[Congressional Record Volume 149, Number 42 (Monday, March 17, 2003)]
[Senate]
[Pages S3806-S3808]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself, Ms. Landrieu, Ms. Stabenow, Ms. 
        Cantwell, and Mr. Pryor):
  S. 633. A bill to modify the contract consolidation requirements in 
the Small Business Act, and for other purposes; to the Committee on 
Small Business and Entrepreneurship.
  Mr. KERRY. Mr. President, I am pleased today to be re-introducing 
legislation, the ``Small Business Federal Contractor Safeguard Act,'' 
designed to protect the interests of small businesses in the Federal 
marketplace.
  Currently as the Ranking Member, and last Congress as Chairman, of 
the Senate Committee on Small Business and Entrepreneurship, I have 
focused a considerable amount of energy on increasing the role of small 
businesses in the Federal marketplace. Not only is it an issue of 
fairness, but it is in the best interest of our economy and our 
national security. In fact, the Small Business Administration was 
created after World War II to ensure that small businesses would be 
viable for defense-related production, to build a diverse pool of 
suppliers so that the country would not be dependent on only a handful 
of companies. As this country prepares for war in Iraq and continues 
the on-going war on terrorism, we should be improving that viability 
and expanding that diverse pool. We should be increasing our business 
with small business, not reducing it.
  It is no secret that the Committee on Small Business and 
Entrepreneurship places a great deal of importance on moving 
legislation forward in a bipartisan manner--the members of my Committee 
understand we represent the interests of all of our nation's small 
businesses, the most important and dynamic segment of our economy. And 
nowhere is the bipartisan consensus stronger than in the area of 
Federal procurement and ensuring that our nation's small businesses 
receive their fair share of procurement opportunities.
  The legislation we are introducing today has one ultimate purpose, to 
prevent Federal agencies from circumventing small business protections 
with regard to the practice known as contract bundling. Few issues have 
so strongly galvanized the small businesses contacting community as the 
practice of contract bundling, which occurs when procurement contracts 
are combined to form large contracts, often spread over large 
geographic areas, and results in minimal or no small business 
participation.
  Many supporters of the practice of contract bundling point to its 
cost savings--they claim it saves the taxpayer money to lump contracts 
together. Unfortunately, there is little evidence supporting this 
claim, and too many contracts are bundled without the required economic 
research designed to determine if a bundled contract will actually 
result in a cost savings.

[[Page S3807]]

  The SBA's Office of Advocacy, an independent body within the SBA, 
estimated that for every increase of 100 bundled contracts, there was a 
decrease of over 106 individual contracts issued to small firms. For 
every $100 awarded on a bundled contract, there was a decrease of $33 
to small business. This cost small businesses an estimated $13 billion 
in 2001. The Office of Advocacy arrived at these conclusions using a 
conservative definition of what constitutes a bundled contract. 
Therefore, the negative impact on small businesses from contract 
bundling is likely more severe.
  While seemingly an efficient and cost-effective means for Federal 
agencies to conduct business, bundled contracts are anti-competitive. 
And they are anti-small business. When a Federal agency bundles 
contracts, it limits small businesses' ability to bid for the new 
bundled contract, thus limiting competition. Small businesses are 
consistently touted as more innovative, providing better and cheaper 
services than their larger counterparts. But when forced to bid for 
mega-contracts, at times across large geographic areas, few, if any, 
small businesses can be expected to compete. By driving small business 
from the Federal marketplace, contract bundling will actually drive up 
the costs of goods and services purchased by the Federal government 
because competition will be limited and our economy will be deprived of 
possible innovations brought about by small businesses.

  While there are current laws in place intended to require Federal 
agencies to conduct market research before bundling a contract, 
loopholes in the current definition of a bundled contract allow them to 
often skirt these safeguards.
  Our legislation changes the name ``bundled contract'' to 
``consolidated contract,'' strengthens the definition of a consolidated 
contract, and closes the loopholes in the existing definition to 
prevent Federal agencies from circumventing statutory safeguards 
intended to ensure that separate contracts are consolidated for 
economic reasons, not administrative expediency.
  The new definition relies on a simple premise: if you combine 
contracts, be it new contracts, existing contracts or a combination 
thereof, you are consolidating them and would need to take the 
necessary steps to ensure it is justified economically before 
proceeding.
  Our legislation also alters the current Small Business Act 
requirements regarding procurement strategies when a contract is 
consolidated to include a threshold level for triggering the economic 
research requirements.
  Previously, any consolidated contract would trigger the economic 
research requirements, something considered onerous by many Federal 
agencies and often cited as the reason for circumventing the law. The 
new procurement strategies section of the Small Business Act would 
require a statement of benefits and a justification for any 
consolidated contract over $2 million and a more extensive analysis, 
corresponding to current requirements for any consolidated contract, 
for consolidations over $5 million.
  In order to move forward with a consolidated contract over $2 
million, the agency must put forth the benefits expected from the 
contract, identify alternatives that would involve a lesser degree of 
consolidation and include a specific determination that the 
consolidation is necessary and justified. The determination that a 
consolidation is necessary and justified may be determined simply 
through administrative and personnel savings, but there must be actual 
savings.
  In order to move forward with a consolidated contract over $5 
million, an agency must, in addition to the above: conduct current 
market research to demonstrate that the consolidation will result in 
costs savings, quality improvements, reduction in acquisition times, or 
better terms and conditions; include an assessment as to the specific 
impediments to small business participation resulting from the 
consolidation; and specify actions designed to maximize small business 
participation as subcontractors and suppliers for the consolidated 
contract. The determination that a consolidation is necessary and 
justified may not be determined through administrative and personnel 
savings alone unless those savings will be substantial for these larger 
contracts.
  By establishing this dual-threshold system, we have placed the 
emphasis for the economic research on contracts more likely to preclude 
small business participation, while not ceding smaller contracts to the 
whims of a Federal agency. This change, coupled with a clear definition 
of a consolidated contract, should be enough to garner compliance. 
However, if Federal agencies continue to consolidate contracts when 
there is no justification, fail to conduct the required economic 
research, or fail to provide procurement opportunities to small 
businesses, the Committee would have little choice but to consider 
legislative changes requiring punitive measures for these Federal 
agencies. This is a step I have been reluctant to take in the past. 
However, I am optimistic that such a step will not be necessary and 
that the fair and reasonable system established under this legislation 
will be effective.
  I would once again like to thank my fellow sponsors, Senators 
Landrieu, Stabenow, Cantwell, and Pryor for their continued support on 
this issue. I hope all of my colleagues will join us in supporting this 
bill. I ask that the text of the legislation be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 633

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Small Business Federal 
     Contractor Safeguard Act''.

     SEC. 2. CONTRACT CONSOLIDATION.

       (a) Definitions.--Section 3(o) of the Small Business Act 
     (15 U.S.C. 632(o)) is amended to read as follows:
       ``(o) Definitions.--In this Act the following definitions 
     shall apply:
       ``(1) Consolidated contract; consolidation.--The term 
     `consolidated contract' or `consolidation' means a multiple 
     award contract or a contract for goods or services with a 
     Federal agency that--
       ``(A) combines discrete procurement requirements from not 
     less than 2 existing contracts;
       ``(B) adds new, discrete procurement requirements to an 
     existing contract; or
       ``(C) includes 2 or more discrete procurement requirements.
       ``(2) Multiple award contract.--The term `multiple award 
     contract' means--
       ``(A) a contract that is entered into by the Administrator 
     of General Services under the multiple award schedule program 
     referred to in section 2302(2)(C) of title 10, United States 
     Code;
       ``(B) a multiple award task order contract or delivery 
     order contract that is entered into under the authority of 
     sections 2304a through 2304d of title 10, United States Code, 
     or sections 303H through 303K of the Federal Property and 
     Administrative Services Act of 1949 (41 U.S.C. 253h through 
     253k); and
       ``(C) any other indefinite delivery or indefinite quantity 
     contract that is entered into by the head of a Federal agency 
     with 2 or more sources pursuant to the same solicitation.''.
       (b) Procurement Strategies.--Section 15(e) of the Small 
     Business Act (15 U.S.C. 644(e)) is amended to read as 
     follows:
       ``(e) Procurement Strategies; Contract Consolidation.--
       ``(1) In general.--To the maximum extent practicable, 
     procurement strategies used by the various agencies having 
     contracting authority shall facilitate the maximum 
     participation of small business concerns as--
       ``(A) prime contractors;
       ``(B) subcontractors; and
       ``(C) suppliers.
       ``(2) Procurement strategy requirements when the value of a 
     consolidated contract is greater than $2,000,000.--
       ``(A) In general.--An agency official may not execute a 
     procurement strategy that includes a consolidated contract 
     valued at more than $2,000,000 unless the proposed 
     procurement strategy--
       ``(i) specifically identifies the benefits anticipated from 
     consolidation;
       ``(ii) identifies any alternative contracting approaches 
     that would involve a lesser degree of contract consolidation; 
     and
       ``(iii) includes a specific determination that the proposed 
     consolidation is necessary and the anticipated benefits of 
     such consolidation justify its use.
       ``(B) Necessary and justified.--The head of an agency may 
     determine that a procurement strategy under subparagraph 
     (A)(iii) is necessary and justified if the monetary benefits 
     of the procurement strategy, including administrative and 
     personnel costs, substantially exceed the monetary benefits 
     of each of the possible alternative contracting approaches 
     identified under subparagraph (A)(ii).
       ``(C) Additional requirements when the value of a 
     consolidated contract is greater than $5,000,000.--In 
     addition to meeting the requirements under paragraph (A), a

[[Page S3808]]

     procurement strategy that includes a consolidated contract 
     valued at more than $5,000,000--
       ``(i) shall be supported by current market research that 
     demonstrates that the consolidated contract will result in--

       ``(I) cost savings;
       ``(II) quality improvements;
       ``(III) reduction in acquisition cycle times; or
       ``(IV) better terms and conditions;

       ``(ii) shall include an assessment of the specific 
     impediments to participation by small business concerns as 
     prime contractors that result from contract consolidation;
       ``(iii) shall specify actions designed to maximize small 
     business participation as subcontractors, including 
     suppliers, at various tiers under the consolidated contract; 
     and
       ``(iv) shall not be justified under paragraph (A)(iii) by 
     savings in administrative or personnel costs, unless the 
     total amount of the cost savings is expected to be 
     substantial in relation to the total cost of the procurement.
       ``(3) Contract teaming.--
       ``(A) In general.--If the head of an agency solicits offers 
     for a consolidated contract, a small business concern may 
     submit an offer that provides for the use of a particular 
     team of subcontractors for the performance of the contract 
     (referred to in this paragraph as `teaming').
       ``(B) Evaluation of offer.--The head of the agency shall 
     evaluate an offer submitted by a small business concern under 
     subparagraph (A) in the same manner as other offers, with due 
     consideration to the capabilities of all of the proposed 
     subcontractors.
       ``(C) No effect on status as a small business concern.--If 
     a small business concern engages in teaming under 
     subparagraph (A), its status as a small business concern 
     shall not be affected for any other purpose.''.
       (c) Conforming Amendments.--The Small Business Act (15 
     U.S.C. 631 et seq.) is amended--
       (1) in section 2(j)--
       (A) by striking the subsection heading and inserting the 
     following:
       ``(j) Contract Consolidation.--''; and
       (B) in paragraph (3), by striking ``bundling of contract 
     requirements'' and inserting ``contract consolidation'';
       (2) in section 8(d)(4)(G), by striking ``a bundled 
     contract'' and inserting ``a consolidated contract'';
       (3) in section 15(a)--
       (A) by striking ``bundling of contract requirements'' and 
     inserting ``contract consolidation''; and
       (B) by striking ``the bundled contract'' and inserting 
     ``the consolidated contract''; and
       (4) in section 15(k)(5)--
       (A) by striking ``significant bundling of contract 
     requirements'' and inserting ``consolidated contracts valued 
     at more than $2,000,000''; and
       (B) by striking ``bundled contract'' and inserting 
     ``consolidated contract''.
                                 ______