FAR 7.107-3—Bundling.
Plain-English Summary
FAR 7.107-3 explains when and how an agency may justify bundling a requirement despite the effect on small business participation. It covers the core standard for a written determination that bundling is necessary and justified, the requirement to quantify and document benefits using market research and other techniques, the types of benefits that can count (such as cost savings, price reduction, quality improvements, shorter acquisition cycles, and better terms and conditions), and the specific monetary thresholds for what counts as a “measurably substantial” benefit. It also addresses the special rule that administrative or personnel cost reductions alone are not enough unless they reach the stated savings threshold, and it creates a narrow exception allowing approval even when the thresholds are not met if the benefits are critical to mission success and small business participation is maximized. The section further identifies who has approval authority for that exception, how agencies and SBA should assess cost savings or price reductions, and the requirement to include the bundling determination in acquisition strategy documentation and provide it to SBA on request. In practice, this rule is a safeguard: it allows bundling when it truly improves mission performance or value, but forces agencies to build a strong, quantified record showing why the loss of small business opportunities is justified.
Key Rules
Written justification required
Before using a bundled acquisition strategy, the agency must make a written determination that bundling is necessary and justified under 15 U.S.C. 644(e). The determination must show that the agency will obtain measurably substantial benefits compared with separate smaller contracts or orders.
Benefits must be quantified
The agency must use market research and other techniques to quantify the specific benefits and explain why those benefits are measurably substantial. General statements about efficiency or convenience are not enough without supporting analysis.
Qualifying benefits are limited
Recognized benefits include cost savings, price reduction, quality improvements that save time or improve performance or efficiency, reduced acquisition cycle times, and better terms and conditions. The agency may rely on these or similar benefits, but must tie them to measurable impact.
Substantial benefit thresholds apply
Benefits are measurably substantial if the anticipated financial benefits equal at least 10 percent of the estimated contract or order value, including options, when the value is $94 million or less. If the value exceeds $94 million, the benefits must equal at least 5 percent of the value or $9.4 million, whichever is greater.
Admin savings alone are insufficient
A reduction in administrative or personnel costs by itself does not justify bundling unless the expected savings are at least 10 percent of the estimated contract or order value, including options. Agencies cannot rely on overhead or staffing efficiencies alone unless they meet that threshold.
Mission-critical exception exists
Even if the benefit thresholds are not met, the approving authority may still find bundling necessary and justified if the expected benefits are critical to mission success and the acquisition strategy provides maximum practicable participation by small business concerns. This is a narrow exception, not a routine alternative.
Approval authority is limited
The exception in paragraph (f) must be approved by a nondelegable senior official: for DoD, the senior procurement executive; for civilian agencies, the Deputy Secretary or equivalent. Lower-level officials cannot make this determination under the exception.
SBA and agency compare small business pricing
When assessing cost savings or price reduction, the agency and SBA must compare prices actually charged by small businesses for similar work, or if no prior small business prices exist, estimate what small businesses could have charged based on market research. This comparison supports the bundling analysis.
Documentation and SBA access required
If bundling is found necessary and justified, the contracting officer must include the determination in the acquisition strategy documentation and provide it to SBA upon request. The record must be available to support oversight and small business review.
Responsibilities
Agency
Decide whether a bundled acquisition strategy is being considered, perform market research, quantify and document the specific benefits, and make the written determination that bundling is necessary and justified when the required thresholds are met or when the mission-critical exception is used.
Contracting Officer
Ensure the bundling determination is included in the acquisition strategy documentation, maintain the supporting record, and provide the documentation to SBA upon request. The contracting officer must also ensure the acquisition file reflects the required analysis and approval path.
Approving Authority
For the mission-critical exception, make the nondelegable determination that bundling is necessary and justified despite not meeting the standard benefit thresholds, and confirm that the acquisition strategy provides maximum practicable participation by small business concerns.
SBA
Review or evaluate the agency’s bundling justification as needed, and work with the agency in assessing cost savings or price reduction by comparing small business pricing or market-based estimates where prior prices are unavailable.
Agency and SBA
Together assess whether bundling would produce cost savings or price reductions by comparing actual small business prices for similar work, or by using market research to estimate what small businesses could charge when historical pricing is unavailable.
Practical Implications
Bundling cannot be justified with vague claims about efficiency; the agency needs a quantified, supportable record tied to market research and estimated contract value.
The dollar thresholds matter. If the expected benefits do not meet the required percentage or dollar amount, the agency generally cannot rely on standard bundling justification.
Administrative savings are a common weak spot. Agencies often overstate staffing or management efficiencies, but those savings alone usually will not support bundling unless they meet the 10 percent rule.
The mission-critical exception is narrow and requires high-level approval. Contractors and contracting staff should not assume it is available simply because bundling seems operationally convenient.
Small business pricing analysis is important and often overlooked. If the agency cannot show what small businesses charged or could have charged, the justification may be vulnerable to challenge or SBA scrutiny.
Official Regulatory Text
(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 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.