Here at SmallGovCon, we have often discussed the federal government’s small business “Rule of Two” and the basis it provides small business contractors for protesting an agency’s decision not to set aside a procurement for small businesses. One essential component of that rule is a requirement that agencies conduct market research when determining whether or not two or more responsible small businesses are likely to submit offers on the pending solicitation. That market research has always been a loosely-defined, broad concept, one which allows agencies a fair amount of discretion in how they go about assessing the number of potentially-responsible small businesses in a given industry. As a result, agencies have some leeway in how they conduct their market research. Unfortunately, this makes it difficult for contractors to assess what constitutes satisfactory market research—in other words, how can a small business determine whether the agency properly chose an unrestricted procurement?
A potential common-sense approach one might consider would be to look at examples of market research that have been found acceptable under judicial review before. That provides a baseline threshold, and if the agency you are assessing falls short, it might seem reasonable to think that the agency did not carry its burden—i.e., there might be a successful Rule of Two protest basis on hand. This approach was applied by the protester in a recent Court of Federal Claims decision, but as explained below, it was not a successful one. The Court essentially stated that, just because one agency had gone to specific lengths in the past to conduct its market research, this did not mean that other agencies were required to go to similar lengths in order to satisfy their market research requirements. Rather than establish a standard to adhere to, the original agency had instead gone above the minimum.
Background
In CORE DC, LLC v. United States, 2026 WL 2563926 (Aug. 7, 2026), the protester was the incumbent contractor on a procurement issued by the Federal Bureau of Prisons (BOP). The BOP, after conducting market research, decided not to set aside the procurement for small businesses, and CORE, DC protested that decision. The company argued that BOP had failed to repeatedly attempt contact with a particular small business in the industry (Reynolds & Associates). CORE, DC also argued that BOP had applied an inappropriately high standard in reviewing the responses of three small businesses that responded to the market research outreach, and that BOP improperly favored the one large firm that responded to the market research outreach.
Before issuing the solicitation, BOP posted a Sources Sought Notice (SSN) on SAM.gov and searched SBA’s Dynamic Small Business Search website for potentially eligible contractors in the region under the applicable NAICS code. The SSN yielded a response from only one small business, and when BOP reached out through email to the small businesses it found in its search, it did not get enough responses to satisfy its goals. BOP then issued the solicitation without setting it aside. CORE DC, the one small business that responded to the SSN, protested the underlying market research, at which point BOP took corrective action, issuing a new SSN and emailing the points of contact at “all small business contractors currently providing RRC services to BOP; responding entities from [the initial SSN]; and other potential small businesses to gauge interest and capabilities for this opportunity.” BOP emailed 16 total organizations. Of those, only four small businesses submitted valid responses, and BOP did not find any of them “responsible” for purposes of market research, essentially determining that none of them would be capable of performing the work required. CORE DC protested again under the arguments listed above—essentially, not trying hard enough to get ahold of Reynolds & Associates, and determining the small businesses that responded were not responsible under inappropriately-high standards.
The Court’s Reasoning
As a refresher, the small business Rule of Two states that “contracting officer shall set aside any acquisition over the simplified acquisition threshold for small business participation when there is a reasonable expectation that- (1) [o]ffers will be obtained from at least two responsible small business concerns; and (2) [a]ward will be made at fair market prices.” FAR 19.502-2(b).
CORE DC needed to establish that BOP had not tried hard enough to figure out whether multiple responsible small businesses would have submitted proposals, and so had to attack the agency’s approach to its market research. It’s primary argument was that BOP should have reached out to multiple email addresses for points of contact at Reynolds (and also speculated that Reynolds may not have received the email outreach). CORE DC argued that this limited outreach undermined BOP’s conclusion that Reynolds was not a responsible small business likely to submit a proposal. To support this argument, CORE DC cited Advanced American Construction, Inc. v. United States, 111 Fed. Cl. 205 (2013), another Federal Claims case where the agency had sent its small business programs manager to several small business conferences, meeting with individual businesses in addition to traditional market research.
CORE DC essentially argued that this indicated the lengths agencies are required to go to before determining that they are not likely to receive responsible proposals from multiple small businesses. Lacking a clear regulatory standard, this seems like a straightforward approach to take—look at what the Court has approved of before and say, “the agency didn’t go that far here.” However, the court disagreed. The court pointed out that the Advanced American case itself held that agencies “enjoy substantial discretion in determining how much and what type of market research is ‘appropriate to the circumstances’ for the purpose of ‘[d]etermin[ing] if sources capable of satisfying the agency’s requirements exist.’” It held that BOP acted “well within that discretion in contacting numerous businesses, including Reynolds, to solicit interest for this procurement, and the Court is unaware of any requirement that BOP do more research.” It stated that CORE DC had nothing but pure speculation to support its assertion that Reynolds had not received the emails, and held that BOP acted reasonably when it determined that, as Reynolds had not replied to the SSN, it was also not likely to submit a proposal.
Regarding CORE DC’s other arguments, the Court once more gave substantial deference to the agency’s decision-making process. BOP assessed the responses it received from small businesses to the SSN and determined that none of them had either the facilities to meet the requirements of the solicitation or a viable plan to obtain such facilities and get them up and running in time. COFC said this “was a reasonable exercise of business judgment, and the conclusion was rational given that [the responding small businesses] did not provide specific site information or demonstrate familiarity with the challenges of opening an RRC.”
Bottom Line
As this case demonstrates, while it might be helpful for contractors, there is no hard line for what does and does not constitute effective market research. Courts give a fair amount of deference to agencies in how they go about this research, and so long as the record of materials compiled by the agency supports its reasons for choosing not to set aside the procurement, it is difficult to get that decision overruled. This case certainly demonstrates that simply pointing to previous examples of market research only demonstrates the ways in which agencies have gone above and beyond, rather than establishing a minimum level of effort required. The fact remains that the viability of a potential Rule of Two protest rests on a case-by-case analysis—while it is certainly a potentially fruitful ground for protest, whether or not it is possible in a given situation is something that should be discussed with counsel. If you are considering this or any other form of procurement protest, reach out to federal contracting attorneys, like us, to help with navigating the process.
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