Senator Collins Discusses DOD Contracting Amendment (cont.)

Ms. COLLINS. Mr. President, our amendment addresses a practice known as "contract bundling," which has become increasingly prevalent in recent years. An October 2002 report for the Small Business Administration that measured the trends and impact of bundling over the last decade concluded that: the number and size of bundled contracts issued by federal agencies has reached record levels; small businesses are receiving disproportionately small shares of the work on bundled contracts; although only 8.6 percent of contracts were bundled, bundled contracts accounted for 44.5 percent of the money spent through contracts from 1992-2001; large firms won 67 percent of all prime contract dollars and 75 percent of bundled contract dollars; and small firms won only 18 percent of prime contract dollars and 13 percent of bundled contract dollars.

Moreover, the problem is getting worse. In 2001, 29,000 contracts were bundled government-wide, up eight percent from 2000 and 19 percent since 1992.

Our amendment would require that DOD perform rigorous analysis on bundled contracts in excess of $5 million. It would require that alternatives be considered and that a determination be made that the benefits of bundling "substantially exceed" the benefits of the identified alternatives. Savings in administrative or personnel costs alone would not constitute a sufficient justification for consolidation "unless the total amount of the cost savings is found to be substantial in relation to the total cost of the procurement."

Our amendment focuses on DOD where, the SBA report notes, "Bundling is rooted." Although bundling rates occur at levels as high or higher at the General Services Administration, Department of Health and Human Services, Social Security Administration, and Treasury, "the high level of spending by the Army, Navy, Air Force and the Office of the Defense Secretary focus attention on defense contracts as the primary source of bundling."

This amendment is about more than just allowing small businesses to compete for contracts on a level playing field; it is about preserving our government's contractor base.

According to Office of Federal Procurement Policy Administrator Angela Styles the issue is a dramatically reduced contractor base, which has created a lost opportunity cost caused by choosing among fewer firms with fewer ideas and innovations to deliver products and services at lower prices.

Further, she notes that when small businesses are excluded from federal opportunities through contract bundling everyone, including our agencies, small businesses, and the taxpayers lose.

Our amendment sets in place a higher level of scrutiny than exists under current law and will be a good start in beginning to reverse a problem that has been building up over the last decade. For that reason, small business advocates such as the National Federation of Independent Business and the National Black Chamber of Commerce support it.

This amendment will make a real difference for small business. One small business owner wrote to me in support of my amendment because, she said, bundling had made contracts of the size they could hope to obtain disappear. She had, she wrote, been knocking on the doors at the Department of Defense for years, without any success due to bundling.

Another small business owner wrote to me that bundling had essentially created a monopoly in his line of business. Even small businesses that have a federal preference in contracting under various programs have seen the beneficial effects of the preferences all but wiped out due to bundling. One woman business owner pointed out in a letter to me what bundling truly is: a shield that keeps large companies from having to compete with smaller firms.

Such a state of affairs is ultimately unhealthy for a federal procurement system that relies primarily upon vigorous competition to keep prices low and the quality of goods and services high.

I am pleased that our amendment has received the support of the distinguished chairman and ranking member, and that it will become part of the defense bill the Senate passes today or tomorrow.