Federal Contract Bundling

A Framework for Making and Justifying Decisions for Purchased Services

by Laura H. Baldwin, Frank Camm, Nancy Young Moore

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An organization bundles the services that it purchases when it consolidates activities previously provided by separate sources and purchases the services through a single contract from a single provider. The Department of Defense is giving increasing attention to this practice because commercial firms report that bundling offers the potential for significant performance and cost benefits. However, the goals of the federal government differ from those of commercial firms in that federal regulations commit the Air Force and other federal organizations to place a fair proportion of purchases and contracts with small business enterprises and to maintain free and open competition among prospective providers of services to the federal government. Small businesses typically do not have the scale of operation or scope of expertise to provide bundles of services as prime contractors. The authors of this report discuss recent legislation designed to protect small businesses by ensuring that bundling occurs only when it is likely to generate measurably substantial increases in performance or reductions in cost to the federal buyer. After reviewing potential sources of such benefits, the authors propose a methodology that buying agencies could use to gather information on when and how to bundle the services they buy and justify those decisions in a way that satisfies the legislative requirements.

Table of Contents

  • Preface

  • Figures

  • Tables

    Table

  • Summary

  • Acknowledgements

    Acknowledgments

  • Acronyms

  • Chapter One

    Introduction

  • Chapter Two

    Why Is the Air Force Interested in Bundling Services into Larger Contracts?

  • Chapter Three

    Relevant Legislation and Skills

  • Chapter Four

    Findings

  • Chapter Five

    Potential Benefits and Risks Associated with Bundled Service Contracts

  • Chapter Six

    Bundling Methodology for Recontracting Activities

  • Chapter Seven

    Conclusions

  • Appendix A

    General Background on Developing and Using

  • Appendix B

    Examples of Strategic Supply-Base Reduction

  • Appendix C

    Industry Consolidation Trends

  • Appendix D

    SBA Final Rule – a Derived Decision Tree for Bundling

  • Appendix E

    Assigning Monetory Values to Performance Improvements

  • References

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The research described in this report was performed under the auspices of RAND’s Project AIR FORCE.

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