‘Rule Of Two’ Survives FAR Overhaul As Socioeconomic Programs Take A Back Seat

“WASHINGTON TECHNOLOGY” By Nick Wakeman, Editor In Chief

“The Federal Acquisition Regulation rewrite keeps in place mandatory requirements for general small business set-asides, while socioeconomic small business programs become discretionary.”

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“Despite widespread fears that the Trump administration would eliminate the ‘rule of two,” the Revolutionary FAR Overhaul has done the opposite – keeping the mandatory small business set-aside requirement in place while subtly deemphasizing socioeconomic set-asides.

The rule of two is a requirement that says a contract must be competed as a small business set-aside if the contracting officer determines that there are at least two small businesses capable of doing the work and offer competitive pricing.

There was widespread speculation in industry that the Trump administration would eliminate the rule of two as part of the Federal Acquisition Regulation rewrite.

But the opposite has happened. The amendments to Part 19 of the FAR that the General Services Administration and the Office of Management and Budget released on Friday reinforce that the rule of two is mandatory.

The FAR changes also state that the rule of two only applies to contracts above the micro-purchase threshold. Currently, the threshold is now $15,000.

While the rule of two is safe, the FAR Overhaul marks other shifts in priorities like socio-economic set-asides being de-emphasized.

The new regulations use the word “may” when talking about set-aside contracts for HUBZone, 8(a) contractors, service-disabled, veteran-owned businesses and women-owned small businesses. The use of “may” means set-aside contracts for these types of businesses are optional.

But the regulations for general small business set-asides use the term “must,” which indicates that contracting officers do not have an option. They must create a small business contract when circumstances dictate, such as the rule of two.

The Trump administration has moved aggressively to remove diversity, equity and inclusion requirements from contracts and government operations as a whole. This de-emphasis of socio-economic small business requirements in the new FAR rules conforms to the Trump administration’s DEI priorities.

In comparing the new Part 19 to the old Part 19, you see a shift. The old version emphasizes the socio-economic small business, while the new version places them as a subset of small businesses in general.

General small business is now the primary category and the socio-economic small businesses are subcategories.

The new regulations also remove nearly all references to the Office of Small and Disadvantaged Business Utilization, another example of how the Trump administration is deemphasizing socio-economic small businesses.

However, this shift does not mean that contracting with these small businesses will go away.

Agencies will have to continue reporting their small business participation numbers, including contracting with small businesses in the socio-economic categories. Many of these goals are congressionally mandated.

Congress would have to change the laws that establish these set-aside goals, but the new regulations certainly de-emphasize them.

Either way, the retention of the rule of two is a win for small businesses.”

Rule of two survives FAR overhaul as socioeconomic programs take a back seat

ABOUT THE AUTHOR:

Nick Wakeman is the editor-in-chief of Washington Technology and joined the publication in 1996 as a staff writer. He’s a graduate of Bridgewater College and earned a masters degree from American University. When he isn’t writing about government contractors, he’s thinking of cooking large pieces of meat over fire and dreaming of ways to embarrass his two sons. Follow him on Twitter: @nick_wakeman