SBA Makes Proposal to Increase Federal Agency Contracts with Small Businesses

On October 25, 2024, the U.S. Small Business Administration proposed a rule titled “Increasing Small Business Participation on Multiple Award Contracts.” The rule proposed to expand the use of the “Rule of Two” in multiple-award contracts (MAC). The proposal stems from the Office of Federal Procurement Policy memo on January 25, 2024 that directed an increase in small business participation in MAC. A definition of MACs may be found in the Federal Acquisition Regulation FAR Part 2.101.

The Rule of Two is more than 40 years old and it is the foundation for the Federal Government’s support for small businesses as prime contractors. The Rule of Two sets asides contracts for small businesses when the federal agency has a reasonable expectation that offers will be obtained from at least two responsible small business concerns that are competitive in terms of fair market prices, quality, and delivery. SBA intends to expand the use of the Rule of Two by Agency Contracting Officers to be required whenever MACs can be reasonably met by small businesses. This requirement would apply to all new MACs and new orders on existing contracts.

Advocacy is seeking comments for small businesses on several questions.:

First, notwithstanding the success of the Federal Schedule (FSS) in contracts awarded to small businesses, should FSS contracts be exempted from this proposed statutory and regulatory requirement? 

Second, Procurement Center Representatives (PCR) currently have authority to appeal an agency’s acquisition strategy by placing a hold on the contracting process, should PCRs be given more authority to ensure this regulation is used to the maximum extent possible? If so, what should be that additional authority?

Third, by law, FAR 19.502-2 each acquisition of supplies or services that has an anticipated dollar value above the micro-purchase threshold but not over the simplified acquisition threshold shall be set aside for small businesses unless there is not a reasonable expectation of obtaining offers from two or more small businesses. This provision is not fully maximized by federal agencies, how can this proposed regulation be strengthened to increase these contract awards to small businesses?

Comments are due on December 24, 2024.

Please submit comment comments to Regulation. Gov identified by RIN 3245-AH95. Or Docket Number SBA-2024-0002.

If you have further questions, please contact the Office of Advocacy at Major.Clark@sba.gov or David.Mullis@sba.gov.