It Takes Two is the name of a 1995 film starring Kirstie Alley, Steve Guttenberg, and the Olsen twins.  With such a star-studded cast, I’m at a loss for why the film merits only a 5.1 rating from the harsh critics at IMDb.  I am far too busy to investigate this apparent injustice by screening the film myself.  However, “it takes two” is worth keeping in mind, because it sums up one of the most important rules for small government contractors.

Under the FAR, agencies are typically required to set-aside procurements exceeding $150,000 for small businesses if there is a reasonable expectation that at least two responsible small businesses will submit offers at fair market prices.  When an agency fails to conduct adequate market research to determine whether the “rule of two” can be met, the GAO will sustain a bid protest, as was the case in DNO Inc., B-406256, B-406256.2 (Mar. 22, 2012).

In the DNO Inc. bid protest, the USDA issued an unrestricted solicitation for the award of contracts to supply the agency with fresh fruits and vegetables as part of a pilot program to provide schools with fresh produce.  DNO, a small business, filed a protest with the GAO, arguing that there was a reasonable expectation that two or more small businesses would submit offers and that the procurement should have been set-aside.  DNO complained that the USDA failed to conduct adequate market research to determine whether a set-aside was appropriate before issuing the solicitation as unrestricted.

The SBA weighed in on DNO’s side, agreeing with the protester that the USDA had not conducted adequate market research (for all the complaints small businesses sometimes have about the SBA, the agency is often a champion for small businesses, as it was for DNO).  The GAO determined that “nothing in the contemporaneous record reflects any analysis or market research” about a possible set-aside, “even though the agency was aware of small business interest in the procurement based on questions submitted by vendors.”  The GAO sustained DNO’s protest.

The DNO Inc. GAO bid protest is a good reminder that procuring agencies must do more than give lip service to the rule of two—they must conduct market research to determine whether a small business set-aside is appropriate, before issuing an unrestricted solicitation.  If not, the GAO will sustain a bid protest, as it did for DNO.