By Sarah Curtis and Annie Hudgins
On October 25, 2024, the Small Business Administration (“SBA”) issued “Small Business Contracting: Increasing Small Business Participation on Multiple Award Contracts.” The proposed rule is intended to address the confusion regarding the “Rule of Two” that applies to task and delivery orders placed under multiple-award contract vehicles. Specifically, whether or not the Rule of Two applies in such situations.
SBA seeks to achieve three objectives with this proposed rule.
First, the proposed rule, if finalized, would apply the Rule of Two to multiple-award contract task and delivery orders over the micro-purchase threshold, with some exceptions. This would require agencies to set aside the award for small businesses where there is a reasonable expectation of receiving competitive offers from two or more small-business contract holders under the multiple-award contract. The exceptions include orders under the Federal Supply Schedule, where an exception to fair opportunity exists, and where an agency creates its own agency-specific exception (ideally in coordination with SBA). By applying the Rule of Two to multiple-award contracts, SBA believes that it will ensure the federal government is directing a fair proportion of not only contracts but also purchases to small businesses.
Second, SBA aims to provide certainty in the application of the Rule of Two to task and delivery orders under multiple-award contracts. Recent conflicting case law from the Court of Federal Claims and the Government Accountability Office has created lingering confusion over the application of the Rule of Two. The proposed rule change to require application of the Rule of Two is intended to eliminate any confusion.
Finally, consistent with its overall mission, SBA intends to create more contract opportunities for small businesses. SBA calculates this proposed rule, if finalized, could add up to $6 billion to small business contract spending annually.
Nichols Liu’s team will be monitoring the progress of this proposed rule. Comments are due on or before December 24, 2024, and should be submitted online at regulations.gov. If you have questions about how this rule may impact your business with the federal government or would like Nichols Liu to prepare comments on your behalf, please contact Sarah Curtis and Annie Hudgins.
