Can we combine these two contracts? How so? I am unsure if this is consolidation or even bundling, however, making one contract from two must fall under something. Thank you.
First, let's define both concepts. Contract consolidation occurs when a single contract is awarded to satisfy two or more requirements for supplies/services previously performed under two or more separate contracts, each of which was lower in cost than cost of the new contract. Consolidating contracts creates a potential impact on the ability of small businesses to compete as they may not be as competitive as large businesses when trying to meet a large requirement. As a result, approval is required for consolidated contracts greater than $2 million (subject to the criteria at FAR 7.107-2).
Contract bundling is actually a subset of consolidation. It occurs when a single contract combines two or more requirements for supplies/services previously performed by one or more small businesses into single contract likely unsuitable for small business due to (i) diversity, size, or specialized nature of the elements of the required performance; (ii) aggregate dollar value of the anticipated award; or (iii) geographical dispersion of the contract performance sites. As is the case for contract consolidation, the "measurably substantial benefits" criteria in FAR 7.107-3 must met for contract bundling to be approved.
You can see that the restrictions on consolidation and bundling exist in order to protect the ability of small businesses to compete for Government contracts. If the combined contract will be a small business set aside anyway, the issue with contract consolidation and bundling would be moot in your case.