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Project on Government Oversight

POGO's public comment supporting DoD's rule prohibiting contract bundling

Defense Acquisition Regulations Council
Attn: Ms. Donna Hairston-Benford
OUSD (AT&L) DPAP (DAR), IMD 3C132
3062 Defense Pentagon
Washington, D.C. 20301-3062

Via e-mail: dfars@osd.mil
Hard copy to follow

Subject: DFARS Case 2003-D109

Dear Ms. Donna Hairston-Benford:

The Project On Government Oversight ("POGO") provides the following public comment to DFARS Case 2003-D109 – "Defense Federal Acquisition Regulation Supplement; Consolidation of Contract Requirements." POGO investigates, exposes, and seeks to remedy systemic abuses of power, mismanagement, and subservience by the federal government to powerful special interests. POGO supports the interim rule, but it avers that it is only the first step in eliminating the problems caused by contract bundling. This practice dramatically reduces competition and transparency in government contracting.

The interim rule amends the DFARS to implement Section 801 of the National Defense Authorization Act for FY 2004. Section 801 adds 10 U.S.C. § 2382, which restricts contract bundling. It provides that the Department of Defense (DoD) may not "execute an acquisition strategy that includes a consolidation of contract requirements with a total value exceeding $5,000,000, unless the senior procurement executive concerned conducts market research, identifies any alternative contracting approaches that would involve a lesser degree of consolidation, and determines that the consolidation is necessary and justified." Defense Federal Acquisition Regulation Supplement; Consolidation of Contract Requirements, 69 Fed. Reg. 55,987 (2004) (to be codified at 48 C.F.R. pts. 207 and 219). In other words, the interim rule governs the bundling of two or more separate contracts, but does not restrict contracts that were bundled from their inception.

The rules' restrictions are a positive step in preventing the government from bundling contract requirements that previously had been in separate and distinct contracts. The $5,000,000 threshold will allow more businesses to compete, including those which normally would be unable to compete because of the high total cost of and/or the multiple requirements included in the bundled contract.

Additionally, the requirement that a senior procurement executive determines that a bundled contract is "necessary and justified" provides a disincentive to contracting officers who bundle separate and distinct requirements. Oversight of contract bundling is essential because competition may be eliminated – especially competition involving small businesses.

POGO asserts, however, that the interim rule will have little effect on bundling as an accepted government contracting practice. Contract bundling is often espoused with favor by "acquisition reformers," because they believe it spurs contract administration efficiency. Moreover, large businesses favor contract bundling because such contracts can often be performed only by larger firms, and they tend to reduce competition by cutting smaller contractors out of the bidding pool.

The interim rule will not restrict contract bundling for goods or services that had not been previously provided to the government under separate contracts. Simply stated, previously bundled contracts, no matter the value, will not be debundled or determined that the consolidation is "necessary and justified." For example, the interim rule will not debundle Iraq reconstruction contracts for separate and distinct services that should have been segregated and opened for competitive bidding from both small and large contractors. Therefore, DoD should review the high levels of contract bundling that already exists, totaling billions of dollars with little competition.

In those instances, POGO recommends that they are debundled or that senior procurement executives determine that the bundling is "necessary and justified" for contracts totaling $50,000,000 or more. Those actions will protect businesses that are forced out of the competitive process because there is no logical fiscal or performance-based means for them to invest or perform on such large contracts.

In summary, POGO supports the interim rule, but would like it to govern contract bundling as an overall contracting practice.

Sincerely,

Scott H. Amey
General Counsel
Project On Government Oversight
(202) 347-1122
scott@pogo.org
pogoarchive.pub30.convio.net  

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