A couple FAR notices have removed proposed SBA rules relating to orders on multiple award contracts. This withdrawal seems to have the affect of decreasing the overall application of the small business Rule of Two, as discussed here. However, it only impacts the application of the rule of two to orders under multiple award contracts that were not restricted to small businesses. So, it’s impact is relatively narrow.
Protests of Orders Under Certain Multiple-Award Contracts
In this notice, the government is withdrawing a proposed rule dealing with Protests of Orders Under Certain Multiple-Award Contracts.
That proposed rule stated: “DoD, GSA, and NASA agree with, and adopts, GAO’s conclusion that ‘the statutory grant of discretion does not require application of the Rule of Two prior to issuing an order, unless the multiple-award contract or task order solicitation expressly anticipated the use of the Rule of Two.’” ITility, LLC, B-419167 (Dec. 23, 2020), 2020 CPD ¶ 412.
That proposed rule would have included the following language in FAR 16.505:
(iv) In accordance with 15 U.S.C. 644(r), a contracting officer’s decision to set aside or not set aside an order, for small business concerns, is an exercise of discretion granted to agencies and not a basis for protest. However, this does not preclude the filing of a protest of such an order if such a protest would otherwise be authorized on a separate basis recognized in accordance with paragraph (a)(10)(i) of this section.
The proposed rule was “expected to deter contractors from submitting protests of decisions to set aside or not set aside orders placed against multiple-award contracts, thereby saving contractors and the Government time and resources.”
Interestingly, this rule was designed to reduce protests, but it has now been rescinded.
Small Business Participation on Certain Multiple-Award Contracts
The proposed rule from January 2025 was designed to “expand the use of small business set-asides for orders against multiple-award contracts.” The “proposed rule would require contracting officers to exercise their discretion to set aside an order for small business if the contracting officer determines that, under an applicable multiple-award contract, there is a reasonable expectation of obtaining offers from two or more responsible small business contract awardees that are competitive in terms of fair market price, quality, capability, ability to comply with the delivery or performance schedule, and past performance.”
It would have allowed for exceptions for GSA schedules and for “agencies to establish procedures for contracting officers to exercise agency-specific exceptions.”
Withdrawal
In withdrawing both rules, the FAR Council said: “E.O. 14148, Initial Rescission of Harmful Executive Orders and Actions, repealed E.O. 14091 on January 20, 2025. As a result, the FAR Council is withdrawing the proposed rules. The FAR Council will focus on reducing the regulatory burden for all small businesses with the goal of increasing small business participation in Federal procurement.”
The corresponding SBA proposed rule has not yet been withdrawn, but that is likely to occur. That “proposed rule would clarify the applicability of the Rule of Two to multiple-award contracts by directing that an agency set aside an order under a multiple-award contract for small business contract holders when the contracting officer determines there is a reasonable expectation of obtaining offers from two or more small business contract holders under the multiple-award contract that are competitive in terms of market prices, quality, and delivery.”
So, the proposed rule would have required setting aside of certain orders under the Small Business Rule of Two. But now that has been rescinded. While the FAR Council still has the goal of “increasing small business participation,” that will not be done through applying the rule of two to orders. This withdrawal does not impact the basic rule of two regulation, found at FAR 19.502-2. Stay tuned to SmallGovCon to see if that rule may be affected by future changes to the FAR.
Questions about this post? Email us Need legal assistance for a federal government contracting matter, give us a call at 785-200-8919.
Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook.