The Rule of Two: Small Business Federal Set-Asides in Government Contracting

May 30, 2014 4:05:26 PM / by USFCR

The Rule of Two- Small Business Federal Set-Asides in Government Contracting

When a procurement officer is conducting market research they also have to consider small business federal set-asides. These set-asides help small businesses win government contracts that would normally be given to larger businesses.  23% of the annual federal contracting budget is devoted to small business contract spending.  The 'Rule of Two' is used at the discretion of each procurement officer when spending their yearly contract funds.  Due to the Simplified Acquisition Threshold, small businesses are set to receive contracts that are between $3,000 and $150,000 automatically.

However, if a procurement officer currently has a contract that has a total over $150,000 they can use the 'Rule of Two."  The Rule of Two simply means if the procurement officer can find at least two small businesses that can compete for the available contract then it can be considered a small business contract.  Once the procurement officer officiates the Rule of Two, the contract can be considered a small business set-aside contract and be used toward the 23% annual small business effort. The available contract must be awarded through a  fair market price to the federal government and not inflated because the awardee is a small business.

One of the ways that you, as a contractor, can help initiate the Rule of Two is by responding to Requests for Information (RFIs). RFIs are announcements made in the pre-solicitation phase of a contract. They are used to collect market data to see if there are any businesses registered in the System for Award Management (SAM) who would take interest in a proposed contract. 

If a business falls within the Small Business Administration 's (SBA) size standard, and meets the capabilities of the RFI, the contracting officer may consider designating a set-aside for the contract. 

Tags: Information for New Vendors


Written by USFCR

US Federal Contractor Registration (USFCR) is the largest and most trusted System for Award Management (SAM) registration and renewal firm. USFCR also provides set-aside qualifications, including women-owned, veteran-owned, disadvantaged (8a), HUBZone and other federal contracting services, technology, and training.

    Subscribe to Our Blog

    Recent Posts