'Rule of Two' Set in Stone: Bill Requires Federal Contract Set-Asides for Competing Small Businesses

This bill takes a long-standing practice known as the 'Rule of Two' and officially writes it into the Small Business Act. The core idea is straightforward: if a government contracting officer expects to get bids from at least two qualified small businesses for a contract valued above the 'simplified acquisition threshold,' that contract must be reserved exclusively for small businesses, as long as the price is fair.

Locking Down the 'Rule of Two'

So, what does 'codifying' this rule actually mean? It means taking something that was largely a regulatory requirement (found in federal acquisition rules) and embedding it directly into the law itself (specifically 15 U.S.C. 644(j)). This gives the rule more permanence and legal weight. The rule kicks in for contracts, including task and delivery orders, that exceed the 'simplified acquisition threshold' – that's a specific dollar amount set by federal regulations which generally allows for simpler government purchasing procedures below it. The key conditions remain: the contracting officer needs a reasonable expectation of getting offers from at least two responsible small businesses (meaning they have the capability to perform the contract) and that the winning bid will be at a fair market price.

More Federal Work Headed to Small Shops?

For small business owners – maybe you run a small construction company, an IT services firm, or a catering business – this could mean a clearer path to winning federal contracts. By making this set-aside mandatory under the right conditions, the bill aims to ensure small businesses get a dedicated slice of the federal contracting pie, potentially leveling the playing field against larger competitors for contracts above that simplified threshold. Think of it as reserving specific opportunities where smaller players have shown they can compete effectively. The goal is to steer more federal dollars towards smaller enterprises, which proponents hope will boost local economies and foster competition.

Reading Between the Lines

While the aim is to help small businesses, locking in this rule isn't without potential wrinkles. The requirement relies on the contracting officer's expectation of receiving two qualified bids at a fair price, which involves judgment. There's also the ongoing debate about whether limiting competition, even to capable small businesses, could sometimes result in the government paying higher prices than it might in a fully open competition. For larger companies, this means certain contracts they might have previously bid on will now be off-limits if the 'Rule of Two' conditions are met. Government agencies might also face slightly more administrative work ensuring the rule is correctly applied in each eligible procurement.