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rios0311

Interpretation of Definition: Consolidation of Contract Requirements

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Background: My customer has 15 contracts that are coming to an end at different times in the near future. Those contracts are being performed by large and small businesses. The customer wants to roll-up the 15 requirements into 3 separate awards under the CIO-SP3 GWAC and place the 3 orders under the small business section of this GWAC to ensure the awards go out to small businesses.

The rates on the GWAC are lower than the rates being charged under the incumbent contracts. I believe that this is a contract consolidation (not bundling). Please see 15 U.S.C. 657q Consolidation of Contract Requirements. Specifically, the definition of the term Consolidation of Contract Requirements". I believe this is also Section 44 of the Small Business Jobs Act of 2010 (PL 111-240-Sept. 27, 2010). I apologize if the reference is incorrect. I’ve included the definition below:

It states: The term “consolidation of contract requirements”, with respect to contract requirements of a Federal agency, means a 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.

If the requirement I’m working on is indeed a consolidated requirement, there are certain statutory requirements that the acquisition team must comply with prior to awarding the contract. I raised my concern to my division chief, but he disagreed with my interpretation of the definition. He does not believe my requirement is a consolidation. I would be fine with his interpretation, were it not for the possibility of my requirement being exposed to a protest and the consequences of not having complied with the statutory requirements of a consolidated contract.

I underlined the text in the definition that my division chief and I are having difficulty with. We do not agree on its meaning. The division chief argues that a requirement is not considered a consolidated contract if the resulting [consolidated] award is lower in cost than the TOTAL cost of the separate contracts prior to consolidating them. According to him, if my [consolidated] contract is lower in value than the total cost of the separate contracts, I do not have a consolidated requirement and therefore do not have to comply with any of the statutory requirements.

I interpret the definition as meaning that provided that EACH of the separate contracts prior to consolidating them is lower in cost than the total cost of the resulting [consolidated] contract (which I expect would occur in the majority of cases), then my requirement is in fact a consolidated contract.

In researching this I turned up a number of protests related to the issue of consolidation. Every example of consolidation I found while reading GAO decisions included consolidated contracts in which the price or cost of the consolidated contract was lower than the total cost of the individual requirements prior to consolidating them. Those contracts were in fact considered consolidated contracts. This is in direct contrast to the division chief’s interpretation.

According to GAO, the area of concern with consolidating requirements (excluding bundling) resides with the restriction of competition (without regard to business size). GAO has stated that because bundled or consolidated procurements combine separate and multiple requirements into one contract, they have the potential for restricting competition by excluding firms that furnish only a portion of the requirement; See 2B Brokers et al., B-298651, Nov. 27, 2006, 2006 CPD ¶ 178 at 9; Pemco Aeroplex, Inc., B-280397, Sept. 25, 1998, 98-2 CPD ¶ 79 at 8-9. I could not find anywhere where the cost or price of the final contract (in relation to the individual contracts prior to the consolidation) was a consideration in determining if a contract is considered consolidated or not.

Further, according to GAO an agency may consolidate or bundle requirements where the agency reasonably determines that consolidation will result in significant cost savings or efficiencies. B.H. Aircraft Co., Inc. , B-295399.2, July 25, 2005, 2005 CPD ¶ 138 at 7. This statement seems to evidence that consolidation occurs with or without regard to cost savings on the resulting [consolidated] contract. Although the determining factor is not the final price of the consolidated contract alone, the final price may be a deciding factor in determining whether or not the consolidated contract is permissible or not.

What is the proper interpretation of the definition? Is my requirement a consolidation of contract requirements per the definition?

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Guest Vern Edwards

You have three separate contracts, each for a separate requirement, with the following costs:

1. $100,000

2. $100,000

3. $100,000

You plan to consolidate them into a single contract with total costs of $300,000.

I think that the keys to the definition are the words "separate" and "consolidate." Consolidate means "to join together into one whole." If the cost of each of the separate contracts is lower than the total cost of the new contract, then there has been a consolidation of requirements. The idea is that a contractor that might have won a $100,000 contract might not be able to compete for a $300,000 contract. Thus: less competition. Bad. I am not aware of any official interpretation or commentary to the contrary. I think your boss's interpretation is wrong, but it's a poorly written definition, as congressional definitions usually are.

If I know Don Acquisition, he's going to look for an interpretation or commentary.

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rios0311,

Vern was right. I couldn't resist looking it up. I found the following in the proposed SBA rule implementing 15 U.S.C. 657q:

One important definition proposed relates to contract consolidation. The SBA has implemented the statute and defined that term to mean a solicitation for a single contract or a multiple award contract to satisfy two or more requirements of the Federal agency for goods or services that have been provided to or performed for the Federal agency under two or more separate contracts each of which was lower in cost than the total cost of the contract for which the offers are solicited, the total cost of which exceeds $2 million (including options). The SBA notes that the $2 million price is a statutory threshold (see 15 U.S.C. 657q), not subject to amendment by the SBA. Based upon this definition, an example of a consolidated contract would include the following:

An agency had two separate contracts for janitorial services. One was performed by a small business and had a contract value of $1 million and the other by a large business that had a contract value of $2 million. The agency places both those requirements into one solicitation for $3 million. This is a consolidated contract because it combines two separate contracts into one and the costs of each of the two contracts is less than the total cost of the consolidated contract. In addition, the consolidated contract's value exceeds $2 million.

[bold added for emphasis].

[77 FR 29129, 16 May 2012]

Having said that, this is a proposed SBA rule. A FAR case hasn't even been opened yet to implement the statute. There are a lot of statutes imposing new requirements on the acquisition process that have yet to be implemented in the regulations. Are you making sure that you are complying with those, too? (Some would require you to deviate from the FAR). If not, why the special concern for 15 U.S.C. 657q?

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Thank you very much. This helps a lot. Regarding your question, I am not aware of any of the other new requirements that might apply to my situation, so I am not aware of other requirements, if any, that I might have to comply with. My concern for contract consolidation arose when it appeared to me that I was working with what I thought was a bundled contract. To my surprise and edification I learned that there was a distinction between contract bundling and contract consolidation.

It was at that point that I realized that what I was working with appeared to be in fact a consolidated requirement. I learned of the requirements necessary to proceed with such an award while researching the subject. I approached my division chief with a question related to the subject and the subject question of this thread followed.

Are you suggesting that since this is a proposed rule I do not need to need to comply with it? The FAR only requires that the contracting officer justify bundling. It does not reference contract consolidation. If it does, I was not able to locate it in the FAR. The Jobs Act amended the the Small Business Act to define contract consolidation, but the rules set forth therein haven't made it into the FAR. Does that mean I'm not required to comply with them?

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rios0311,

Take a look at the open FAR cases report. There are dozens of open cases that, when final, will implement existing acquisition-related statutes.

To answer your question, I do not think you are required to comply with a proposed SBA rule or a nonexistent FAR rule. The statute places a requirement on agency heads. The requirement will most likely be placed on contracting officers by an amendment to the FAR or, if time is of the essence, by the issuance of a FAR deviation by the agency head.

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Guest Vern Edwards

A similar statute, 10 U.S.C. 2382, with a similar definition of consolidation, was applied to DOD several years ago and is implemented in DFARS 207.170, 210.001, and 219.201. The SBA statute was enacted later to make the rule applicable to all agencies. So if rios0311 works for DOD his office is already covered by regulation.

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Do you think this would apply to BPAs too or just single and multiple award contracts?

dbukis, did you see this Federal Register Notice of a final rule by SBA for "Task and Delivery Order Contracts, Bundling, Consolidation",

yesterday on the WIFCON home page? The SBA final rule includes coverage for Agreements such as BPA's.at 13 CFR 121.404.

https://www.federalregister.gov/articles/2013/10/02/2013-22064/acquisition-process-task-and-delivery-order-contracts-bundling-consolidation

"SUMMARY: The U.S. Small Business Administration (SBA) is amending its regulations governing small business contracting procedures. Specifically, this rule amends SBA's regulations to establish policies and procedures for setting aside, partially setting aside and reserving Multiple Award Contracts for small business concerns. SBA is also is establishing policies and procedures for setting aside task and delivery orders for small business concerns under Multiple Award Contracts. In addition, SBA is addressing how it will determine size under certain Agreements and when recertification of status will be required. Finally, SBA is establishing a new definition of consolidation and reorganizing its prime contracting assistance regulations."

Also note from the Notice:

5. What relevant Federal rules may duplicate, overlap, or conflict with this rule?

This final rule may conflict with current FAR and General Services Administration regulations. In fact, one respondent commented that SBA should provide a detailed analysis as to how the SBA and FAR rules differ. SBA believes that as a result of this final rule, the FAR will need to be amended. SBA consulted with the FAR Councils and GSA prior to issuing the proposed and final rule. However, as noted in the discussion in the preamble, SBA attempted to draft the regulations to avoid unnecessary conflicts. For example, the FAR and GSA define the term “teaming” to mean something in particular. Rather than define the term “teaming” to conflict with those rules, SBA defined the term “Small Business Teaming Arrangement.”

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