GAO: Small Business Set-Aside Did Not Violate Bundling Restrictions

A small business set-aside procurement did not violate the FAR’s restrictions on contract bundling, according to the GAO.

In a recent bid protest decision, the GAO pointed out the bundling occurs when a procurement would be unsuitable for award to small business, and held that a set-aside procurement–by its nature–is not unsuitable for small businesses.

The GAO’s decision in Homecare Products, Inc., B-408898.2 (Mar. 12, 2014) involved a VA RFQ to establish blanket purchase agreements for the purchase, delivery, and installation of prosthetic ramps.  The VA issued the RFQ as a small business set-aside.

Homecare Products, Inc. filed a pre-award GAO bid protest.  Homecare Products argued, in part, that the VA improperly bundled its acquisition for prosthetic ramps and ramp installation services without justifying the necessity to combine the requirements, and without providing “proper notice” of the consolidation to the SBA.

The GAO wrote that under the Small Business Act, agencies must “to the maximum extent possible . . . avoid unnecessary and unjustified bundling of contract requirements that precludes small business participation in procurements as prime contractors.”  Bundling, as defined in the Small Business Act and the FAR, is “consolidating  or more requirements for goods or services previously provided or 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 concern.”

Analyzing these statutory and regulatory requirements, the GAO wrote, “a necessary predicate for the application of the Small Business Act’s anti-bundling provisions is the issuance of a solicitation that effectively ‘precludes small business participation’ or one that is unsuitable for award to small businesses.”  The GAO continued, “[h]ere, however, the solicitation has been issued as a total small business set-aside and small business firms, such as the protester, will be competing for the BPAs. As a result, there is no possible violation of the Small Business Act’s restrictions on bundling.”  The GAO denied the protest.

As I pointed out in a previous post, the FAR’s anti-bundling rules are often misunderstood.  Contrary to a common misconception, improper bundling does not occur any time an agency consolidates requirements.  Rather, bundling only occurs if the consolidated procurement is unlikely to be suitable for small businesses.  Where, as in the Homecare Products case, the consolidated contract is a small business set-aside, the consolidated contract is suitable for small businesses, and the bundling rules are not violated.

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