[House Report 106-858]
[From the U.S. Government Publishing Office]
106th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 106-858
======================================================================
SMALL BUSINESS COMPETITION PRESERVATION ACT OF 2000
_______
September 18, 2000.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Talent, from the Committee on Small Business, submitted the
following
R E P O R T
[To accompany H.R. 4945]
[Including cost estimate of the Congressional Budget Office]
The Committee on Small Business, to whom was referred the
bill (H.R. 4945) to amend the Small Business Act to strengthen
existing protections for small business participation in the
Federal procurement contracting process, and for other
purposes, having considered the same, report favorably thereon
without amendment and recommend that the bill do pass.
Purpose
The purpose of H.R. 4945, the ``Small Business Competition
Preservation Act of 2000,'' is to ensure that the United States
Small Business Administration (SBA) and Congress have
sufficient information concerning the impact of contract
consolidation on small business participation in the federal
procurement process. Access to adequate data is necessary so
that federal agencies can determine whether they should adjust
their procurement strategies in order to meet the small
business participation goals set forth in section 15 of the
Small Business Act,
The bill mandates that the Administrator of the SBA develop
a database of bundled contracts. The Administrator is then
required to assess whether contracts whose terms have expired
but will be recompeted as part of bundled contracts have
achieved the savings or improvements in quality that the
procuring agency anticipated when it consolidated the contract
requirements initially. This analysis also will be used by the
Administrator in determining the number of small businesses
that have been displaced as prime contractors as a result of
contract bundling. All of this information will be reported on
an annual basis to the House and Senate Small Business
Committees.
Need for Legislation
Contract bundling is one of the most important issues
facing small business today. The federal government spends
nearly 200 billion dollars a year procuring goods and services.
Although Congress has made it a goal for federal agencies to
spend at least 20 percent of their procurement dollars with
small businesses, the federal government has not met that
objective. Federal government procurement policies apparently
place a greater premium on efficiency and the reduction of
workload for contracting officers than the goals of a diverse,
competitive industrial base. The ultimate losers will be the
American taxpayer who will face the long-term prospect of
procuring lower quality goods and services at higher prices.
Bundling of contracts is performed by all federal agencies
but one agency, the Department of Defense, stands out as the
agency with the most adverse impact on small business
participation as prime contractors. To the extent that the
Department actually achieves substantial cost savings or
significant improvements in the quality of goods and services
procured, bundling is at least defensible. However, the
Committee has examined a number of contracts and has not found
supportable justifications for these contracts.
For example, the Department of Defense issued a contract
for the provision of telecommunication services to the three
largest long-distance carriers in the United States who would
provide, on a competitively-bid task order arrangement,
interstate interexchange (long-distance) circuits for the
transmission of voice and data between various Department
installations. Ostensibly, the limitation on the number of
firms eligible to bid was necessitated by security concerns.
However, an examination of the task order requests reveals that
the need for security was not an issue in many of the task
orders. Thus, the Department, at substantial expense to the
taxpayers (competition under the prior system was significantly
greater resulting in substantially lower prices for
telecommunication services), bundled a contract without any
clear need to do so.
The Committee also examined the consolidation of Marine
Corps mess hall services. The Department of Navy currently
provides mess hall services on a base-by-base contract. Many
current providers are small businesses. Despite evidence that
demonstrates improvements in quality of both the food and the
service, the Department of Navy decided to consolidate these
mess hall contracts into two large regions utilizing central
kitchen preparation techniques known as ``cook and chill.'' The
Department of Navy has not been able to justify that the
contract will save money or provide higher quality meals to
Marine Corps personnel.
Numerous other examples of bundling exist both at the
Department of Defense and with other government agencies. At a
Committee hearing on the Department of Defense's bundling
policies, the Principal Deputy Under Secretary for Acquisition,
Mr. David Oliver, promised that he would commission a study of
the effects of bundling on small business. Some months later,
Mr. Oliver admitted that the Department lacked the data needed
to conduct an appropriate study of bundling.
The absence of data on bundling also affects the
Administrator's ability to implement the Small Business
Reauthorization Act of 1997. That legislation required federal
agencies not to bundle contracts unless the procuring agency
could demonstrate that the bundle would result in measurably
substantial benefits, such as cost savings, quality
improvements, reduction in acquisition cycle times, or better
terms and conditions. The procuring agency then must identify
those benefits to be derived from contract bundling and that
the anticipated benefits of the proposed bundled contract
justify the use of bundling. Should the Administrator of the
SBA disagree with the conclusions of the procuring agency, the
Administrator is entitled to file an appeal contesting the
procuring agency's bundle to the head of the agency. The
Administrator has never won such an appeal. The bill would
require the Administrator to perform its own assessment of
these measurably substantial benefits on any bundled contract
which will be recompeted as a bundled contract. In addition,
the Administrator will be required to determine the number of
small businesses that will be displaced as prime contractors as
a result of contract bundling.
The need for this legislation is great. Federal agencies
contend that contract bundling saves taxpayers money while
improving the quality of goods and services provided to the
government. None of this has been substantiated. The database,
analyses and reports to Congress in this bill will ensure that
adequate data exists concerning the benefits and costs of
contract bundling. This will enable federal agencies to
reconfigure their procurement strategies to meet statutory
goals for small business participation. Furthermore, Congress
will have information needed to modify federal procurement
legislation if agencies are bundling without obtaining
concomitant benefits.
Committee Action
The Committee on Small Business held no separate hearings
on H.R. 4945. During the 106th Congress, the committee held the
following hearings on contract bundling: (1) the Department of
Defense's Contract Bundling Policy (Nov. 4, 1999); and (2)
Contract Bundling and Federal Procurement Problems Facing Small
Businesses (Aug. 4, 1999). Both hearings provided substantial
anecdotal evidence concerning the adverse impact of contract
bundling on the ability of small businesses to maintain their
status as prime contractors. The hearings also revealed the
absence of adequate data within the government on contract
bundling.
Consideration of H.R. 4945
At 11:30 a.m. on July 27, 2000, the Committee on Business
met to consider and report H.R. 4945. Following brief opening
statements by the Chairman and Ranking Democratic Member, the
Chairman declared the bill open for amendment.
No amendments were offered. Chairman Talent then moved the
bill be reported, and at 11:50 a.m., by unanimous voice vote, a
quorum being present, the Committee passed H.R. 4945 and
ordered it reported.
Section-by-Section Analysis
Section 1. Short title
Designate the bill as the ``Small Business Competition
Preservation Act of 2000.''
Section 2. Database, analysis, and annual report with respect to
bundled contracts
This section amends section 15 of the Small Business Act by
adding a new subsection (p) to establish the requirements for
maintenance of a contract bundling database, analysis of
bundled contracts, and reporting requirements to the House and
Senate Small Business Committees.
Paragraph (1) defines the term bundled contract. In the
Small Business Reauthorization Act of 1997, the term ``bundled
contract'' was defined as a contract that consolidated existing
contract requirements. It is unclear whether this definition
includes new contract requirements that permit bundling
although the Committee believes that the definition should be
that inclusive. Furthermore, the regulations promulgated by the
Administrator of the United States Small Business
Administration implementing the Small Business Reauthorization
Act of 1997 inappropriately exclude contracts for which a
procuring agency performed an analysis mandated by Circular A-
76 issued by the Office of Management and Budget (``OMB'').
Paragraph (1) would clarify the definition of ``bundled
contract'' for purposes of the maintenance of the database and
analysis performed under this new subsection of section 15 of
the Small Business Act.
Paragraph (1) amends the definition of contract bundle as
set forth in section 3(o) of the Small Business Act by
including contracts for which an agency performed a study of
the effects of the contract on civilian or military personnel.
The definition broadens the scope of the database maintained by
the Administrator to include contracts for which an agency has
performed an analysis pursuant to OMB Circular A-76. The
modification does not have any legal effect on the definition
of bundled contract in section 3(o) of the Small Business Act.
Paragraph (1) also modifies the definition of contract
bundling, for purposes of this subsection, by including any new
contract requirements that permit the consolidation of 2 or
more procurement requirements. This ensures that the
Administrator's database will include all bundled contracts
irrespective of whether the bundled contract constitutes a new
requirement.
Paragraph (2) mandates that the Administrator establish a
database no later than 180 days after the effective date of the
statute. The database will contain information on each bundled
contract awarded by a federal agency as defined in paragraph
(1) and the number of small businesses that used to provide
services as prime contractors but are no longer doing so as a
result of the bundled contract. The Committee expects that the
Administrator will receive data from its Procurement Center
Representatives as well as the Directors of the Office of Small
and Disadvantaged Business Utilization. Furthermore, the
Committee expects that the Administrator will construct this
database with already existing funds and does not believe that
a separate authorization or appropriation is needed to maintain
this database because maintenance of the database constitutes a
vital adjunct to the Administrator's responsibilities under
subsection (a) of section 15.
Paragraph (3) requires that the Administrator analyze
bundled contracts that are recompeted as bundles when their
initial terms expire. The Committee expects that the
Administrator will use the database of bundled contracts
established in paragraph (2) to determine which contracts need
to be analyzed pursuant to this paragraph. However, if a
recompeted bundle somehow is not included in the database
established pursuant to paragraph (2), the Committee expects
that the Administrator will undertake the analysis mandated by
this paragraph.
For each contract recompeted as a bundled contract, the
Administrator will be required to calculate the amount of
savings and benefits from the bundled contract. The
Administrator also will be required to estimate whether the
savings and benefits will continue and whether such savings and
benefits would be greater if the contract was divided into
separate solicitations more suitable for award to small
businesses. The Committee expects that the Administrator will
utilize this analysis in pursuing any appeal of a bundled
contract as set forth in subsection (a) of section 15.
Paragraph (4) requires the Administrator to file an annual
report on contract bundling with the House and Senate Small
Business Committees. The report is required to contain data on
the number of small businesses displaced as prime contractors
as a result of contract bundling sorted by industrial
classification. The Committee expects that the report will
utilize the new North American Industrial Classification rather
than the old Standard Industrial Classification.
The report also shall contain a description of the bundling
activity for each federal agency during the preceding fiscal
year including the number of contracts bundled, the total
dollar value of the bundled contracts, the justification for
each bundled contract, the cost savings realized by the
contract, the Administrator's estimate of the whether the
savings will continue for any recompeted bundled contract, the
extent to which the bundled contract complied with agency's
subcontracting plan, the total dollar value awarded to small
business subcontractors, the total dollar value previously
awarded to small business prime contractors prior to the
bundling of the contract, the impact that bundling has on the
ability of small business to compete as prime contractors, and
the effect that has on the industry, including the decretion of
small businesses in the particular industrial classification.
The Committee expects that the reports will use the new
industrial classification system. Further, the Committee
intends that the Administrator translate existing Standard
Industrial Classifications to the new system when submitting
its reports with the House and Senate.
U.S. Congress,
Congressional Budget Office,
Washington, DC, September 8, 2000.
Hon. James M. Talent,
Chairman, Committee on Small Business,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4945, the Small
Business Competition Preservation Act of 2000.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is John R.
Righter.
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
H.R. 4945--Small Business Competition Preservation Act of 2000
H.R. 4945 would amend the Small Business Act to require the
Small Business Administration (SBA) to study and report each
year on the effect on small businesses of federal agencies
combining, or bundling, together multiple contracts into a
single procurement contract. Specifically, SBA would report on
the number and type of small businesses that were displaced as
prime contractors as a result of implementing such larger,
combined contracts and the number and total dollar amount of
such contracts. In addition, for each bundled contract, the
report would include the agency's justification for combining
the contracts, whether the combined contract was consistent
with the agency's small business subcontracting plan, any
estimated savings for combining contracts, and the extent to
which SBA expects such savings would continue.
The annual cost of implementing H.R. 4945 is uncertain
because no data exist about the number of contracts that
agencies bundle together each year. Agencies, however, are
already required to produce much of the information that SBA
would collect under H.R. 4945 for all of their contracts. In
addition, agencies are beginning to submit some of that data to
the Federal Procurement Data System, a database of procurement
actions that is maintained by the General Services
Administration. CBO estimates that implementing H.R. 4945 would
cost SBA less than $500,000 a year, subject to the availability
of appropriated funds, to develop and maintain such a database,
as well as report annually to the Congress.
In addition to SBA's costs, implementing the bill would
increase costs for federal agencies to estimate the accumulated
costs of savings each year for each bundled contract. Because
we expect agencies would base such estimates on the market
research they already perform under current law, CBO estimates
that the annual increase in costs for other agencies would also
be less than $500,000 subject to the availability of
appropriated funds. In total, CBO estimates that implementing
H.R. 4945 would cost around $500,000 a year.
Because the bill would not affect direct spending or
receipts, pay-as-you-go procedures would not apply. H.R. 4945
contains no intergovernmental or private-sector mandates as
defined in the Unfunded Mandates Reform Act and would not
affect state, local, or tribal governments.
The CBO staff contact is John R. Righter. This estimate was
approved by Peter H. Fontaine, Deputy Assistant Director for
Budget Analysis.
Committee Estimate of Costs
Pursuant to the Congressional Budget Act of 1974, the
Committee estimates that the amendments to the Small Business
Act contained in H.R. 4945 will not significantly increase
discretionary spending over the next five fiscal years. The
Committee also estimates that H.R. 4945 will not affect direct
spending. These estimates concur with Congressional Budget
Office (CBO) estimates.
Furthermore, pursuant to clause 3(d)(2)(A) of rule XIII of
the Rules of the House of Representatives, the Committee
estimates that implementation of H.R. 4945 will not
significantly increase other administrative costs.
Oversight Findings
In accordance with clause 4(c)(2) of rule X of the Rules of
the House of Representatives, the Committee states that no
oversight findings or recommendations have been made by the
Committee on Government Reform with respect to the subject
matter contained in H.R. 4945.
In accordance with clause (2)(b)(1) of rule X of the Rules
of the House of Representatives, the oversight findings and
recommendations of the Committee on Small Business with respect
to the subject matter contained in H.R. 4945 are incorporated
into the descriptive portions of this report.
Statement of Constitutional Authority
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in Article I, Section 8, clause 18, of the
Constitution of the United States.
Compliance with P.L. 104-4
H.R. 4945 contains no unfunded mandates.
Congressional Accountability Act
H.R. 4945 does not relate to the terms and conditions of
employment or access to public services or accommodations
within the meaning of section 102(b)(3) of P.L. 104-1.
Federal Advisory Committee Statement
This legislation does not establish or authorize the
establishment of any new advisory committees.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
SECTION 15 OF THE SMALL BUSINESS ACT
Sec. 15. (a) * * *
* * * * * * *
(p) Database, Analysis, and Annual Report With Respect to
Bundled Contracts.--
(1) Bundled contract defined.--In this subsection,
the term ``bundled contract'' includes--
(A) each contract that meets the definition
set forth in section 3(o) regardless of whether
the contracting agency has conducted a study of
the effects of the solicitation for the
contract on civilian or military personnel of
the United States; and
(B) each new procurement requirement that
permits the consolidation of 2 or more
procurement requirements.
(2) Database.--
(A) In general.--Not later than 180 days
after the date of enactment of this subsection,
the Administrator of the Small Business
Administration shall develop and shall
thereafter maintain a database containing data
and information regarding--
(i) each bundled contract awarded by
a Federal agency; and
(ii) each small business concern that
has been displaced as a prime
contractor as a result of the award of
such a contract.
(3) Analysis.--For each bundled contract that is to
be recompeted as a bundled contract, the Administrator
shall determine--
(A) the amount of savings and benefits (in
accordance with subsection (e)) achieved under
the bundling of contract requirements; and
(B) whether such savings and benefits will
continue to be realized if the contract remains
bundled, and whether such savings and benefits
would be greater if the procurement
requirements were divided into separate
solicitations suitable for award to small
business concerns.
(4) Annual report on contract bundling.--
(A) In general.--Not later than 1 year after
the date of enactment of this paragraph, and
annually in March thereafter, the
Administration shall transmit a report on
contract bundling to the Committees on Small
Business of the House of Representatives and
the Senate.
(B) Contents.--Each report transmitted under
subparagraph (A) shall include--
(i) data on the number, arranged by
industrial classification, of small
business concerns displaced as prime
contractors as a result of the award of
bundled contracts by Federal agencies;
and
(ii) a description of the activities
with respect to previously bundled
contracts of each Federal agency during
the preceding year, including--
(I) data on the number and
total dollar amount of all
contract requirements that were
bundled; and
(II) with respect to each
bundled contract, data or
information on--
(aa) the
justification for the
bundling of contract
requirements;
(bb) the cost savings
realized by bundling
the contract
requirements over the
life of the contract;
(cc) the extent to
which maintaining the
bundled status of
contract requirements
is projected to result
in continued cost
savings;
(dd) the extent to
which the bundling of
contract requirements
complied with the
contracting agency's
small business
subcontracting plan,
including the total
dollar value awarded to
small business concerns
as subcontractors and
the total dollar value
previously awarded to
small business concerns
as prime contractors;
and
(ee) the impact of
the bundling of
contract requirements
on small business
concerns unable to
compete as prime
contractors for the
consolidated
requirements and on the
industries of such
small business
concerns, including a
description of any
changes to the
proportion of any such
industry that is
composed of small
business concerns.