A subset of contract  consolidation is contract bundling. Further, the four  agencies reported only a total of 24 bundled contracts—far fewer than the  928 contracts reported as bundled in FPDS. For example, about  33 percent of FPDS-coded bundled contract actions were also shown as  being awarded to small businesses. By definition, a small business is  essentially precluded from being awarded a bundled contract. According  to OSDBU officials at the Departments of Defense (DOD), Veterans  Affairs, Interior, Health and Human Services, and Transportation—the five  agencies with the largest number of FPDS-reported bundled actions in  fiscal year 2002—the inaccuracies in FPDS were coding errors made as  the result of confusion about the statutory definition of contract bundling,  inadequate verification of data, and ineffective controls in the FPDS  reporting process. DOD  similarly had its military departments and defense agencies review the  109 contracts originally identified as bundled, and they determined that  only 8 out of the 109 contracts met the statutory definition of a bundled  contract. Effect of Regulatory Changes on Small Business Contracting Opportunities Will Be Difficult to Gauge, Although Certain Changes May Yield Increases

According to OFPP, the primary goal of its strategy—and the recent FAR  changes—is to increase small business federal contracting opportunities. However, it will be difficult to determine whether any increases in small  business opportunities are the result of the recent regulatory changes or  other factors, such as continuing agency efforts. While some aspects of the  changes have the potential to help achieve desired goals, the new  regulations do not provide for metrics to measure agency accountability  for improving small business participation in federal procurement. Further, SBA has yet to disseminate best  practices to agencies—an action item in OFPP’s strategy. The other three agencies also have a history of efforts to address contract  bundling and increase small business contracting opportunities. Finally, the recent regulations relate primarily to contract bundling—an  activity most agencies report they do not engage in. However, because 16 of the 23 agencies  held accountable by the OFPP strategy reported that they had no bundled  contracts in fiscal year 2002 and the bundling that was reported was  limited, it is unclear to what extent the regulations will help increase small  business contracting opportunities at these agencies. For example, the FAR  now requires OSDBUs to conduct periodic reviews to assess (1) the extent  to which small businesses are receiving their fair share of federal  procurements under the Small Business Act, (2) the adequacy of contract  bundling documentation and justification, and (3) the actions taken to  mitigate the effects of necessary and justified bundling on small  businesses. Despite  our findings, the new contract bundling regulatory changes do not  establish metrics or identify the information needed to determine the  extent to which agencies bundle contracts and measure the impact of  bundling on small businesses—a weakness exacerbated by the fact that  past data on bundling has been limited and unreliable. Recommendations for Executive Action

We are recommending that the Director, Office of Management and  Budget,    ensure that planned FPDS reliability improvements include accurate  agency reporting to provide uniform and reliable contract bundling  information and    direct the Administrator, OFPP, to establish metrics to measure  contract bundling and the extent to which contract bundling impacts  contracting opportunities for small businesses. Appendix I: Status of Nine Action Items Contained in OFPP’s Report

In October 2002 in response to the President’s tasking to develop a  strategy to hold agencies accountable for contract bundling practices, the  Office of Federal Procurement Policy (OFPP) issued “Contract  Bundling: A Strategy for Increasing Federal Contracting Opportunities  for Small Business.” The status of the strategy’s nine action items, as of  February 25, 2004, is presented below. Reliability Federal Procurement Data.
Why GAO Did This Study

To achieve efficiencies and respond to procurement reforms, agencies have consolidated their procurement contracts--that is, combined existing smaller contracts into fewer larger contracts. To ensure contract bundling--a subset of contract consolidation--does not unfairly disadvantage small businesses, the President tasked the Office of Management and Budget (OMB) to develop a strategy that would hold agencies accountable for contract bundling practices. In October 2002, the Office of Federal Procurement Policy (OFPP) within OMB issued its strategy. This report discusses the extent to which contracts were bundled in fiscal year 2002 and assesses the potential effectiveness of regulatory changes that have recently resulted from OFPP's strategy.

What GAO Found

In contrast to data captured in the Federal Procurement Data System (FPDS), only 4 of the 23 agencies held accountable by OFPP's strategy reported a total of 24 bundled contracts in fiscal year 2002--far fewer than the 928 contracts identified as bundled in FPDS. Agency officials, after researching their contracts, determined that the bundling data in FPDS were miscoded due to confusion about the statutory definition of contract bundling, inadequate verification of information, and ineffective controls in the FPDS reporting process. For example, about 33 percent of FPDS contract actions identified as bundled were miscoded, because they were awarded to small businesses. By definition, a small business is essentially precluded from being awarded a bundled contract. The Department of Defense, which reported the second largest number of bundled contracts, determined that only 8 of the 109 contracts identified as bundled in FPDS met the statutory definition of a bundled contract. Although the actual number of bundled contracts reported by agencies is small, concerns about the effect of contract bundling on small businesses remain. According to OFPP, the primary goal of its strategy--and the resulting regulatory changes--is to increase small business federal contracting opportunities. Because new regulations have only recently been established, it is too early to determine whether agencies are achieving this goal. In addition, part of OFPP's strategy--to identify and disseminate best practices for maximizing small business contract opportunities--has not been implemented. Yet even with time and guidance, it could be difficult to assess the effect of the recent regulations, in part because any increases in small business contracting opportunities could be attributed to other factors. For example, the largest procuring agencies have a history of seeking opportunities to increase small business contracting, and according to the General Services Administration, nearly 80 percent of Federal Supply Schedule contracts are awarded to small businesses. Further, because the regulations primarily relate to contract bundling--an activity most agencies report they do not engage in--the regulations may have little impact on increasing small business contracting opportunities. Nevertheless, certain regulatory changes--especially those related to oversight--have the potential to promote greater small business opportunities. For example, the new regulations require agencies to annually assess the extent to which small businesses receive a fair share of federal procurements, the adequacy of contract bundling documentation and justifications, and actions taken to mitigate the effects on small businesses of necessary and justified contract bundling. However, the new regulations do not establish metrics to measure agency accountability, and past data on bundling and its effects on small businesses have been limited and unreliable. Without metrics and reliable data, it will be difficult to gauge agency efforts to identify and eliminate contracts that are unnecessarily bundled.