7.107-2 Consolidation
Source: FAR 7.107-2 on acquisition.gov
Consolidation of contract requirements over $2 million requires rigorous justification, coordination with small business offices, and documented benefits that substantially exceed alternative approaches.
Overview
FAR 7.107-2 establishes the requirements for justifying and documenting the consolidation of contract requirements when the estimated total value exceeds $2 million. The regulation aims to balance the potential benefits of consolidation, such as cost savings and efficiency, with the need to protect small business participation in federal contracting. Before proceeding with a consolidated acquisition, agencies must conduct market research, consider alternative approaches, coordinate with small business offices, assess impacts on small businesses, and take steps to include them in the strategy. The senior procurement executive (SPE) or chief acquisition officer (CAO) must make a written determination that consolidation is necessary and justified, based on substantial benefits that exceed those of alternative approaches. Specific thresholds for what constitutes "substantial benefits" are provided, and special provisions exist for mission-critical consolidations that do not meet these thresholds. Documentation must be included in the acquisition strategy and provided to the SBA upon request.
Key Rules
- Written Determination Requirement
- Consolidations over $2 million require a written justification by the SPE or CAO, ensuring compliance with statutory requirements and small business considerations.
- Market Research and Alternatives
- Agencies must conduct market research and identify less consolidated alternatives before proceeding.
- Small Business Coordination
- The determination must be coordinated with the agency's small business office, and impacts on small businesses must be identified and mitigated.
- Substantial Benefit Thresholds
- Consolidation is justified if anticipated benefits meet or exceed 10% (for contracts ≤ $94M) or 5%/$9.4M (for contracts > $94M) of contract value, or if non-quantifiable benefits are specifically identified.
- Mission-Critical Exception
- Approving authorities may justify consolidation for mission-critical needs even if benefit thresholds are not met, provided small business participation is maximized.
- Documentation and Reporting
- Justification must be documented in the acquisition strategy and provided to the SBA upon request.
Responsibilities
- Contracting Officers: Ensure all required analyses, coordination, and documentation are completed and included in the acquisition strategy; provide documentation to SBA if requested.
- Contractors: Be aware of consolidation justifications and advocate for small business participation where possible.
- Agencies: SPE/CAO must make and document determinations; agency small business offices must be involved in the process.
Practical Implications
- This section ensures that consolidation is only used when truly beneficial and not at the expense of small business opportunities. Failure to follow these requirements can result in protest, delays, or disapproval of the acquisition strategy. Contractors should monitor consolidation decisions and engage with agencies to promote small business inclusion.
(a) Consolidation may provide substantial benefits to the Government. However, because of the potential impact on small business participation, before conducting an acquisition that is a consolidation of requirements with an estimated total dollar value exceeding $2 million, the senior procurement executive (SPE) or chief acquisition officer (CAO) shall make a written determination that the consolidation is necessary and justified in accordance with 15 U.S.C. 657q, after ensuring that-
(1) Market research has been conducted;
(2) Any alternative contracting approaches that would involve a lesser degree of consolidation have been identified;
(3) The determination is coordinated with the agency's Office of Small Disadvantaged Business Utilization or the Office of Small Business Programs;
(4) Any negative impact by the acquisition strategy on contracting with small business concerns has been identified; and
(5) Steps are taken to include small business concerns in the acquisition strategy.
(b) The SPE or CAO may determine that the consolidation is necessary and justified if the benefits of the acquisition would substantially exceed the benefits that would be derived from each of the alternative contracting approaches identified under paragraph (a)(2) of this section, including benefits that are quantifiable in dollar amounts as well as any other specifically identified benefits.
(c) Such benefits may include cost savings or price reduction and, regardless of whether quantifiable in dollar amounts-
(1) Quality improvements that will save time or improve or enhance performance or efficiency;
(2) Reduction in acquisition cycle times;
(3) Better terms and conditions; or
(4) Any other benefit.
(d) Benefits.
(1) Benefits that are quantifiable in dollar amounts are substantial if individually, in combination, or in the aggregate the anticipated financial benefits are equivalent to-
(i) Ten percent of the estimated contract or order value (including options) if the value is $94 million or less; or
(ii) Five percent of the estimated contract or order value (including options) or $9.4 million, whichever is greater, if the value exceeds $94 million.
(2) Benefits that are not quantifiable in dollar amounts shall be specifically identified and otherwise quantified to the extent feasible.
(3) Reduction of administrative or personnel costs alone is not sufficient justification for consolidation unless the cost savings are expected to be at least 10 percent of the estimated contract or order value (including options) of the consolidated requirements, as determined by the SPE or CAO (15 U.S.C. 657q(c)(2)(B)).
(e)
(1) Notwithstanding paragraphs (a) through (d) of this section, the approving authority identified in paragraph (e)(2) of this section may determine that consolidation is necessary and justified when-
(i) The expected benefits do not meet the thresholds for a substantial benefit at paragraph (d)(1) of this section but are critical to the agency's mission success; and
(ii) The procurement strategy provides for maximum practicable participation by small business.
(2) The approving authority is–
(i) For the Department of Defense, the SPE: or
(ii) For the civilian agencies, the Deputy Secretary or equivalent.
(f) If a determination is made that consolidation is necessary and justified, the contracting officer shall include it in the acquisition strategy documentation and provide it to the Small Business Administration (SBA) upon request.