GAO Disagrees with SBA: Consolidation Analysis Not Required for BPAs

No, the government isn’t trying to figure out how it can bundle home and auto coverage to save on its insurance premiums. Instead, “consolidation” in the federal government contract context refers to the action of collecting requirements being performed under discrete small business set-aside contracts into a single procurement. Before an agency may consolidate contracts, it must consider the impacts the proposed consolidation will have on small business participation. Recently, however, GAO was asked to determine whether consolidation analyses are required for Blanket Purchase Order (“BPA”) procurements, and its decision did not adopt the SBA’s position.

Coast to Coast Computer Products, Inc., B-417500 et al.(Comp. Gen. July 29, 2019), involved a General Services Administration (“GSA”) procurement for information technology equipment, software, and associated services. Competition was restricted to holders of GSA Schedule 70 contract holders.

The procurement was structured as a BPA, which GSA referred to as the “second generation information technology (“2GIT”)” BPA. The goal of the 2GIT BPA was to provide a “one-stop-shop in the Information Technology market to meet the needs of the Air Force, Department of Defense (DOD) agencies, and other federal, state, local, regional, and tribal governments.” Given the broad scope of services GSA sought, the 2GIT procurement was not set-aside for small businesses. Instead, small business participation was incorporated as an evaluation factor, and individual orders could be set-aside exclusively for small businesses. The estimated value of the BPAs was $5.5 billion.

As a prospective small business offeror, Coast to Coast filed a protest challenging the terms of the 2GIT BPA solicitation. Among other things, Coast to Coast alleged that the GSA had improperly consolidated contracts without first determining the impact on small businesses.

As alluded to above, bundling is technically defined as “consolidating 2 or more procurement requirements for goods or services previously 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.” 15 U.S.C. § 632(o). While consolidation means “[the] use of a solicitation to obtain offers for a single contract or a multiple award contract . . . to satisfy 2 or more requirements of the Federal agency for goods or services that have been provided to or performed for the Federal agency under 2 or more separate contracts lower in cost than the total cost of the contract for which the offers are solicited[.]” 15 U.S.C. § 657q(a)(2).

Those are pretty wordy definitions. Stated more succinctly, consolidation is the action of consolidating two or more individual procurement into a single procurement that may make it hard for small businesses to compete for the procurement. While related, consolidation is sightly different from another procurement integration action, “bundling.”

The concern with consolidation is that it will freeze small business contractors out of federal contracting opportunities because it will both reduce the number of awardees and require the awardee to have greater qualifications than small businesses may otherwise be able to muster. To address this issue, before a procurement exceeding $2 million may be consolidated, the contracting agency must first conduct market research to evaluate the impact on small businesses and investigate potential alternatives to consolidation. 15 U.S.C. § 657q(c)(1). Even if consolidation is found to be necessary, the acquisition strategy must still find ways to incorporate small business participation.

It was undisputed that GSA did not conduct any type of consolidation analysis before issuing the BPA solicitation. Despite this, GSA defended the structure of its procurement by arguing that a subtle technicality built into the wording of the consolidation statute exempted this procurement from the consolidation analysis. Specifically, GSA argued that because the consolidation statutes referred to contracts, it was not required to conduct a consolidation analysis because, as a legal matter, a BPA is not a “contract.”

As resolution of the protest would impact small businesses, GAO solicited the input of the SBA before issuing its decision. The SBA responded that it supported the position advanced by Coast to Coast that GSA’s failure to conduct any type of consolidation analysis was improper. GAO summarized the SBA’s position as follows:

[T]he Small Business Administration (SBA) echoes the protester’s arguments, stating that the BPA improperly consolidates orders for which many schedule 70 contract holders would be able to compete, and that the proposed strategy “subverts congressionally mandated competition by setting aside $5.5 billion in IT orders for nine other-than-small business[es] and teams that receive spots on the BPA.”

Despite receiving support from the SBA, Coast to Coast failed to convince GAO that GSA failed to conduct a consolidation analysis. The basis for GAO was the same as that advanced by the agency. As GAO explained, “Our review of applicable statutory and regulatory authority reveals that a consolidation analysis is not required prior to establishment of a BPA—which is not a contract, according to the SBA’s definition of a contract—but rather, that the required consolidation analysis is to be performed at the task order level.” While GAO acknowledged this may be administratively burdensome, it nevertheless concluded that BPAs are not subject to consolidation requirements.

GAO’s decision in Coast to Coastwas a matter of first impression, which is to say that GAO had not previously considered the question of how BPAs would impact consolidation analyses. Now, GAO has spoken, and its decision paves the way for agencies to consolidate more services under BPAs without needing to conduct a consolidation analysis.