Contract Bundling Feeds Wall Street/Starves Small Business Inclusion

Contract bundling might be well intentioned purported cost containment, but unfortunately there are long-term consequences including widespread dissolution of small business participation, to be noted.  Mine is not to say yea or nay – my point of view is that of a passionate small business owner watching bundling practices escalate over the past 10 years.  No one is discussing the underlying implications.   Execution of the inherently flawed system recklessly reduces small business participation overall.  This rampant big business practice is adversely affecting small business concerns across the Nation.  The genesis of this blog is to get the conversation started.  Points to note are as follows:

• Contract bundling is often counter-productive to diversity procurement goals as it can shrink the supplier pool, limit brand offerings, and affect higher overall prices in the long term.  The bids are written with language relevant toward majority corporate scope, capabilities and culture.  The concept is streamlining so that one majority supplier WINS the total bucket of business.  The outcome is disadvantaged, MBE/WBE/WOSB/DBE local companies lose participation, future open bid opportunities and Supplier Diversity programs erode.

• Spreadsheets produced by majority corporations show “cost savings” but a bigger price is paid – one must read between the lines of skewed figures – understand these numbers don’t reflect the ousting of struggling small businesses which have now been displaced, resulting in local jobs lost, homes that will not be bought, cars & groceries not purchased, SBA loans not secured, home foreclosures, decreased retail spend and on and on.

• What about the adverse effects on the Supplier Diversity program that used to exist and now will no longer exist in it’s previous robust state?  Goals once prioritized for direct spend are now a diluted version of 2^nd tier negotiations.  Sure, there may be participation, but 2^nd tier is NOT 1^st tier spend.  Small businesses thrive when they are the Prime.  As secondary participants – we are directed by the Prime’s whimsical decisions.  Also, 2^nd tier spend is not calculated as 100% spend toward goals, creating yet another diversity deficit.  So the municipality or organization now lets other people worry about handling diversity inclusion – The New Mantra – don’t do as I do, do as I say….

• If small businesses are the heart of the American economic successes – then open bid processes which once allowed ALL to fairly participate must be reinstated – in order to prosper our struggling economy.  Bundling specs often excludes small business by the very nature of dollar size and robust T’s & C’s of the requirements.  Not only does it exclude but it DISPLACES small businesses who previously held the business on many of the supply chain items on open market bid.  Reduced opportunities – which is the plight of small businesses means less economic stimulation for the middle class.

• Closed bundling intricacies reverse cost savings by extinguishing bid competition – thus higher overall prices are paid.  Bundled bids are often RFI’s or RFP’s where non-disclosure agreements – so tracking data is virtually impossible.  Small business limited resources restrict options toward legal fees, time and talent required to prove it up to defend ourselves.   And often times these contracts are held for decades without going to rebid.

Supplier Diversity programs are not self-propelled.  Diversity is not a success unless it is thoughtfully conceptualized, implemented & monitored.  These programs are fragile and must be protected and preserved.  Bundling allows people to “pass the buck” onto Level 2 supply chain participation.  The best way to get buy-in on participation is to BE the example, not divert the attention – requiring others to step up the plate when the owner is not actively engaged in living the example.  I see this lack-luster form of quasi inclusion as EXCLUSION – it’s a LOSE/LOSE/LOSE.  CEO’s, CPO’s and SBLO’s – we need your help to reverse the trend and make this plight into a WIN/WIN/WIN.

Category: Editorials