth into forcing the government agencies to provide proper 
oversight, which is their responsibility to our taxpayers, 
correct, as well as the contractor that took that bid?
    Ms. Dorfman. We do need mechanisms in there that would 
ensure that the agency is doing their due diligence as well as 
the prime contractor living within the plan, keeping the plan, 
the contracting plan.
    Mr. Bentivolio. But there could be changes and, you know, 
they may find maybe that subcontractor didn't, you know, isn't 
going to fulfill, they found out something new, and they have 
to change it, but there should be some protocol for change, 
right, correct? I mean, legitimate reasons. They could say, 
well, in this particular case we can't use this subcontractor, 
things change.
    Ms. Dorfman. Things may change, but unfortunately this is a 
systemic issue where it happens frequently where our small 
businesses, they fulfill a piece of the precontract, the pre-
award. I mean, they have to go and put together a proposal for 
the prime contractor. The prime contractor wins the award and 
then systematically does not use the small business that took 
the time and money from, you know, from their pockets. I mean, 
they are basically robbing the small business because the small 
business has paid, has invested lots of money in preparing 
this, and then they get nothing at the end of it.
    Mr. Bentivolio. So we need----
    Ms. Dorfman. There needs to be some mechanism in there to 
ensure that the small business is getting the part of the 
contract that originally was put there. But so often they just 
take it in-house.
    Mr. Bentivolio. For small business we should write some 
legislation that opens the door for small business and keeps 
the door open, right?
    Ms. Dorfman. [Nonverbal response.]
    Mr. Bentivolio. Great. Thank you very much. I appreciate 
your time today.
    Ms. Beauford. Can I speak to that for a minute?
    Mr. Bentivolio. Sure.
    Ms. Beauford. There is some regulations right now for prime 
contractors to use the subcontractors that are written into 
their subcontracting plan, and if they don't, they have to give 
justification as to why they are changing. They can change, but 
it is already regulations out there supporting that.
    What I find is that, even with the PCRs, who should have 
oversight over these contracts, they have a grieving process 
with the agency. However, in the final analysis the agency will 
make the final decision. If we are going to have the PCRs 
review an agency, we need to give them authority to have final 
decision on that. But if the contracting officer has the final 
decision on whether or not this contract is going to go to this 
company or not, even though I come in as a PCR and tell you 
that this is really not the way this should go, it doesn't 
matter. They don't have any authority, the PCRs, over the 
agency.
    Mr. Bentivolio. And improve the challenge process. Thank 
you.
    Chairman Hanna. Thank you, everyone. I want to thank Emily 
Murphy, our chief counsel. She does a great job.
    Chairman Hanna. If there are no further questions for the 
witnesses, I want to thank you for being here today.
    Seventeen years after the committee passed the first law 
addressing contract bundling it is simply inconceivable that 
these agencies are not correctly identifying bundling and 
consolidating. Bundling and consolidation pose threats to 
competition and the viability of small business, our small 
business and our industrial base. So we owe it to the taxpayers 
to make sure that any contract bundling is justified and 
mitigated. I look forward to working with Chairman Graves and 
other members of this committee to address these problems that 
we learned about today.
    Thank you very much, everyone, for being here.
    I ask unanimous consent that members have 5 legislative 
days to submit statements and supporting materials for the 
record. Without objection, so ordered.
    This hearing is now adjourned. Thank you.
    [Whereupon, at 12:55 p.m., the subcommittee was adjourned.]
                            A P P E N D I X


                              Testimony of


                     Juanita H. Beauford, President


                  Association of Procurement Technical


                     Assistance Centers (APTAC) and


           Program Manager of the University of Delaware PTAC


   To a Hearing of the U.S. House of Representatives' Small Business 
                              Committee's


             Subcommittee on Contracting and the Workforce


    Chairman Hanna, Ranking Member Meng, and distinguished 
Members of the Subcommittee, thank you for the opportunity to 
testify today. I am honored to speak before you on behalf of 
the Association of Procurement Technical Assistance Centers and 
the small businesses we serve across the country.

    First, I would like to express my gratitude for your 
leadership and efforts on behalf of small businesses.

    My name is Juanita Beauford. I am President of the 
Association of Procurement Technical Assistance Centers--
APTAC--which is the professional organization of the 98 PTACs 
nationwide. I am also Program Manager of the University of 
Delaware PTAC. As you may know, the Procurement Technical 
Assistance Program was created by Congress in 1985 to help 
small businesses compete for federal, state and local 
government contracts. It is funded and administered through the 
Defense Logistics Agency and supported by state or local 
governments, educational institutions, or non-profits which 
must provide a non-federal funding match of up to 50%. Our 
purpose is to assist local small businesses at little or no 
cost by preparing them to become capable government 
contractors, on the belief that a broad base of small business 
suppliers provides the highest quality and best value to our 
government agencies and at the same time creates a strong and 
vibrant economic base for our communities. Last year we helped 
over 70,000 small businesses win more than 112,000 government 
contracts valued at over $14.1 billion.

    We applaud your efforts to re-examine the issue of 
``bundling'' and ``consolidation'' of federal contract 
opportunities. Many of our members--procurement counselors 
across the country--report frustration and concern among their 
small business clients about dwindling bid opportunities as 
agencies increasingly rely upon larger acquisition mechanisms 
such as Strategic Sourcing, Government-wide Acquisition 
Contracts (GWACs), Multi-Agency Contracts (MACs), Omnibus 
``Single Solution'' contracts, and multiple year Indefinite 
Delivery Indefinite Quantity (IDIQ) contracts in addition to 
more traditional bundling and consolidation. There is a clear 
perception that--as agencies prioritize strategies to 
streamline acquisitions and achieve price reductions--the 
number of solicitations appropriate for small businesses is 
shrinking significantly, and small businesses are disadvantaged 
generally by lack of access to contracting officers and a trend 
away from Best Value trade-offs and toward Lowest Price 
Technically Acceptable.

    We cannot quantify the extent to which these perceptions 
are accurate or the degree to which change is occurring--either 
for better or worse. We have anecdotal evidence and the 
observation of procurement counselors with many years of 
experience that small businesses are losing opportunities and 
concerned the environment worsening. But as you know, hard data 
about bundled or consolidated contracts is incomplete and hard 
to find. Likewise, we hear little about efforts to challenge or 
mitigate consolidation practices, despite statutory and 
regulatory provisions to do so.

    It is a difficult problem. Agencies strive to be good 
stewards of tax dollars, often with understaffed and under-
funded acquisition offices. Streamlined acquisition tools are 
attractive because of their ease of use and promise of cost 
savings. I suspect that there is confusion about--or even 
ignorance of--what constitutes bundling or consolidation, not 
to mention the fact that there are requirements that 
solicitations be accessible to small business wherever 
possible. And it is clear that enforcement of such requirements 
is simply not happening in many cases.

    Simplifying the definition could be an important place to 
start. As new types of contract vehicles evolve, the complexity 
of the current definitions makes it easier for agencies to find 
loopholes or work-arounds--or simply believe that these 
definitions do not apply to their contracting vehicle. Having 
different definitions for ``bundling'' and ``consolidation'' is 
itself difficult. Whatever utility was once served by the 
distinction is--I believe--outweighed by the confusion caused. 
Selecting one team--perhaps ``consolidation''--and defining it 
simply--ie: ``2 or more requirements of the federal agency for 
goods or services that could reasonably be provided to or 
performed for the federal agency under 2 or more separate 
contracts'' would bring under the umbrella all of the vehicles 
which present barriers to small business. It would also make 
communications about--and measurement of--the issue much 
easier.

    From there, criteria under which consolidated contracts may 
be considered appropriate and/or require review or 
justification can be determined. Certainly, there are many 
circumstances in which consolidated procurements may be the 
best option. But it would at least make clear that newer 
mechanisms like strategic sourcing. GWACs, MACs, IDIQs, etc. 
indeed constitute consolidated solicitations, which is the 
first step in determining the prevalence--and impact--of these 
practices.

    Simplifying the reporting process--and identifying a better 
platform for making the information available to SBA's 
Procurement Center Representatives (PCRs) and the public--could 
be helpful as well. We've included just one example of a 
possible simplified format as an addendum to our written 
testimony. While the reporting requirements in the Small 
Business Act and Jobs Act may have been intended to provide 
accountability, it appears that they are often side-stepped, 
perhaps because they are so rigorous. Those ``Justification for 
Fair Opportunity Exception'' notices that are posted to 
FedBizOpps are difficult to find. It is critical that there be 
an ability to track and analyze this information if effective 
strategies for protecting the ability of small business to 
participate in the federal marketplace are to be developed and 
implemented.

    Defining realistic enforcement triggers, and providing 
adequate resources to implement them, is also critical. The 
current situation in which enforcement actions are rare--and 
successful actions rarer still--only undermines the current 
regulations.

    At the end of the day, the real answer--and challenge--is 
to convince government buyers that their interests can be well 
served by contracting with small business. I don't believe this 
problem can be solved by case-by-case challenges from PCRs, 
small businesses or trade associations.

    To this end, we encourage the Subcommittee to consider 
initiatives that could educate agency acquisition staff at all 
levels about statutory and regulatory provisions with regard to 
bundling/consolidation, including circumstances in which 
justification are required and provisions allowing small 
business set-asides, reserves and other tools that foster small 
business inclusion. This would also provide an opportunity to 
emphasize the importance of maintaining a robust base of small 
business suppliers generally as well as the specific benefits 
that small business contractors can bring to individual agency 
requirements. You understand--as we do--that it is false to 
believe that striving for the lowest possible price or the most 
streamlined contract vehicle necessarily delivers the best 
value to the taxpayer. But contracting officers may not be 
aware of all the benefits that working with small business 
vendors offers, much less best practices for crafting 
accessible contract vehicles and reaching out to the small 
business community. There are success stories out there--buying 
activities with strong local relationships (or relationships 
with local PTACs), and agencies like DLA's Land and Maritime 
which have energetic small business outreach programs. 
Collecting and highlighting these examples to share government-
wide might be helpful. Substantial and widespread training of 
Contracting Officers on how and why to contract with small 
businesses could be critical to overcoming the current cultural 
trend toward consolidation; buying from small businesses must 
be seen as an easy and appealing option.

    To the extent that APTAC or the PTACs can help on any of 
these fronts, we hope you will call upon us. PTACs around the 
country are proud to collaborate with local federal offices to 
sponsor outreach events, identify potential vendors for 
specific requirements and support small businesses in their 
efforts to market and bid. APTAC has partnered with DLA Land 
and Maritime to promote their Training, Knowledge and 
Opportunity (TKO) events and facilitate and distribute recorded 
webinars on DIBBS and their First Destination Transportation 
and Packaging Initiative (FDTPI). We would gladly work with 
other agencies to help them open more opportunities to small 
business.

    Thank you again for the opportunity to appear before you 
today. I hope my testimony has been helpful. I know I speak for 
all of the PTACs when I say that it is a privilege for us to 
assist small business in the government marketplace, and we are 
eager to support this Subcommittee, the full Committee and the 
agencies in endeavors that will better utilize this invaluable 
national resource.
    Addendum to the Testimony of Juanita Beauford, President

    Association of Procurement Technical Assistance Centers

    Possible reporting format to facilitate tracking of 
consolidated contracts:

    Require the Contracting Officer (CO) to stipulate up front 
whether or not his/her requirement constitutes a bundled or 
consolidated contract, and if so, what is the justification. 
This could be accomplished via a simple yes/no drop-down field 
in the system used to submit solicitations to FBO or in another 
acquisition tracking vehicle if more appropriate. Language with 
the relevant definition(s) could be included on the form itself 
as an aid. A second drop-down field with the various categories 
of justification for bundling could follow immediately 
thereafter and be required for any ``yes'' answer to the 
bundled/consolidated question.

    At the very least, such a mechanism would remove the 
ability for a CO to ``duck the question'' with regard to 
consolidation and would improve tracking. Regularly publishing 
a listing of bundled/consolidated contracts--or ensuring that 
the reporting vehicle is easily accessible and searchable so 
that others can publish such a report--will also increase 
transparency, allowing small business contractors and their 
supporters to better assess the degree to which they are being 
excluded from potentially appropriate opportunities.


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    Bungling Bundling: How Contract Bundling and Consolidation 
Remain Challenges to Small Businesses Success

    Chairman Hanna, Ranking Member Meng, and distinguished 
Members of the Subcommittee, thank you for the opportunity to 
testify this morning.

    My name is Gloria Larkin and I am President of TargetGov at 
Marketing Outsource Associates, Inc., and serve as Vice-Chair 
of the Educational Foundation of Women Impacting Public Policy 
(WIPP). I have been in business since 1997 and my firm helps 
companies of all types pursue, propose, and win federal 
contracts. As a result, we have specific experience in the 
challenging world of bundled and consolidated contracts.

    I am also here today representing Women Impacting Public 
Policy (WIPP). WIPP is a national nonpartisan public policy 
organization advocating on behalf of its coalition of 4.7 
million business women including 75 business organizations. 
WIPP plays a key role in developing women-owned businesses into 
successful federal government contractors through its Give Me 5 
and ChallengeHER programs.

    In our view, bundling and consolidation continues to hamper 
small businesses in the federal marketplace. We believe that 
contracts that can be serviced by small businesses should not 
be subject to any form of consolidation.\1\ It is our 
recommendation the following actions be taken to minimize 
unnecessary and unjustified consolidation: 1) improve the 
collection of statutorily required data from agencies to 
measure the impact of bundling and consolidation on small 
businesses; 2) complete the regulatory actions required in the 
National Defense Authorization Act for FY2013 (P.L. 112-239) 
and the Small Business Jobs Act of 2010 (``Jobs Act'' P.L. 111-
240); and 3) increase outreach to small business vendors 
regarding the consolidation and bundling processes.
---------------------------------------------------------------------------
    \1\ For the purposes of this testimony, consolidation and bundling 
will both be used to refer to the contracting practice of merging 
smaller contracts into a single larger contract, through bundling will 
be specifically used when considering the practice of consolidation 
with a finding that the new contract is not longer suitable for small 
business concerns.

    As this discussion begins, we value the Congressional 
direction already given on this issue in the Small Business Act 
---------------------------------------------------------------------------
(P.L. 85-536), which notes that the government should:

          Aid, counsel, assist, and protect, insofar as is 
        possible, the interests of small-business concerns in 
        order to preserve free competitive enterprise, to 
        insure that a fair proportion of the total purchases 
        and contracts or subcontracts for property and services 
        for the Government be placed with small-business 
        enterprises...[in order] to maintain and strengthen the 
        overall economy of the Nation.\2\
---------------------------------------------------------------------------
    \2\ 15 U.S.C. Sec. 631

    This is our guiding principle to improve small business 
access to government contracts. We concur that small businesses 
play a vital and irreplaceable role in growing and 
strengthening the national economy and deserve broad access to 
---------------------------------------------------------------------------
government contracts.

    Changes To Contracting Over the Last Decade

    Federal government purchasing has grown significantly over 
the last decade. According to USAspending.gov, federal spending 
increased from $220 billion in 2000 to over $500 billion in 
FY2013. Amid this tremendous rise in spending, agencies are 
consistently failing to meet the small business contracting 
goal of 23%. The last time the goal was met was FY2005. On that 
note, the data for women-owned small businesses are equally 
disappointing. Despite a new contracting program and the 
removal of the dollar caps on contracts in that program, as 
well as WIPP efforts to register more than 20,000 women-owned 
businesses in the SAM database, FY2012 marked another year in 
which the government failed to meet the 5% percent goal for 
purchases from women-owned small businesses--a goal it is yet 
to meet.

    More awarded dollars in federal contracting does not mean 
more money to small businesses, largely because the number of 
contracts awarded has been declining since FY2008. Thus the 
average contract size is increasing--due in some part to 
policies like contract consolidation and bundling--which limits 
the number of businesses that can compete. This practice harms 
small businesses and this trend, while not surprising, is 
certainly threatening women-owned small businesses, the small 
business community in general, and their long term prospects in 
the federal market.

    The last decade has not been all bad news. Indeed, there 
are many areas where contracting opportunities and education 
have been improved significantly. For example, WIPP applauds 
the government's success in making positive changes in the 
market research process. We have seen the Sources Sought Notice 
and Request for Information (RFI) processes improve and grow in 
just the last two years, especially since the Office of 
Management and Budget (OMB) ``Myth-busters'' memorandums of 
2011 and 2012.\3\ Sources Sought Notices grew from 50 to 70 in 
a typical month in 2011 to approximately 1,100 to 1,300 per 
month in 2013. This increase is indicative of the acquisition 
community's efforts to perform mandated market research. 
Similarly, WIPP has stepped up to educate women-owned 
businesses in the importance of responding to these Notices and 
RFIs.
---------------------------------------------------------------------------
    \3\ Daniel Gordon, Office of Federal Procurement Policy. ``Myth-
Busting'': Addressing Misconceptions to Improve Communication with 
Industry during the Acquisition Process.'' Feb. 2, 2011. http://
www.whitehouse.gov/sites/default/files/omb/procurement/memo/Myth-
Busting.pdf Lesley Field. Office of Federal Procurement Policy. ``Myth-
Busting 2'': Addressing Misconceptions and Further Improving 
Communication During the Acquisition Process.'' May 7, 2012. http://
www.whitehouse.gov/sites/default/files/omb/procurement/memo/myth-
busing-2-addressing-misconceptions-and-further-improving-communication-
during-the-acquisition-process.pdf

    Reports on and Examples in Contract Bundling and 
---------------------------------------------------------------------------
Consolidation

    Congressional Research Service (CRS) reports prepared in 
the last few years detail consolidation and bundling with 
regard to federal contracting as well as legislative and 
regulatory changes to the underlying law. Key points from these 
reports include:\4\
---------------------------------------------------------------------------
    \4\ See multiple reports by Kate Manuel all filed under CRS Report 
Number: R41133. These include ``Contract ``Bundling'' Under the Small 
Business Act: A Legal Overview'' and multiple updates of ``Contract 
`Bundling' Under the Small Business Act: Existing Law and Proposed 
Amendment.''

          1. Congress recognizes that bundling and 
        consolidating can limit opportunities for small 
---------------------------------------------------------------------------
        business to receive prime contracts.

          2. To combat this limitation, statutory requirements 
        mandate that agencies must: a) conduct market research 
        to justify possible bundling; b) provide advance note 
        to incumbent small businesses holding contracts that 
        possibly may be bundled; and c) use certain procurement 
        strategies for ``substantial bundling.''

          3. Consolidation has separate but similar 
        requirements also aimed at ensuring all consolidated/
        bundled contracts are ``necessary and justified.''

          4. Protections exist that, if enforced government-
        wide, would keep small businesses from losing access to 
        government contracts.

          5. Legislative action aimed at improving these 
        protections has existed in recent Congresses with 
        varied levels of success and some regulations from 
        previously enacted legislation are still awaiting 
        promulgation.

    Examples of these consolidated contracts (with contract 
ceiling value) in use today include: Department of the Navy 
SeaPort-e ($50 billion), Department of Homeland Security 
FirstSource II ($3.1 billion), NASA SEWP IV ($5.6 billion), and 
Department of Health and Human Services CIO-SP3 ($20 billion). 
These multi-billion dollar contracts are either agency-specific 
or government-wide contracts. Examining the largest, Navy's 
SeaPort-e contract, shows that small businesses are not getting 
access to the bulk of the contracts.

    Bloomberg Government reports that the Navy's Seaport-e 
vehicle expects to award $8 billion via task orders in 
FY2013.\5\ SeaPort-e, which provides professional services, is 
the largest multiple-award contract (MAC) in the federal 
government, with almost $50 billion in orders since its 
creation in FY2004.\6\ Annually, the contract averages nearly 
$6 billion, more than any other MAC outside the General 
Services Administration and Veterans Affairs Federal Supply 
Schedule. SeaPort-e reflects a larger trend toward 
consolidation in professional services government-wide.
---------------------------------------------------------------------------
    \5\ Brian Friel, Paul Murphy, et al. ``8 Billion in 2013 
Opportunities On SeaPort-e Multiple Award Contract.'' Bloomberg 
Government. Nov. 14, 2013. http://www.bgov.com/news--item/
BGflu73ZpTBruuiAEiZ9tQ. NB: All following data on SeaPort-e contract 
vehicle comes from this report.
    \6\ Professional Services is the largest category of government 
spending. Overall, federal agencies spent $77.6 billion on professional 
services in FY2011, $20 billion more than the next category, research 
and development, with $57.7 billion. Professional services include 
financial management services, engineering support, logistics 
management and office support.

    With nearly 3,000 prime contractors on the contract, with 
``hunting licenses'' to pursue individual task orders, the 
competition for task orders is fierce. But structural problems 
---------------------------------------------------------------------------
within the contract make that competition unfair.

    SeaPort-e, as a cost-plus-fee contract, caps profit to 8% 
of the order's value, two percentage points lower than the cap 
for services contracts set by federal acquisition regulations. 
Many companies that ``win the contract'' never bid on task 
orders because they cannot run and grow a company on such slim 
margins. Companies who can accept lower margins are taking over 
more contracts as smaller companies who cannot operate on such 
margins are leaving. Moreover, the SeaPort-e bid and proposal 
costs are rising, as task orders grow shorter, forcing them to 
compete more often. Limited profit margins, increasing 
competition issues, shorter contract awards, and consolidation 
are ultimately forcing many small businesses to leave what 
should be a lucrative market for all businesses.

    Furthermore, in FY2012, 90% of small business awards on 
SeaPort-e came through set-asides--task order competitions 
limited only to small businesses. Set-asides accounted for 83% 
of small business wins by value on SeaPort-e from FY2004 
through FY2012. Small businesses rarely win full-and-open task 
order competitions on Seaport-e, even for orders worth less 
than $1 million. Only 20% of primes won orders, meaning 80% of 
companies have never actually secured work through SeaPort-e. 
The top 20 primes alone won over $29 billion of the $50 billion 
in SeaPort-e orders. The result is big companies getting bigger 
and small businesses struggling to compete.

    Lastly, Navy buyers are mandated to consider using SeaPort-
e before creating new contracts for professional services such 
as engineering and project management support. SeaPort-e is an 
example of a broader trend to increase the mandatory use of 
MACs government-wide as part of the ``Strategic Sourcing'' 
initiative being advanced by the White House.\7\ Increased 
mandatory MAC usage will force agencies to rely on a small pool 
of participating contractors, which further limits competition. 
WIPP opposes the implementation of Strategic Sourcing methods 
without adequate consideration and protection of small business 
concerns. We recognize that increased consolidation and 
bundling of contracts are symptomatic of this Strategic 
Sourcing initiative.
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    \7\ An effort to increase strategic sourcing was highlighted in an 
OMB memorandum cited below and has been a topic of consideration before 
in this Committee (June 13, 2013). Jeffrey Zients. Office of Management 
and Budget. ``Improving Acquisition through Strategic Sourcing.'' Dec. 
5, 2012. http://www.whitehouse.gov/sites/default/files/omb/memoranda/
2013/m-13-02--0.pdf

    Burdens on Small Businesses Caused by Contract Bundling and 
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Consolidation

    According to WIPP members, the key reasons they are wary of 
entering the federal market include:

    Costs Involved: The costs involved in pursuing a 
consolidated contract are astronomical. It is not unusual for 
large businesses to invest $100,000 or even over $250,000 in 
pursuing these large contracts through the entire proposal 
pursuit and writing effort. Small businesses invest $20,000, 
$30,000 or more in valuable, non-billable time to simply write 
a proposal, not taking into account the business development 
and marketing efforts that go into planning, positioning, 
pursuing, proposing and possibly winning a hunting license.

    Time & Effort: In order to be considered as a viable 
competitor in these large contracts, vendors must enter the 
market 12 to 18 months before the contract is competed. They 
must spend time and money marketing their business to the 
multiple layers of decision-makers. This is difficult because 
for most small businesses, every person must be billable. 
Marketing and sales costs, however, cannot be billed and 
therefore, many times are eliminated from daily activities. 
Small business must choose between going to vendor outreach 
days, attending industry days where specific procurements are 
discussed, and making money on existing contracts.

    Size: Seemingly, an engineering firm, with a size standard 
of $14 million in annual revenue, pursuing a consolidated 
contract worth $100 million cannot possibly win as a prime 
contractor. The government is prohibited from taking a risk in 
awarding contracts and requires that past performance show work 
on a similar sized contract. An engineering firm, with revenues 
of $14 million, cannot show proof of performing a $100 million 
contract. If they could, they would not be small. As these 
consolidated contracts increase in size, far exceeding the size 
standard for the small business, the burden to respond and win 
becomes an exercise in expensive teaming.

    Bonding: Two US Army Corps of Engineers consolidated 
contracts are coming up this year (FY2014), one for $200 
million and the other for $300 million. One is set-aside for 
small business and the other is set-aside for service disabled 
veteran owned small business. On the surface this is an 
excellent opportunity--$500 million for small businesses. It 
seems hard to imagine that a small construction business with a 
size standards ranging from $7 million to $33.5 million could 
receive bonding for a contract valued at $200 or $300 million.

    Teaming: One viable way a small company can pursue and win 
these large consolidated contracts is to team with other small 
and/or large businesses. This is fraught with costs, risks and 
dangers to all parties. If one business pursues a $200 million 
dollar contract and each company only has a ten million dollar 
maximum bonding capacity, at least 20 or more companies would 
have to team together. These teaming contracts are 
intricate.\8\ The costs involved in teaming are unallowable in 
the federal cost accounting process and must be borne by the 
small business directly.
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    \8\ At a minimum teaming requires companies to: develop trusting 
relationships, share delicate financial information, develop legal 
documentation as to who is responsible for what, who manages the 
federal reporting and DCAA accounting and compliance requirements, who 
manages the contract, how each teaming partner gets paid and how/when 
payments are distributed, what happens in the cases of default or 
substandard performance and a myriad other contract requirements.

    Winners and Task Orders: When a small business is 
successful and actually wins a bundled contract, it is often 
only a first step. No money is actually paid for products or 
services until each awardee further pursues individual task 
orders on a competitive basis. The winners have simply won the 
right to limited competition in the pool of other winners. As 
we have seen, in the case of Seaport-e, 80% of companies are 
---------------------------------------------------------------------------
yet to be successful in that second effort.

    Protests: As is the case with FirstSource II, the bundled/
consolidated contract at Homeland Security, 29 small business 
awardees celebrated the win for this multi-year 3.1 billion 
dollar contract. However, protests were filed and despite 
investing all of the effort, time and tens of thousands of 
dollars in overhead and RFP response costs required to win, 
most awardees have been stopped dead in their tracks and 
prohibited from conducting business on this contract because 
other companies have protested parts of the acquisition 
process.

    These burdens listed above negatively impact small 
businesses that already work in the federal sector as well as 
those wishing to enter the marketplace. We appreciate this 
Committee's efforts to improve the contracting environment 
through hearings and legislation over the past three years.

    Recommendations to the Committee

    WIPP offers the Committee these suggestions on removing 
some of the barriers consolidating contracts have created.

          1. Improve the collection of statutorily required 
        data from agencies to measure the impact of bundling 
        and consolidation. Provisions in the Small Business Act 
        as well as additional requirements in the 2010 Jobs Act 
        require agencies and the Small Business Administration 
        (SBA) to record and track consolidation and bundling 
        via a database. At this point, that database does not 
        appear accessible or complete. This data collection is 
        vital, but our attempts at identifying this information 
        through the Federal Procurement Data System (FPDS) have 
        not been successful. Without adequate data from any 
        source, we cannot entirely know how damaging 
        unjustified consolidation is to women-owned small 
        businesses.

          2. Complete the regulatory actions required in the 
        National Defense Authorization Act for FY2013 and the 
        Small Business Jobs Act of 2010. These enacted pieces 
        of legislation carry important provisions with regards 
        to consolidation and should be promulgated by SBA and 
        adopted by the Federal Acquisition Regulatory (FAR) 
        Council. Regulations still in need of implementation 
        include additions of bundling justifications to agency 
        websites as well as procedural details on advance 
        notice to small business vendors whose contracts may 
        face consolidation.

          3. Increase education efforts of small business 
        vendors regarding the consolidation and bundling 
        processes. As new rules and regulations are released, 
        small businesses need to understand the consolidation 
        process, as well as the appeal and protest processes 
        for possibly unjustified or unnecessary consolidations 
        or bundling.

    Thank you to the Subcommittee holding this hearing today 
and for the efforts to make the contracting environment better 
for women-owned businesses. It is our hope that our 
identification of barriers and recommendations are helpful to 
your efforts to assist small businesses to become successful 
federal contractors. I am happy to answer any questions.
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