Contract Bundling: Consolidation of Large Business Requirements Doesn’t Qualify

“Bundling” under the FAR is often misunderstood.  One common misconception is that any time an agency consolidates requirements from multiple contracts into a single contract unsuitable for small businesses, the consolidation is impermissible “bundling” unless the consolidated contract cannot be broken down into smaller requirements.

Unfortunately for small businesses, the FAR’s definition of bundling is not so broad.  For example, as demonstrated in a recent GAO bid protest decision, a consolidation of requirements being performed by large businesses likely will not qualify as impermissible bundling.

The GAO’s bid protest decision in Star Food Service, Inc., B-408535 (Nov. 1, 2013) involved a Defense Logistics Agency procurement for chicken parts.  For 20 years, the DLA had obtained chicken parts through its Prime Vendor program, under which regionally-based prime contractors were responsible for obtaining the chicken parts from suppliers.  However, in the solicitation, the DLA announced its intent to enter into contracts directly with the chicken suppliers themselves.

The DLA broke its procurement into two parts.  The first part, for chicken wings, was set-aside for small businesses.  The second part, for various other chicken parts, was issued as unrestricted.

Star Food Service Inc. filed a GAO bid protest challenging the unrestricted designation.  Star argued, in part, that because the solicitation combined requirements being performed by several prime vendors, the result was impermissible bundling under the FAR.

The GAO noted that under the Small Business Act, and its implementing FAR provisions, bundling means “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.”  Importantly, though, the definition of “separate smaller contract” is “a contract that has been performed by 1 or more small business concerns or was suitable for award to 1 or more small business concerns.”

In Star’s case, this definition proved fatal to its protest.  The GAO wrote that “[t]he prior contracts relevant to this analysis are the prime vendor contracts, which Star acknowledges are being performed by large businesses.”  Although Star had established that chicken parts had been provided to the prime vendors by small contractors, “Star has not established that the prime vendor contracts were suitable for award to 1 or more small businesses.”  The GAO denied this aspect of Star’s protest, and denied or dismissed Star’s remaining allegations.

The Star Food Service GAO bid protest demonstrates that in order to qualify as impermissible bundling, the agency usually must have consolidated requirements being performed by small businesses.  If the work in question is being performed by large companies, it may be an uphill battle for a small contractor to show that bundling occurred.

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