Small Businesses: Limited Information Available on Contract Bundling's
Extent and Effects (Letter Report, 03/31/2000, GAO/GGD-00-82).

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

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-00-82
     TITLE:  Small Businesses: Limited Information Available on
	     Contract Bundling's Extent and Effects
      DATE:  03/31/2000
   SUBJECT:  Federal procurement policy
	     Contract oversight
	     Procurement regulations
	     Cost control
	     Small business contractors
IDENTIFIER:  GSA Federal Procurement Data System

Small Businesses: Limited Information Available on Contract Bundling's
Extent and Effects (Letter Report, 03/31/2000, GAO/GGD-00-82).

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

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-00-82
     TITLE:  Small Businesses: Limited Information Available on
	     Contract Bundling's Extent and Effects
      DATE:  03/31/2000
   SUBJECT:  Federal procurement policy
	     Contract oversight
	     Procurement regulations
	     Cost control
	     Small business contractors
IDENTIFIER:  GSA Federal Procurement Data System

******************************************************************
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GAO/GGD-00-82

SMALL BUSINESSES Limited Information Available on Contract Bundling's Extent
and Effects

United States General Accounting Office

GAO Report to the Chairman, Committee on Small Business, U. S. Senate

March 2000 GAO/ GGD- 00- 82

United States General Accounting Office General Government Division
Washington, D. C. 20548

Page 1 GAO/ GGD- 00- 82 Contract Bundling

B- 284554 March 31, 2000 The Honorable Christopher S. Bond Chairman,
Committee on Small Business United States Senate

Dear Mr. Chairman: This report responds to your request for a review of
contract bundling and its effect on small businesses. As you know, agencies
have been combining existing contracts into fewer contracts as a means of
streamlining the procurement process and reducing costs. This practice is
referred to as contract consolidation. Congress and small business advocates
have been concerned that contract consolidation may negatively affect small
businesses' ability to compete for contracts. Contracts that are
consolidated to such an extent that they present a barrier to small
businesses' ability to compete for such contracts are considered to be
“bundled contracts.”

Specifically, the Small Business Reauthorization Act of 1997 1 defines
bundling of contract requirements as the consolidation of two or more
procurement requirements for goods or services previously provided or
performed under separate, smaller contracts into a solicitation of offers
for a single contract that is likely to be unsuitable for award to a small
business concern due to (1) the diversity, size, or specialized nature of
the elements of the performance specified; (2) the aggregate dollar value of
the anticipated award; (3) the geographic dispersion of contract performance
sites; or (4) any combination of these three criteria.

The Office of Advocacy, an independent agency whose mission is to represent
and advance small business before Congress, has sponsored studies that have
concluded (1) that the federal government has fallen short of its 1998 goal
of 23 percent of its prime contract dollars being awarded to small
businesses and (2) that contract bundling is growing and negatively
affecting small businesses. Based, in part, on these reports, you were
concerned that small businesses are losing opportunities to contract with
the federal government because contracting agencies are bundling contract
requirements. Specifically, as agreed with your office, we have determined
(1) whether the government has met the governmentwide goal

1 Public Law 105- 135, December 2, 1997.

B- 284554 Page 2 GAO/ GGD- 00- 82 Contract Bundling

of awarding 23 percent of its federal prime contracts to small businesses,
(2) what the federal government knows about the extent of contract bundling
and its effect on small businesses, and (3) the Small Business
Administration's (SBA) efforts to oversee contract bundling by federal
agencies.

Our analysis of contracting data in the Federal Procurement Data System
(FPDS) indicated that in fiscal year 1998, the most recent year for which
data were available, federal agencies met the governmentwide goal of 23
percent for prime contract awards to small businesses. The Small Business
Reauthorization Act of 1997 amended the Small Business Act of 1953 to set
the goal as being not less than 23 percent of the total value of all the
prime contract awards for each fiscal year. SBA administers and issues
regulations under the Small Business Act and is responsible for determining
how the extent of small business participation in governmentwide procurement
is to be calculated. To measure achievement of the 23- percent
governmentwide goal, SBA relies on FPDS, which showed that federal agencies,
as a whole, awarded 23.4 percent of the total dollar value of federal prime
contracts to small businesses during that year.

However, using a different universe of prime contracts, but the same FPDS
data, SBA's Office of Small Business Advocacy (Office of Advocacy) reported
that federal agencies awarded 20.6 percent of their prime contract dollars
to small and disadvantaged businesses, which was short of the governmentwide
goal.

Our analysis showed that the main difference between SBA's and the Office of
Advocacy's universe was that SBA's universe included all contracts except
those contracts for which SBA believed that small businesses did not have a
reasonable opportunity to compete. For example, it excluded foreign military
sales, overseas procurements, and procurements from mandatory sources of
supplies, such as purchases from Federal Prison Industries, Inc. According
to SBA officials, they excluded these procurements because (1) foreign
government purchases are not subject to SBA requirements, (2) U. S. small
businesses are not likely to bid for overseas contracts, and (3)
acquisitions from mandatory sources are to be awarded noncompetitively in
accordance with legal requirements. SBA also excluded contracts from some
specific programs from the Departments of State, the Treasury, and
Transportation. The Office of Advocacy did not exclude any contracts in its
calculations. We believe the method SBA- the agency charged with the
responsibility to administer the statute- used to calculate the extent of
small business Results in Brief

B- 284554 Page 3 GAO/ GGD- 00- 82 Contract Bundling

participation in governmentwide procurement is within its discretion under
the statute.

There is very little data on the extent of contract bundling governmentwide
and its effect on small businesses. The Federal Procurement Data Center
(FPDC) will not collect data on bundled contracts until SBA finalizes an
interim rule on the matter. SBA had some data on bundled contracts that it
had identified, but neither SBA nor the three agency procurement centers we
contacted had performed definitive studies measuring the extent of contract
bundling or its effect on small businesses. DOD plans to contract for a 6-
month study in 2000 of its contract bundling practices and their effects on
small businesses. We identified the Office of Advocacy's study as the only
governmentwide study that has been completed to date. It concluded that
contract bundling has increased and had a negative effect on small business'
share of federal contracts. 2 However, the study's analysis was based on a
definition that was broader than the statutory definition of contract
bundling and provided no convincing evidence that bundling caused adverse
effects on small businesses.

In the absence of governmentwide data, we selected three procurement
centers- the National Aeronautics and Space Administration's (NASA) Johnson
Space Center in Houston, Texas; the Department of Energy's (DOE) Operations
Office in Albuquerque, New Mexico; and DOD's WrightPatterson Air Force Base
in Dayton, Ohio- to serve as case studies to examine the effects of contract
bundling on small businesses at a cross section of defense and civilian
agencies. Our analysis of contracting data at these three procurement
centers showed that the small business share of federal contracts overall
increased at Johnson Space Center and DOE's Albuquerque Operations Office
and declined at Wright- Patterson Air Force Base since 1997. Procurement
center officials identified and had available data on 74 contracts worth
$13.6 billion that were consolidated to 13 contracts worth $12.4 billion.
The small business share in terms of percentage of contracts and contract
dollars awarded declined ranging from a 28- percent reduction in contract
dollars at Wright- Patterson Air Force Base to a 52- percent reduction at
NASA's Johnson Space Center. SBA identified 1 of the 13 contract
consolidations as a bundled contract.

Agency officials have stated that small businesses often receive
subcontracts from the winning prime contractor. We determined this was the
case for all but one consolidated contract at two centers we visited.
Johnson Space Center and DOE's Albuquerque Operations Office had

2 Final Report: Bundled Contract Study FY 91- FY 95 (Eagle Eye Publishers
for SBA, June 20, 1997).

B- 284554 Page 4 GAO/ GGD- 00- 82 Contract Bundling

some available subcontractor data, which showed that all but one of the
consolidated contracts had subcontractors that were small businesses. The
dollar values of the subcontracts were not readily available. Officials at
the three sites reviewed believed that contract bundling had, at most, a
limited effect on the share of contracts and contract dollars awarded to
small businesses.

SBA is responsible for reviewing potential contract bundling at procurement
centers and recommending to agencies ways of increasing small business
participation for those contracts, such as breaking up the contracts or
identifying subcontracting opportunities. However, according to SBA
officials, the effectiveness of these activities has been limited, and it is
not clear to what extent agency contracting officers are identifying
proposed bundled contracts and notifying SBA's Procurement Center
Representatives (PCR) who are to review the contracts. Specifically,
according to SBA officials, partly due to budget constraints, SBA does not
have the staff assigned to review proposed contracts at all of the
government's 2,250 procurement centers to detect and deal with bundling. In
addition, we noted that not all contracts were reviewed. The SBA PCR for
NASA's Johnson Space Center had not reviewed any of the proposed contracts
awarded there for the past 3 years, reportedly due to lack of travel funds.

SBA officials acknowledged that they have not assessed the best use of
personnel to monitor contract bundling, and they plan to reevaluate the
placement of PCRs and determine if existing staff have skills to become PCRs
in those geographic areas where PCR coverage is needed. SBA officials also
noted that they were highly dependent on contracting officers' notifying SBA
of bundled contracts; and therefore, they had no assurance that all bundled
contracts were being identified. We are recommending that SBA's
Administrator design a strategy to achieve the results desired from
oversight of contract bundling.

The Small Business Act of 1953 created SBA, whose function is to aid,
counsel, assist, and protect the interests of small business concerns. The
act also stipulated that SBA would ensure small businesses a “fair
proportion” of government contracts. The Office of Government
Contracting within SBA is responsible for coordinating agency goals for
awarding contracts to small businesses to ensure that the federal government
meets the governmentwide 23- percent goal of prime contracts to small
businesses. This office is also responsible for overseeing the achievement
of that goal. Background

B- 284554 Page 5 GAO/ GGD- 00- 82 Contract Bundling

A 1976 amendment to the Small Business Act and Small Business Investment Act
of 1958 established the Office of Advocacy, which is an independent agency
that is housed in SBA. The Office of Advocacy's mission is to represent and
advance small business before Congress and federal agencies and to enhance
small business competitiveness in the American economy.

Under guidance of the Office of Management and Budget's Office of Federal
Procurement Policy (OFPP), FPDC was established in 1978 to develop and
manage the computer- based FPDS. Data collection began on October 1, 1978.
Originally, FPDC was under DOD, but it is now under the General Services
Administration (GSA). FPDC collects quarterly data from over 60 executive
branch agencies and annually publishes the Federal Procurement Report, which
contains snapshot statistics on the agencies' procurement activities. The U.
S. Postal Service and the legislative and judicial branches, among other
agencies, are not required to report their procurement activities to FPDC.
FPDS also does not contain data on certain kinds of procurements, such as
those from credit- card purchases. FPDS contains about 50 data elements,
including agency name, items purchased, obligations, place of performance,
name of contractor, and the type of contractor (e. g., large business, small
business, or women- owned business). FPDS does not yet include data on
bundled contracts, but is expected to do so soon.

The Business Opportunity Development Reform Act of 1988 amended the Small
Business Act to establish an annual governmentwide goal of not less than 20
percent of prime contract dollars to be awarded to small businesses. The
Small Business Reauthorization Act of 1997 increased the annual
governmentwide goal to not less than 23 percent. A prime contract is any
direct contract between the government and the contractor. The 23- percent
goal is a governmentwide goal. Therefore, some agencies' goals for awarding
prime contracts to small businesses may be below 23 percent while others may
be above 23 percent.

SBA is responsible for coordinating goals with all executive agencies to
ensure that the federal government meets the governmentwide 23- percent
goal. Prior to the beginning of each fiscal year, SBA (1) establishes with
each agency separate goals for prime contract and subcontract awards to
small businesses, (2) requires use of FPDS data to measure goal achievement,
and (3) requires agencies to submit a detailed written presentation of the
method used to establish the goals. Small Business

Procurement Goal

B- 284554 Page 6 GAO/ GGD- 00- 82 Contract Bundling

The Small Business Act requires each agency to consult with SBA to establish
goals for the participation of small business concerns in contracts issued
by the agency. If SBA and an agency fail to agree on established goals, the
disagreement is submitted to OFPP for final determination.

FPDC generates and publishes interim and final achievement reports for each
executive agency and department. Federal agencies and departments can
periodically review and revise FPDS data to resolve any discrepancies. On
June 1 of each calendar year, FPDC is to provide SBA with a list showing
preliminary prime contract statistics for each agency and department
containing the first two- quarters of data. The final report for each fiscal
year is to be issued in mid- March of the subsequent year.

Executive agencies and departments are required to report to SBA on the
extent of small businesses' participation, including the justification of
any failure to meet the goals established for the agency. The Small Business
Act does not authorize SBA to impose penalties for failing to meet goals.
However, SBA officials told us that agencies and departments wish to avoid
the embarrassment of failing to achieve their goals. Furthermore, SBA
officials told us that they have entered into an agreement with OFPP to
publicly report executive agency and department goal accomplishments.

Agencies have combined existing contracts into fewer contracts as a means of
streamlining and reducing procurement and contract administration costs.
This practice is generally referred to as “contract
consolidation.” As mentioned earlier, a subset of consolidated
contracts are “bundled contracts” that the Small Business
Reauthorization Act of 1997 defines as the consolidation of two or more
procurement requirements for goods or services previously provided or
performed under separate, smaller contracts into a solicitation of offers
for a single contract that is likely to be unsuitable for award to a small
business concern due to

ï¿½ the diversity, size, or specialized nature of the elements of the
performance specified;

ï¿½ the aggregate dollar value of the anticipated award;

ï¿½ the geographic dispersion of contract performance sites; or

ï¿½ any combination of these three criteria. Contract Bundling

B- 284554 Page 7 GAO/ GGD- 00- 82 Contract Bundling

Congress and small business advocates have expressed concern about the
extent to which contract requirements are bundled and the effect that such
bundling has on small businesses and small, disadvantaged business' ability
to participate in federal procurement. 3 In light of these concerns,
Congress enacted legislation, including a 1997 amendment to the Small
Business Act, requiring SBA to review all proposed consolidated acquisitions
for goods or services that small businesses were currently providing, but
that may be unlikely for award to a small business. According to the Act, if
SBA believes that the proposed procurement will render small business
contract participation unlikely, SBA shall recommend alternate procurement
methods to the procurement activity to increase such participation. If SBA
and the contracting agency cannot agree, the matter shall be submitted to
the head of the appropriate department or agency for resolution.

The Small Business Reauthorization Act of 1997 also requires each federal
agency, to the maximum extent practicable, to (1) promote participation of
small businesses by structuring its contracting requirements to facilitate
competition by and among small businesses and (2) avoid the unnecessary and
unjustified bundling of contracts that are likely to be unsuitable for small
business participation as prime contractors. The act also requires that the
Office of Small and Disadvantaged Business Utilization of each federal
contracting agency identify proposed solicitations that involve
“significant” contract bundling and increase participation by
small businesses in such solicitations as either prime contractors or, if a
solicitation for a bundled contract is to be issued, subcontractors and
suppliers.

To comply with the act, in October 1999, SBA issued an interim rule.
Although the interim rule did not become effective until December 1999, the
rule provided general guidance to agencies on bundled contracts. The interim
rule used the same bundling definition as the Small Business Reauthorization
Act of 1997.

Under the Small Business Act, as amended, and SBA's interim regulations,
agencies that intend to bundle requirements must document that such action
is necessary and justified. Expected benefits of consolidation must be
quantified and substantial. Benefits may include cost savings; price
reduction, quality improvements; reduction in acquisition cycle times;

3 Acquisition refers to the process of obtaining goods, services, and space
for use by the government. The acquisition process begins with the
determination of a need for goods or services and includes a description of
requirements, solicitation and selection of sources, award of contracts,
contract administration, completion, and closeout.

B- 284554 Page 8 GAO/ GGD- 00- 82 Contract Bundling

better terms and conditions; and other benefits that individually, in
combination, or in aggregate would result in

ï¿½ benefits equivalent to 10 percent if the contract value (including
options) is $75 million or less, or

ï¿½ benefits equivalent to 5 percent if the contract value (including options)
is over $75 million (unless the estimated benefits are solely administrative
cost savings in which case they must normally be at least 10 percent).

Exceptions to these provisions require approval by the agency assistant
secretary with responsibility for acquisition matters (service acquisition
executives) when (1) the benefits from the proposed bundling, though not
meeting the above thresholds, are critical to the agency's mission and (2)
the procurement strategy provides for the maximum small business
participation practicable.

To accomplish our three objectives, we examined records and interviewed
officials at SBA, NASA, DOE, and DOD headquarters and SBA's Offices of
Government Contracting in Fort Worth, TX; Albuquerque, NM; and Dayton, OH.
We obtained reports and interviewed officials from FPDC. We did not
independently verify data contained in those reports. We also interviewed
procurement center officials at NASA's Johnson Space Center in Houston, TX;
DOE's Operations Office in Albuquerque, NM; and Wright- Patterson Air Force
Base, in Dayton, OH.

We selected these procurement centers because they had large volumes of
contracting expenditures relative to the approximately 2,250 federal
procurement centers from which federal contracts are awarded and managed. In
fiscal year 1998, NASA's procurement center at Johnson Space Center awarded
about $3.9 billion in contracts, DOE's procurement center in Albuquerque,
NM, awarded about $3.6 billion in contracts, and one of the three
procurement centers at Wright- Patterson Air Force Base awarded about $9.1
billion in contracts. 4 For each procurement center, we reviewed all
consolidated contracts that center officials identified for us. We had SBA
identify which of the consolidated contracts were bundled.

We requested comments on a draft of this report from SBA, DOD, DOE, and
NASA. The comments we received are discussed near the end of this

4 Wright- Patterson has three procurement centers, Aeronautical Systems
Command, Electronic Systems Center, and Material Systems Group. However,
only one, the Aeronautical Systems Command, had readily available data to
include in our review. Scope and Methodology

B- 284554 Page 9 GAO/ GGD- 00- 82 Contract Bundling

letter. We conducted our review between July 1999 and January 2000 in
accordance with generally accepted government auditing standards. A detailed
discussion of our scope and methodology is presented in appendix I.

FPDS data indicated that federal agencies, as a whole, met their annual
governmentwide goal for providing prime contract awards to small businesses
over the last several fiscal years, based on the formula SBA's instructions
set forth for measuring the extent of small business participation and for
determining whether the governmentwide goal has been achieved. Using a
different approach for calculating goal achievement, SBA's Office of
Advocacy reported that federal agencies did not meet the governmentwide goal
for fiscal year 1998. Because the statutory provisions establishing the goal
do not prescribe a method for determining goal achievement, SBA program
officials have latitude in determining how goal achievement is to be
calculated. While SBA's Office of Advocacy and others may have differing
views on how goal achievement should be calculated, we believe the approach
specified by SBA's Office of Government Contracting is within its discretion
under the statute.

Using FPDS data and the approach SBA's instructions prescribe, the annual
governmentwide percentage goal for providing prime contract awards to small
businesses, which increased from 20 to 23 percent effective fiscal year
1998, was met each year for fiscal years 1994 through 1998. Figure 1
compares the legislative goals to the percentages of contract dollars
awarded to small businesses for the period fiscal year 1994 through 1998.
Governmentwide Goal

Appears to Have Been Met, but Views Differ on Measurement Method

B- 284554 Page 10 GAO/ GGD- 00- 82 Contract Bundling

Source: GAO analysis of legislation and FPDS data.

SBA has issued instructions that specify how goal achievement is to be
calculated. The instructions require use of FPDC data and specify that all
types of contracts tracked by FPDC should be included, with three general
exceptions. The exceptions are (1) contracts for foreign military sales, (2)
contracts awarded and performed outside the United States, and (3) purchases
from mandatory sources of supplies as listed in the Federal Acquisition
Regulation. In fiscal year 1998, foreign military sales totaled $12.9
billion, procurements outside of the United States totaled $8 billion, and
mandatory sources of supplies totaled $784 million.

According to SBA officials, they excluded these procurements because small
businesses do not have a reasonable opportunity to compete for them. For
foreign military sales, the buying entity is a foreign government, which is
not subject to SBA's requirements; U. S. small businesses are not likely to
bid for overseas contracts; and the acquisitions for mandatory sources (e.
g., Federal Prison Industries, Inc., and the Committee for Purchase from
People who are Blind or Severely Disabled) are to be

Figure 1: Comparison of Statutory Goal to Actual Federal Achievement of
Percentage of Contract Dollars Awarded to Small Businesses for Fiscal Years
1994 Through 1998

B- 284554 Page 11 GAO/ GGD- 00- 82 Contract Bundling

awarded noncompetitively in accordance with legal requirements. In addition,
because they did not believe that small businesses could compete for these
contracts, SBA officials excluded specific programs from the Departments of
State, Transportation, and the Treasury. 5

In March 1999, SBA's Office of Advocacy issued a report on federal
procurement from small firms, concluding that 18.3 percent of contract
dollars were awarded to small businesses in fiscal year 1998. 6 According to
the Office of Advocacy officials, their methodology relied on the same FPDS
database that SBA used but included all contracts except prime contract
awards below $25,000. These contracts were initially excluded because the
Office of Advocacy's report was based on analyses of contract awards at
about 2, 250 procurement centers nationwide, and FPDC's database did not
track contract awards below $25,000 at the procurement center level. The
Office of Advocacy subsequently included all prime contract awards under
$25,000, as reported by the FPDC, in its calculation; and, according to
Office Advocacy Officials, the governmentwide small business share was 20.6
percent when including all prime contract awards. 7

Office of Advocacy officials said they believe that the three categories of
contracts- foreign military sales, contracts awarded and performed outside
the United States, and purchases from mandatory sources- that SBA program
officials exclude in the goal- achievement calculation should be included
because they believe that all contract awards should be included in the
calculation. We believe that SBA officials decision to exclude the three
types of contracts and the various programs from the calculation is within
SBA's discretion under the statute that establishes the 23- percent goal.

Limited governmentwide data exist on the extent of contract bundling and the
actual effect of contract bundling on small businesses. Similarly,
Department of Defense (DOD), DOE, and NASA had little agencywide information
on these topics; and none of the three procurement centers we

5 Exclusions for the Department of State include all awards to the American
Institute of Taiwan and awards made by American embassies located abroad.
Exclusions for the Department of Transportation include all awards made by
the Federal Highway Administration and the Federal Aviation Administration.
Exclusions for the Department of the Treasury include awards made by the
Bureau of Engraving and Printing, U. S. Mint, Comptroller of the Currency,
and the Office of Thrift Supervision.

6 Federal Procurement From Small Firms: National and State- by- State
Rankings of Federal Procurement Centers on Their Procurement From Small
Firms in FY 1998, March 1999, SBA, Office of Advocacy. 7 Because contractor
data are not available for classified projects, both SBA and the Office of
Advocacy treat those contracts as being awarded to large contractors. The
Extent and Effect

of Contract Bundling is Unknown

B- 284554 Page 12 GAO/ GGD- 00- 82 Contract Bundling

visited had compiled information on the effects of bundling on small
businesses. There was one study that attempted to measure the extent and
effect of contract bundling, but it used a much broader definition than the
statutory definition of bundled contract; and, therefore, could not clearly
show the extent of contract bundling. In addition it could not show the
effect on small businesses' participation in federal contracting. Moreover,
evidence of the effect on small businesses from contract bundling has been
largely anecdotal. Although the three sites in our review identified
contracts that were consolidated during fiscal years 1997 through 1999, SBA
identified only one of the consolidations as a bundled contract. SBA and
agency procurement officials at these sites believed that contract bundling
had, at most, a limited effect on small businesses' participation.

FPDC, SBA, and the three agencies covered in our review did not have
complete data on the extent of contract bundling or its effects on small
businesses. Federal agencies are not required to report information on
contract bundling to FPDC until SBA has finalized a ruling on the matter;
and FPDS, therefore, did not contain data on this topic. 8 Although SBA has
a contract bundling alert system to identify and track to resolution agency
proposals for consolidated contracts that SBA believes are potential bundled
contracts, this system does not capture all potential bundled contracts; nor
has SBA determined the effect of those that are identified as bundled
contracts on small businesses. SBA's PCRs identify and place contracts they
consider bundled on SBA's alert system. However, PCRs cover only 238
centers, leaving over 2,000 procurement centers uncovered. The Small
Business Act also requires the representatives of Offices of Small Business
Utilization for each agency to identify bundled contracts and to deal with
bundling issues within their agencies. In addition, the agencies are
required to notify SBA of bundled contracts that are determined to be
unnecessary and unjustified. By regulation, contracting officers are also to
notify SBA of bundled contracts that they determine are necessary and
justified. While SBA had cases where agencies had notified it of bundled
contracts, SBA officials said that they had no assurance that all
contracting officers were doing so. Consequently, the bundling alert list
may not include all bundled contracts.

SBA's alert system listed 96 contract proposals that possibly constituted
bundling in fiscal years 1998 and 1999. SBA did not have the final
resolution on all proposed contracts listed in its alert system. SBA did

8 The Small Business Reauthorization Act of 1997 requires agencies to report
data on bundled contracts anticipated to exceed $5 million to FPDC. SBA's
instructions to agencies on reporting of these data will not become in
effect until it has finalized its ruling. Limited Data Available on

Bundling

B- 284554 Page 13 GAO/ GGD- 00- 82 Contract Bundling

advise us that some cases may take over 1 year to determine a viable
procurement strategy. As shown in table 1, as of January 2000, SBA officials
considered 54 of the 96 cases resolved in its alert system but had no
information on the status of the remaining 42 cases.

According to SBA officials, resolution of a case can be achieved through
various ways. For example, a case is considered resolved if the contract was
broken up or subcontracting opportunities were identified to allow for small
business contracting opportunities. Conversely, SBA could agree that no
small business opportunities were available and that the contract was an
“appropriate” bundled contract. In addition, the contract could
be canceled, or SBA could determine that it wasn't a bundled contract after
all. The requirements could also have been included in another existing
contract or the Federal Supply Schedule, which allows goods and services to
be bought from a catalogue at established prices.

Disposition Number of cases 1998 1999 Total Cases unresolved 6 36 42 Cases
resolved

Small business opportunities identified 23 0 23 No small business
opportunities available 1 0 1 Small business sources could not be identified
11 0 11 Cases canceled or transferred to another buying activity 3 0 3 Cases
placed against an existing contract or Federal Supply Schedule 5 0 5 Cases
determined not bundled 11 0 11

Subtotal 54 0 54 Total 60 36 96

Source: GAO analysis of data provided by SBA.

None of the three agencies- DOD, DOE, or NASA- covered in our review had
agencywide data on the extent of contract bundling or its effects on small
business. However, in November 1999, DOD testified before the House
Committee on Small Business that DOD plans to contract for a 6- month study
in 2000 of its contract bundling practices and their effects on small
businesses.

Eagle Eye Publishers, a private contractor, prepared a study for the SBA's
Office of Advocacy in 1997, which the contractor later updated in November
1999, that estimated the extent of contract bundling governmentwide and its
effects on small businesses. The study reported that there was a decline in
small business prime contracts when contract bundling occurred.

Table 1: SBA's Reported Disposition of Potential Bundling Cases SBA
Identified for Fiscal Years 1998 and 1999, as of January 2000

Office of Advocacy Study on Contract Bundling

B- 284554 Page 14 GAO/ GGD- 00- 82 Contract Bundling

Eagle Eye Publishers' approach was to make several assumptions to
approximate the number of bundled contracts. Eagle Eye Publishers used the
FPDS database to perform its analysis. Because this database does not
contain information on consolidated or bundled contracts, Eagle Eye
Publishers defined “bundled contracts” as those contracts that
were coded in the database as (1) providing multiple goods or services, (2)
being performed at different locations, and (3) using different contract
types. In addition, because FPDS does not include detailed information
needed for contracts below $25,000, Eagle Eye Publishers could only look at
contracts valued at $25,000 or more. The president of Eagle Eye Publishers
told us that its assumptions were necessary to make any kind of
approximation of bundled contracts, given the data limitations. This
definition differs from the statutory definition of contract bundling which
is consolidating requirements from multiple, smaller contracts to one
contract that is likely to be unsuitable for award to a small business.

In testimony before the U. S. House of Representatives Committee on Small
Business on November 4, 1999, the president of Eagle Eye Publishers
testified that the share of bundled contracts increased from 1992 to 1998.
He reported that during that time period, bundled contracts increased from
12 percent to 13 percent of the total number of contracts, and the total
bundled contract dollars remained around 41 percent of total contract value.
Eagle Eye Publishers also noted that small businesses received 784,427
contracts, or 62 percent, of all prime contracts $25,000 and over awarded
between fiscal years 1989 and 1998. In contrast, Eagle Eye Publishers stated
that small businesses received 53 percent of the bundled contracts. It
stated that in terms of dollars, the $310 billion small businesses received
over the period constituted 17 percent of all prime contract dollars and
10.8 percent of all bundled contract dollars.

Given that the definition Eagle Eye Publishers used to determine the extent
of contract bundling is broader than the statutory definition of contract
bundling, we believe that Eagle Eye Publishers study probably overstates the
number of bundled contracts. Moreover, Eagle Eye Publishers did not clearly
demonstrate that an increase in the number of bundled contracts took place
or convincingly show that contract bundling caused a decline in the small
business participation in federal contracts.

Since 1997, percentages of contract dollars awarded to small businesses
increased at two of the centers we visited-- NASA's Johnson Space Center and
DOE's Albuquerque Operations Office. The percentage declined at Wright-
Patterson Air Force Base. Officials at the three sites identified at least
103 contracts that were consolidated into 20 contracts during fiscal Results
of Visits to Selected

Procurement Centers

B- 284554 Page 15 GAO/ GGD- 00- 82 Contract Bundling

years 1997 through 1999. However, we limited our analysis to the 13
consolidated contracts for which there were complete data. 9 According to an
SBA official, only one of the contract consolidations identified at the
centers was a bundled contract. This bundled contract was at Johnson Space
Center. All but one of the consolidated contracts had small business
subcontractors. Officials at the three sites said that contract bundling had
a limited effect on small businesses' ability to participate in federal
contracting.

Table 2 shows the share of prime contracts awarded to small businesses from
fiscal year 1997 through fiscal year 1999 at the three procurement centers
we visited. As the table shows, at NASA's Johnson Space Center, small
businesses' dollar share of prime contracts increased from 4.9 percent in
1997 to 5.8 percent in 1999. DOE's Albuquerque Operations Office's share of
prime contract dollars to small businesses also increased from 19.9 percent
in 1997 to 21.5 percent in 1998, the latest year with available data at the
time of our review. 10 Wright- Patterson Air Force Base's share declined
from 3.1 percent to 2.7 percent.

Procurement center Awards to prime contractors

($ millions) Awarded to small business prime contractors ($ millions) Small
business share of prime

contractors awards (percent) 1997 1998 1999 1997 1998 1999 1997 1998 1999

Johnson Space Center $3,856 $3,854 $3,718 $192 $205 $216 4.9 5.3 5.8
Albuquerque Operations Office a $3,463 $3,620 N/ A $688 $778 N/ A 19.9 21.5
N/ A Wright- Patterson Air Force Base $10,596 $9,121 $10,037 $326 $279 $266
3.1 3.1 2.7

Note: N/ A – Data were not available. a Includes subcontracts for
management and operations contracts per Office of Federal Procurement

Policy waiver. Source: FPDC.

Contract consolidations, by definition, reduce the number of prime
contractors. In addition, since an intent of consolidation is often to save
money, contract dollars may also be reduced. We observed that, at each of
the three sites we visited, in general, total contract dollars declined for

9 NASA's Johnson Space Center had five consolidations and DOE's Albuquerque
Operations Office had three. Wright- Patterson Air Force Base had complete
data on only 5 of the reported 12 contract consolidations. These five
contract consolidations are included in our analysis.

10 OFPP granted a waiver that permitted DOE to include subcontracts to small
businesses awarded under its management and operations contracts to be
included in its calculation of prime contract awards to small businesses.
OFPP discontinued this waiver as of fiscal year 2000.

Table 2: Prime Contract Awards to Small Business by Selected Procurement
Centers in Fiscal Years 1997 Through 1999

B- 284554 Page 16 GAO/ GGD- 00- 82 Contract Bundling

those contracts that were consolidated. In terms of the effect on small
businesses, reductions in the numbers of prime contracts and prime contract
dollars varied among the three sites.

Specifically, at Johnson Space Center, small businesses had 12 prime
contracts valued at $265.5 million before consolidation and 3 prime
contracts valued at $126.8 million after consolidation, for a total
reduction of 75 percent of the number of contracts and 52 percent of
contract dollars awarded to small businesses. Contract consolidation at
DOE's Albuquerque Operations Office reduced small business contracts from 7
to 3, or 57 percent, and total contract value from $72.3 million to $36.4
million, or 50 percent. Wright- Patterson Air Force Base showed declines to
the number of contracts to small businesses from 15 to 5, or by 66 percent,
and total contract value from $115.7 million to $83 million, or by 28
percent. Table 3 summarizes contracts awarded to small business both
preconsolidation and postconsolidation at each of the three sites.

Site Total prime contracts

Small business

prime contractors

Percent of small business of total

contracts Value of total

contracts Total value of

small business contracts

Percent of small business

of total contracts'

value NASA- Johnson Space Center

Preconsolidation 52 12 23.1 $13,426.4 $265.5 a 2.0 Postconsolidation 5 3 b
60.0 $12,301.3 $126.8 b 1.0

DOE- Albuquerque Operations Office

Preconsolidation 7 7 100.0 $72.3 $72.3 100.0 Postconsolidation 3 3 100.0
$36.4 $36.4 100.0

Wright- Patterson Air Force Base c

Preconsolidation 15 15 100.0 $115.7 $115.7 100.0 Postconsolidation 5 5 100.0
$83.0 $83.0 100.0

a Contract value not available on one small business contract; therefore, it
could not be included. b One of the small businesses teamed with a large
business. Small business contract dollars include only the share that went
to that small business. c Wright- Patterson Air Force Base had complete data
on only 5 of the reported 12 contract

consolidations that occurred in 1998. It did not have readily available data
for 1999. Source: GAO analyses of data provided by NASA's Johnson Space
Center, DOE's Albuquerque Operations Office, and Wright- Patterson Air Force
Base.

Table 3: Preconsolidation and Postconsolidation Prime Contract Awards at
NASA's Johnson Space Center, DOE's Albuquerque Operations Office, and
Wright- Patterson Air Force Base for Fiscal Years 1997 Through 1999 (dollars
in millions)

B- 284554 Page 17 GAO/ GGD- 00- 82 Contract Bundling

SBA identified one contract, for base operations support at Johnson Space
Center, as a bundled contract. Prior to bundling, there were 10 contracts
valued at $250.9 million, of which 7 contracts valued at about $100 million
were awarded to small businesses. 11 A Johnson Space Center official agreed
that the consolidation was a bundled contract but noted that the prime
contract was awarded to a women- owned, small business that had teamed with
a large firm, Brown and Root Services. The bundled contract was valued at
$174.9 million, of which the small business received $394,000.

SBA did not consider the other consolidations to be bundled due to various
reasons. For example, two of the largest consolidations, also at Johnson
Space Center, involved only large businesses before consolidation with 36
contracts valued at $12.0 billion. The three consolidated contracts at the
DOE Albuquerque Operations Office were all awarded as small business set-
asides, meaning that the small businesses competed amongst themselves for
the contracts. According to service officials, the five consolidated
contracts at Wright- Patterson Air Force Base had only small businesses as
prime contractors before and after consolidation.

NASA center officials noted that contract consolidation has forced small
businesses to change their marketing strategies to seek more subcontracting
opportunities. Only Johnson Space Center and DOE's Albuquerque Operations
Office had readily available subcontract information. According to agency
contracting officers, of the 19 small businesses at these two centers that
had prime contracts before consolidation, 2 received subcontracts after
consolidation. We could not determine the dollar value of the subcontracts.
In addition, these two centers had information on the number of subcontracts
awarded to small businesses for each of the consolidated contracts. The
centers did not have information on the values of the contracts that were
awarded to those subcontractors, however. As shown in table 4, the number of
subcontractors varied widely (1) from a Johnson Space Center contract, which
was the largest consolidated contract, that had 249 small business
subcontractors over time after consolidation (2) to one of DOE Albuquerque
Operations Office's consolidated contracts, which was awarded as a small
business set- aside, that had no small business subcontracts.

11 The contract value was not available for one of the small business
contracts; and, therefore, it was not included in the total amount.

B- 284554 Page 18 GAO/ GGD- 00- 82 Contract Bundling

Contract Prime contract value Small business

prime Number of small

business subcontractors NASA- Johnson Space Center

Base operations support $174.9 1 a 5 Space operations support $8,600.0 0 249
Space operations $3,400.0 0 8 Manufacturing and calibration $68.5 1 1
Imagery, media, and public affairs 57.9 1 1

Total $12,301.3 3 264 DOE- Operations Office

Environmental management support $9.5 1 1 Technical and administrative
support $12.2 1 2 Technical security support $14.7 1 0

Total $36.4 3 3

a The small businesses teamed with a large business. The small business
received $394,000 of the $320.1 million contract. Source: GAO analysis of
NASA's Johnson Space Center and DOE's Albuquerque Operations Office data.

Officials at the three sites reviewed believed that contract bundling had,
at most, a limited effect on the share of prime contracts and contract
dollars awarded to small businesses.

SBA monitors federal agency procurement activity to ensure that (1)
appropriate steps are taken to provide contract awards to small businesses,
(2) agencies meet their small business contracting goals, and (3) proposed
contracts that could involve bundling are identified and resolved. SBA also
provides training to its PCRs to aid them in carrying out their
responsibilities. However, we identified several limitations in SBA's
oversight that have impeded its effectiveness in identifying and dealing
with proposed contracts that could involve bundling, including complying
with its statutory mandate to review all proposed bundled contracts.

According to SBA officials, due to budget limitations, SBA does not have
representatives assigned to oversee procurement activity at all federal
procurement centers and, by statute, relies, in part, on agencies to
identify bundled contracts. In addition, it has not reassessed how to
determine optimal oversight of procurement center activities with its
existing

Table 4: Number of Small Business Subcontractors for Each Consolidated
Contract at Johnson Space Center and DOE's Albuquerque Operations Office
(dollars in millions)

Limitations in SBA's Monitoring of Contract Bundling

SBA Oversight of Procurement Centers

B- 284554 Page 19 GAO/ GGD- 00- 82 Contract Bundling

resources. Consequently, SBA did not have assurance that it was identifying
all bundled contracts.

In fiscal year 1999, SBA had 45 PCRs assigned throughout the country to
oversee contracting activity at 238 of the government's approximate 2,250
procurement centers. The 238 procurement centers made up $120.5 billion, or
66 percent, of the government's $181.8 billion in procurement awards during
fiscal year 1998. Thus, SBA did not have PCRs to review contracts that could
involve bundling being proposed by over 2,000 federal procurement centers.

SBA officials said that they assigned PCRs to procurement centers based on
dollar volume of contracts awarded at the centers and congressionally
required coverage. 12 According to SBA officials, some PCR positions cannot
be changed because these positions are assigned to the procurement centers
for specific purposes. For example, SBA was required to locate a PCR in
North Carolina where there was none because 22 federal purchasing offices
were located there.

According to SBA's Associate Administrator for Government Contracting, SBA's
downsizing effort has significantly reduced the number of PCRs through
attrition. From fiscal years 1993 to 1999, the number of PCRs declined 34
percent, from 68 to 45. SBA officials told us that, in the past, SBA had not
requested an increase in the number of PCRs because Congress had made it
clear to them that there would be no increase in staffing. SBA officials
told us that they plan to assess the number of PCRs and how they are
assigned to procurement centers to determine the optimal number and
relocation of procurement center representation. As of January 2000, SBA had
not begun its assessment. In commenting on a draft of this report, SBA
pointed out that it was determining whether it could expand its coverage of
procurement centers by converting some of its field personnel to PCRs.

SBA lacked assurance that PCRs were reviewing all proposed contracts to
identify possible bundling at procurement centers that have PCRs assigned.
In addition, agencies are required to identify and report “unnecessary
or unjustified” bundled contracts, but it is unclear whether

12 According to SBA PCR guidance, Conference Reports to the SBA Continuing
Appropriations for fiscal years 1988, 1989, 1991, 1992, and 1993, and P. L.
100- 590, Small Business Reauthorization and Amendment Act of 1998 specify
that PCR coverage is required in the following locations: Connecticut; Iowa;
Kentucky; Louisiana; Maine; Minnesota; Montana; Omaha, Nebraska; Las Vegas,
Nevada; New Hampshire; North Carolina; North Dakota; Oregon; Rhode Island;
Tennessee; West Virginia; and Clarksburg, West Virginia. Review of
Potentially

Bundled Contracts

B- 284554 Page 20 GAO/ GGD- 00- 82 Contract Bundling

the agencies are doing so. We verified that the SBA PCRs for DOE's
Albuquerque Operations and the Wright- Patterson Air Force Base had reviewed
all contracts that the agencies reported at those locations for fiscal years
1997 through 1999. However, the SBA PCR for NASA's Johnson Space Center had
not reviewed procurement actions for 1997 through 1999. Although NASA's
contract coordination form provides for the SBA PCR's signature to verify
that the PCR reviewed the contract proposal, the ones we reviewed had not
been signed. The SBA PCR, who is located in Fort Worth, TX, acknowledged
that she had not reviewed the contracts at NASA's Johnson Space Center. She
cited limited travel funds as the primary reason. She stated that she has
travel funds to visit the Johnson Space Center, in Houston, TX, for half a
day, once a year. SBA headquarters officials stated they did not know that
the PCR was not reviewing contracts at NASA's Johnson Space Center, but they
acknowledged that travel funds allowing PCRs to visit procurement centers
were extremely limited.

SBA officials recognized that agencies were required to identify
“unnecessary or unjustified” bundled contracts for SBA to
review. However, SBA had no assurance that was being done particularly at
the over 2,000 procurement centers for which SBA has no PCR assigned.

For the possible bundling cases that SBA did identify, it could not provide
the status of 42 unresolved cases. As mentioned earlier, as of January 2000,
SBA had a total of 42 unresolved cases that had been entered into its
bundling alert system entered by SBA's PCRs during fiscal years 1998 and
1999. Six of these cases were entered in fiscal year 1998 (two of which were
at least 21 months old and were not resolved as of January 2000).

SBA has offered some training to its PCRs on contract bundling, but does not
track which PCRs received the training, and has not determined how much or
what type of training is needed. Demands for PCRs' possessing contracting
skills have increased considering SBA's new requirements on contract
bundling imposed in late 1999.

SBA officials stated that PCR's responsibilities concerning contract
bundling require that they possess highly technical skills. The PCRs are to
recommend alternative procurement methods to agencies to provide prime
contract opportunities to small businesses. The strategies are to include,
under what SBA considers appropriate circumstances, such as,

ï¿½ breaking up the procurement into smaller ones, Unresolved Bundling Cases

PCR Training

B- 284554 Page 21 GAO/ GGD- 00- 82 Contract Bundling

ï¿½ breaking out discrete components as small business set- asides,

ï¿½ reserving one or more awards for small businesses in multiple award
contracts, or

ï¿½ ensuring small business participation is maximized through subcontracting
opportunities.

According to SBA's Assistant Administrator in the Office of Prime Contracts,
the only contract bundling training PCRs have received is a 20minute course
on contract bundling policy at the annual 3- day conference, which covers
updates on SBA regulation changes and on SBA's organization, held in June
1999. SBA does not maintain training or attendance records for those who
attended the conference. Consequently, SBA does not have assurance that all
of its PCRs attended the course.

The Assistant Administrator stated that while PCRs were generally
experienced contracting officers and SBA has limited training funds,
additional training would be helpful because of the technical nature of the
PCRs work and the limited training received so far.

SBA has discretion under statute to prescribe how achievement against the
governmentwide annual goal of having 23 percent of prime contract dollars
awarded to small businesses is to be measured. Based on SBA's prescribed
approach to measuring goal achievement, which we believe is within its
discretion, FPDS data indicated that federal agencies met the goal in recent
years.

Limited governmentwide data are available on the extent of contract bundling
and its effects on small businesses. Until fiscal year 2000, FPDC did not
collect information on bundled contracts, and neither SBA nor the agencies
in our review had definitively measured the extent of contract bundling or
its effect on small businesses. Our limited review of consolidated contracts
at three selected sites showed, as would be expected, that the number of
contractors and the contract dollars were generally reduced due to
consolidation, but that consolidation did not necessarily result in
bundling. SBA identified one contract bundling case of all the contract
consolidations we reviewed. In that case, a small business remained as a
prime contractor after teaming with a large contractor, but total prime
contract dollars to small businesses were significantly reduced.

SBA oversight of contract bundling is limited due, in part, to budget
limitations, according to SBA officials. SBA has not developed a strategy
Conclusions

B- 284554 Page 22 GAO/ GGD- 00- 82 Contract Bundling

that sets forth how it can most effectively achieve the results it desires
through its oversight of contract bundling. Such a strategy could take into
consideration factors such as its statutory mandate to review all proposed
bundled cases, the number of PCRs needed and their procurement center
assignments, training of PCRs needed, timely resolution of potential bundled
contract cases, and how to deal with budgeting and other constraints.

We recommend that the Administrator of SBA develop a strategy setting forth
how the agency can best achieve the results desired from oversight of
contract bundling. The strategy should take into consideration the number of
PCRs needed and their assigned procurement centers, training needed, timely
resolution of potential bundling cases, and constraints the agency faces in
implementing the strategy.

We requested comments on a draft of this report from SBA's Administrator,
the Administrator of NASA, the Secretary of Energy, and the Secretary of
Defense. On March 6, 2000, SBA's Associate Deputy Administrator for
Government Contracting and Minority Enterprise Development provided written
comments in which he said that our recommendation to improve SBA's oversight
of contract bundling was helpful. Also, he pointed out that SBA was not
required to collect data on contract bundling's effects and made several
technical comments, which we have reflected in this report, as appropriate.
On March 9, 2000, DOE's Director, Office of Economic Impact and Diversity,
wrote to us saying that the report provided insight for implementing recent
legislation. In a letter dated March 16, 2000, NASA's Associate
Administrator for Small and Disadvantaged Business Utilization said that
NASA agreed with our recommendation to SBA and pointed out that one of the
first actions taken by Administrator Golden when he arrived at NASA 8 years
ago was to require NASA centers to obtain headquarters approval before any
small business contract bundling was initiated. He also said that NASA has
focused attention on small business contracting. DOD had no comments on our
draft report.

As agreed with your office, unless you publicly announce the contents
earlier, we plan no further distribution of this report until 30 days from
its issue date. At that time, we will send copies of this report to Senator
John Kerry, Ranking Minority Member, Senate Committee on Small Business; the
Honorable Aida Alvarez, SBA's Administrator; the Honorable Daniel S. Goldin,
Administrator of NASA; the Honorable Bill Richardson, Secretary of Energy;
and the Honorable William S. Cohen, Secretary of Defense. We will make
copies available to others upon request. Recommendation to

the Administrator, SBA Agency Comments

B- 284554 Page 23 GAO/ GGD- 00- 82 Contract Bundling

Key contributors to this assignment are acknowledged in Appendix II. If you
have any questions regarding this report, please contact me on (202) 512-
8387 or Hilary Sullivan on (214) 777- 5652.

Sincerely yours, Bernard L. Ungar Director, Government Business Operations
Issues

Page 24 GAO/ GGD- 00- 82 Contract Bundling

Contents 1 Letter 26 Appendix I Objectives, Scope, and Methodology

28 Appendix II GAO Contacts and Staff Acknowledgments

Table 1: SBA's Reported Disposition of Potential Bundling Cases SBA
Identified for Fiscal Years 1998 and 1999, as of January 2000

13 Table 2: Prime Contract Awards to Small Business by

Selected Procurement Centers in Fiscal Years 1997 Through 1999

15 Table 3: Preconsolidation and Postconsolidation Prime

Contract Awards at NASA's Johnson Space Center, DOE's Albuquerque Operations
Office, and WrightPatterson Air Force Base for Fiscal Years 1997 Through
1999 (dollars in millions)

16 Table 4: Number of Small Business Subcontractors for

Each Consolidated Contract at Johnson Space Center and DOE's Albuquerque
Operations Office (dollars in millions)

18 Tables

Figure 1: Comparison of Statutory Goal to Actual Federal Achievement of
Percentage of Contract Dollars Awarded to Small Businesses for Fiscal Years
1994 Through 1998

10 Figures

Contents Page 25 GAO/ GGD- 00- 82 Contract Bundling Abbreviations

DOD Department of Defense DOE Department of Energy FPDC Federal Procurement
Data Center FPDS Federal Procurement Data System GSA General Services
Administration NASA National Aeronautics and Space Administration OFPP
Office of Federal Procurement Policy PCR Procurement Center Representatives
SBA Small Business Administration

Appendix I Objectives, Scope, and Methodology

Page 26 GAO/ GGD- 00- 82 Contract Bundling

Our objectives were to determine (1) whether the government has met the 23-
percent goal for prime contract awards to small businesses; (2) what the
federal government knows about the extent of contract bundling and its
effect on small business; and (3) the Small Business Administration's (SBA)
efforts to oversee agencies' contract bundling activities.

To meet our first objective, we interviewed staff from SBA and the Federal
Procurement Data Center (FPDC) to determine the methodology they used to
compute and report achievement of the governmentwide 23.4 percent small
business prime contract attainment in 1998. This was reported in the FPDC's
Federal Procurement Report for fiscal year 1998. We also interviewed staff
from the Small Business Advocacy Office and Eagle Eye Publishers, Inc., 1 to
determine the methodology used to estimate the percentage of contracts
awarded to small businesses.

To meet our second objective, we selected three sites: National Aeronautics
and Space Administration's (NASA) procurement center at Johnson Space Center
in Houston, TX; the Department of Energy's (DOE) procurement center at
Kirtland Air Force Base in Albuquerque, NM; and one of three Air Force
procurement centers located at Wright- Patterson Air Force Base in Dayton,
OH. 2

Of approximately 2,250 procurement centers, we first narrowed our scope to
the 34 procurement centers that awarded over $1 billion in fiscal year 1998.
Contract awards in 1998 totaled $181.8 billion governmentwide. Secondly, our
objective was to obtain a cross section of civilian and military procurement
centers. Within these top 34 centers, the DOE's Albuquerque procurement
center awarded $3. 6 billion in fiscal year 1998, or 2.0 percent of the
governmentwide total. Johnson Space Center's procurement center awarded $3.9
billion in fiscal year 1998, or 2.1 percent of the governmentwide total.
Wright- Patterson's procurement center awarded $9.1 billion, or 5.0 percent
of the governmentwide total. WrightPatterson's procurement total also
represents 7.9 percent of DOD's $115.7 billion total contract awards in
fiscal year 1998.

At each site, we reviewed data related to contracts that the agencies
identified as consolidated contracts for fiscal years 1997, 1998, and 1999.
We collected small business prime contract information before and after

1 Eagle Eye Publishers, Inc., was under contract to the Small Business
Advocacy Office to study the impacts of contract bundling on small
businesses. 2 Data were readily available for only one of the three Air
Force procurement centers located at WrightPatterson Air Force Base.

Appendix I Objectives, Scope, and Methodology

Page 27 GAO/ GGD- 00- 82 Contract Bundling

consolidation to determine how small business participation changed after
bundling. We also obtained the number of small business subcontractors
performing work after consolidation.

To meet our third objective, we interviewed SBA headquarters staff and SBA
staff and procurement center staff at each of the three sites we visited to
determine SBA's procedures for reviewing prime contract proposals. We
reviewed file documentation to determine evidence of SBA's Procurement
Center Representatives' reviews of prime contract proposals.

We performed work at SBA headquarters, the Small Business Office of
Advocacy, NASA headquarters, DOE headquarters and the DOD Office of Small
and Disadvantaged Business Utilization. We visited SBA's procurement center
representative's office in Fort Worth, TX. We also performed work at NASA's
procurement center at Johnson Space Center in Houston, TX; SBA's office and
DOE's procurement center located at Kirtland Air Force Base in Albuquerque,
NM; and SBA's office and Air Force procurement centers located at Wright-
Patterson Air Force Base in Dayton, OH.

Our fieldwork was performed between July 1999 and January 2000 in accordance
with generally accepted government auditing standards.

Appendix II GAO Contacts and Staff Acknowledgments

Page 28

Bernard L. Ungar, (202) 512- 8387 Hilary Sullivan, (214) 777- 5652 In
addition to the individuals named above, Nelsie Alcoser, David P. Marks,
Anthony D. Radford, Miguel A. Salas, and Linda Kay Willard made key
contributions to this report. GAO Contacts

Acknowledgments

Page 29 GAO/ GGD- 00- 82 Contract Bundling

Page 30 GAO/ GGD- 00- 82 Contract Bundling

Page 31 GAO/ GGD- 00- 82 Contract Bundling

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