A Senate bill approved last week would lower the dollar threshold whereby the Pentagon must justify the combination of two or more previously separate contracts into a larger contract, a practice called bundling, which critics argue squeezes small companies and their innovative solutions out of the federal contracting process.

Under the Senate's plan, DoD would not be able to execute a bundled contract valued above $5 million without first conducting an exhaustive review of "alternative contract approaches" to minimize bundling. However, even if potential alternatives are found, the amendment to the FY '04 Defense Authorization Bill would permit senior acquisition officials to approve a consolidated contract "if the benefits of the acquisition strategy substantially exceed the benefits of each of the possible alternatives contracting approaches..."

That loophole, combined with a one-year limit on the amendment, brought criticism from Sen. John Kerry (D-Mass.) who otherwise lauded the provision's goals.

Kerry has introduced separate legislation in the Senate to further limit contract bundling.

"I look forward to obtaining its Senate passage," he said referring to his amendment, "in cooperation with the Senators who advocated on behalf of this amendment and all those who are determined to remove the barriers to small business development created by contract bundling."

Four Republican Senators sponsored the defense provision, "Consolidation of Contract Requirements." They were Susan Collins and Olympia Snow of Maine, James Talent (Mo.) and Kay Bailey Hutchison (Texas). It was approved without a formal vote.

A similar amendment was approved by the Senate several years ago but failed to garner support in conference with the House, Sen. Carl Levin (Mich.), the ranking Democrat on the Senate Armed Services Committee, said during discussion on the provision last Wednesday. With the support of Collins and Talent, Levin said he is "hopeful" the House will agree to it this year.

The $5 million threshold set by the Senate is $2 million less than current DoD policy set by the White House. Other federal agencies have thresholds as low as $2 million.

Contract bundling has been increasing throughout the federal government since the early 1990s, accelerated by declines in the acquisition workforce, which have prompted the need for more streamlined procurement practices. The unfortunate side effect is that larger, bundled contracts, tack on more and more requirements that usually exceed the ability of small companies to meet, so the frequently don't bother to bid (Defense Daily, Oct. 11, 2002).

DoD is the target of the latest amendment because, as Collins pointed out, "bundling is rooted at the Department of Defense."

DoD officials say they are working to improve opportunities for small businesses and believe attacking the issue in the earliest phases of the acquisition process will go a long way to mitigating bundling (Defense Daily, March 31).

The Collins amendment also calls for better data collection by DoD to improve oversight of potential bundling above $5 million.