7.107-3 Bundling
Source: FAR 7.107-3 on acquisition.gov
Bundling contract requirements is only permitted when agencies can demonstrate and document substantial, quantifiable benefits, with strict thresholds and protections for small business participation.
Overview
FAR 7.107-3 outlines the requirements and justifications for bundling contract requirements, emphasizing the need to balance government benefits with the potential impact on small business participation. Agencies must make a written determination that bundling is necessary and justified, demonstrating that the anticipated benefits are measurably substantial compared to separate, smaller contracts. The regulation specifies how to quantify these benefits, sets financial thresholds for what constitutes a substantial benefit, and details the types of benefits that may justify bundling. It also establishes special approval procedures for cases where benefits are critical to mission success but do not meet standard thresholds, and requires documentation and coordination with the Small Business Administration (SBA).
Key Rules
- Written Justification for Bundling
- Agencies must document that bundling is necessary and justified, showing substantial benefits over separate contracts.
- Quantification of Benefits
- Benefits must be quantified using market research and must meet specific financial thresholds (10% for contracts ≤ $94M; 5% or $9.4M for contracts > $94M).
- Types of Acceptable Benefits
- Acceptable benefits include cost savings, price reductions, quality improvements, reduced acquisition cycle times, and better terms and conditions.
- Administrative Cost Savings
- Administrative or personnel cost reductions alone are insufficient unless they meet the 10% threshold.
- Special Approval for Critical Mission Needs
- Senior officials may approve bundling below thresholds if benefits are critical to mission success and small business participation is maximized.
- Price Comparisons
- Agencies and SBA must compare prices charged by small businesses or use market research to estimate such prices.
- Documentation and SBA Notification
- Justifications must be included in acquisition strategy documentation and provided to SBA upon request.
Responsibilities
- Contracting Officers: Ensure bundling is justified, benefits are quantified, documentation is complete, and SBA is notified as required.
- Contractors: Be aware of how bundling decisions may affect opportunities and prepare to demonstrate value in bundled procurements.
- Agencies: Conduct thorough market research, quantify benefits, obtain appropriate approvals, and maintain compliance with small business participation requirements.
Practical Implications
- This section ensures that bundling is only used when it provides significant, measurable benefits, protecting small business opportunities. Failure to properly justify and document bundling can lead to procurement delays or challenges. Contractors should monitor agency bundling practices and be prepared to engage in market research or advocacy if their opportunities are affected.
(a) Bundling may provide substantial benefits to the Government. However, because of the potential impact on small business participation, before conducting an acquisition strategy that involves bundling, the agency shall make a written determination that the bundling is necessary and justified in accordance with http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section644(e)&num=0&edition=prelim" target="_blank">15 U.S.C. 644(e). A bundled requirement is considered necessary and justified if the agency would obtain measurably substantial benefits as compared to meeting its agency's requirements through separate smaller contracts or orders.
(b) The agency shall quantify the specific benefits identified through the use of market research and other techniques to explain how their impact would be measurably substantial (see 10.001(a)(2)(iv) and (a)(3)(vii)).
(c) Such benefits may include, but are not limited to-
(1) Cost savings;
(2) Price reduction;
(3) Quality improvements that will save time or improve or enhance performance or efficiency;
(4) Reduction in acquisition cycle times, or
(5) Better terms and conditions.
(d) Benefits are measurably substantial if individually, in combination, or in the aggregate the anticipated financial benefits are equivalent to-
(1) Ten percent of the estimated contract or order value (including options) if the value is $94 million or less; or
(2) Five percent of the estimated contract or order value (including options) or $9.4 million, whichever is greater, if the value exceeds $94 million.
(e) Reduction of administrative or personnel costs alone is not sufficient justification for bundling unless the cost savings are expected to be at least ten percent of the estimated contract or order value (including options) of the bundled requirements.
(f)
(1) Notwithstanding paragraphs (a) through (e) of this subsection, the approving authority identified in paragraph (f)(2) of this subsection may determine that bundling is necessary and justified when
(i) The expected benefits do not meet the thresholds for a substantial benefit but are critical to the agency's mission success; and
(ii) The acquisition strategy provides for maximum practicable participation by small business concerns.
(2) The approving authority, without power of delegation, is–
(i) For the Department of Defense, the senior procurement executive; or
(ii) For the civilian agencies is the Deputy Secretary or equivalent.
(g) In assessing whether cost savings and/or price reduction would be achieved through bundling, the agency and SBA shall-
(1) Compare the price that has been charged by small businesses for the work that they have performed; or
(2) Where previous prices are not available, compare the price, based on market research, that could have been or could be charged by small businesses for the work previously performed by other than a small business.
(h) If a determination is made that bundling is necessary and justified, the contracting officer shall include it in the acquisition strategy documentation and provide it to SBA upon request.