HispanicBusiness

Bundling results in cost savings and improved service. Most consolidated contracts end up being broken up anyway.
// By Ron Utt

At all levels of government throughout the United States, as well as in other countries, competitive contracting is maximizing market forces and enabling the public sector to lower taxpayer costs while improving services.

One way to do that is through the "bundling" of government contracts. This allows a government agency to combine several small projects into a single large contract.

Doing so saves money, because the agency has to approve only one contract, instead of many. It's also an efficient way to lower government operating costs.

Unfortunately, the Bush administration and members of Congress are trying to crack down on bundling, claiming it can hurt small businesses.

It is true that bundling reduces the number of small businesses that get government contracts directly.

However, most bundled contracts are eventually broken up anyway. In such cases, the company that wins the contract divides up the duties and subcontracts them out. Small businesses can bid on these individual subcontracts and continue their work for the government.

This is an excellent way of using the competitive marketplace to achieve cost savings and improve service. Since the contract is likely to be broken down into subcontracts, the various subcontractors will be answering to a private contractor, not a government agency. The contractor will do everything necessary to make sure the work is finished on time and on budget. That helps avoid the cost overruns that can plague work done by government agencies.

In addition, bundling eliminates a layer of bureaucracy. Instead of reviewing half a dozen small contracts, agencies can issue just a single larger one. Plus, over the life of the agreement, they have to supervise only one contract instead of many.

Many of the largest government contracts today use bundling, including some awarded by the Defense Department. Under rules proposed by the Bush administration, Defense Department acquisitions of $7 million or more would have to be reviewed to determine if the requirements could be unbundled.

Again, doing so might seem to provide a short-term gain by allowing small businesses to bid on the unbundled contracts. However, it would also force the government to pay more in administrative costs and other overhead than it would pay for the single, bundled one.

A bundled contract is a way for the government to "buy in bulk." In much the same way that a shopper can save by purchasing a super-size box of laundry detergent rather than several smaller boxes, the government can save by allotting one large contract rather than several small ones. And the contractor, not a federal agency, then assumes responsibility for the oversight of subcontractors.

Small businesses are critical to the financial future of the United States. They should continue to get their fair share of government contracts.

But bundling government contracts won't stop that from happening. Small businesses will still get their contracts, and we'll all save money in the long run. That's an outcome that everyone – especially taxpayers – can benefit from.