Small businesses pursuing federal contracts may soon have a new statutory authority upon which to cite and to make their case to contracting officers to set aside acquisitions which exceed the simplified acquisition threshold ($250,000). GovContractPros has learned of efforts by Ranking Member of the House Small Business Committee, Representative Nydia Velazquez (Democrat, New York), to introduce a bill that applies the “Rule of Two” to federal acquisitions, including multiple-award contracts, except those made under GSA MAS.
What is the “Rule of Two?”
The Small Business Act, and the Federal Acquisition Regulations (“FAR”) implementing applicable portions of that Act, mandate that if the government has a reasonable expectation that two or more small businesses can perform the requirements at a reasonable price, the government must set aside the work for small businesses. This rule applies to “multiple award contracts,” including task orders over the simplified acquisition threshold.
The Court of Federal Claims (“COFC”), in a 2020 decision, opined that before conducting an acquisition “an agency must apply the Rule of Two before an agency can even identify the possible universe of procurement vehicles which may be utilized for a particular scope of work.” In Tolliver, the COFC explained that prior to identifying a contract vehicle under which a procurement will be awarded, the government must conduct a Rule of Two analysis.
In effect, utilization of certain IDIQs and MACs does not excuse the Government from performing Rule of Two analysis; such analysis must be performed prior to the selection of any contract vehicle. Although the Rule of Two, as interpreted and ruled upon by the COFC, exists at present in regulation and federal case law interpreting those regulations, this bill would codify the COFC holding in Tolliver, which affirms that agencies must apply the Rule of Two in almost all cases.
What are the implications of the codification of the Rule of Two?
Codification of the Rule of Two into statute would remove any lingering ambiguity with regard to its application. In GCP’s experience, certain contracting officers do forego Rule of Two analysis and make awards on existing contract vehicles without regard to the availability of small businesses to perform the work. If codified, GCP expects this proposed legislation would significantly increase the amount of small business set asides in federal procurement. At present, the bill requires a small business set aside for multiple award contracts “unless a contracting officer for the Federal agency is unable to obtain offers from two or more small business concerns that are competitive with market prices and are competitive with regard to the quality and delivery of the goods or services being purchased…”
GCP believes this language could be even stronger. First, the Rule of Two should be codified as applicable to all federal procurements, not just multiple award contracts. Second, the language should read “unless there is no reasonable expectation a contracting officer for the Federal agency may obtain offers from two or more small business concerns that are competitive with market prices and are competitive with regard to the quality and delivery of the goods or services being purchased…” as this language would set the highest bar for ensuring small business set asides.
If you have any questions regarding legislative advocacy for this proposed legislation, please contact Jake Neilson.
If you have any questions regarding the Rule of Two or its application to your pipeline, please contact Trevor Skelly.
And mark your calendars for December 13 when Trevor Skelly will be answering your questions about contracting post-award. This session covers compliance, including e-Verify, SCRs, EEOCs, and monthly reports, and dives into critical post-award events like change orders, modifications, and payment delays. Understanding FAR and agency supplement procedures is key to navigating these challenges successfully. Register here.
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