In a bid to increase federal contract opportunities for small businesses, the U.S. Small Business Administration (SBA) proposed a rule on October 25, 2024, aimed at expanding the application of the longstanding “Rule of Two” in multiple-award contracts (MACs). This proposed rule, titled “Increasing Small Business Participation on Multiple Award Contracts,” responds to guidance from the Office of Federal Procurement Policy (OFPP) earlier this year. By expanding this rule, the SBA hopes to reinforce small business representation in federal procurement processes.
The “Rule of Two,” foundational to federal small business contracting, mandates that contracts be set aside for small businesses when at least two capable small business offers are expected. Under the proposed changes, federal agency contracting officers would be required to apply the Rule of Two to all new multiple-award contracts and new orders under existing contracts whenever feasible. This requirement would create more contract opportunities exclusively for small businesses, potentially bolstering revenues across various industries.
The SBA’s proposal follows a January 2024 OFPP memo directing agencies to increase small business participation in multiple-award contracts—a pivotal move to enhance competition and support diverse suppliers. These multiple-award contracts, as defined in the Federal Acquisition Regulation (FAR Part 2.101), allow for greater flexibility and streamlined purchasing across federal agencies, and expanding small business participation could bring valuable services and products from smaller suppliers into federal procurement.
Small Business Empowerment
In preparation for finalizing this proposal, the SBA actively seeks input from small businesses on several points. First, the SBA is considering whether Federal Schedule (FSS) contracts should be excluded from this rule, given that FSS contracts already provide substantial opportunities for small business contractors. Secondly, the SBA examines whether Procurement Center Representatives (PCRs) should receive expanded authority to enforce the Rule of Two across federal acquisition strategies.
Currently, PCRs can appeal acquisition decisions, but the SBA is seeking comments on whether this authority should be strengthened to ensure compliance with the new rule. These comments are due on December 24, 2024.
Additionally, the SBA aims to address existing limitations in federal contracting law, specifically in FAR 19.502-2. This provision mandates that acquisitions within a certain dollar range be set aside for small businesses if two or more qualified small businesses can meet the requirements. However, some federal agencies have not fully utilized it, leaving potential contract opportunities untapped. The SBA’s proposed rule could enhance accountability and enforcement, giving small businesses a larger stake in federal contracts and potentially reshaping the landscape of government procurement.
As the SBA opens up these questions to public input, small business owners and industry representatives can influence policies that may significantly impact their future participation in federal contracts. By strengthening small business inclusion in multiple-award contracts, the SBA’s proposed rule could expand access, drive competition, and improve the quality of services and products within the federal marketplace.
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