FedSubK Feature: The "Rule of Two" and the Rest of the Story
If you are a small business, you’ve probably heard that if there are two small businesses interested in a solicitation, the Government is required to set aside that opportunity for small businesses.
(INSERT BUZZER SOUND HERE)
Not so fast. It’s a little more complicated than that so we are going to break down what the “Rule of Two” means to you and when it comes in and works to your advantage.
Let’s start first with…
What is the “Rule of Two”?
The “Rule of Two” is inculcated in Federal procurement via the Federal Acquisition Regulation (FAR) and Title 13 of the Code of Federal Regulations (CFR). In essence it means that, over the micro-purchase threshold (see FAR Subpart 2.101), the Contracting Officer must determine that there is reason to believe that quotes or offers will be obtained from at least two or more responsible small business concerns which are competitive in terms of fair market price, quality, and delivery.
When Does the Rule of Two Apply?
Simplified Acquisitions. Simplified Acquisitions are those opportunities where the total aggregate dollar value does not exceed the Simplified Acquisition Threshold (SAT), presently $250,000. The Federal Acquisition Regulation (FAR) Subpart 19.502-2(a) says that the Contracting Officer shall set aside simplified acquisitions for small businesses unless there is NOT a reasonable expectation of obtaining offers from two or more responsible small business concerns that are competitive in terms of fair market prices, quality, and delivery.
Over the Simplified Acquisition. These actions are anything over the SAT (over $250,000 in total aggregate dollar value). FAR Subpart 19.502-2(b) says that the Contracting Officer shall set aside any acquisition over the simplified acquisition threshold for small business participation when there is a reasonable expectation that-
(1) Offers will be obtained from at least two responsible small business concerns; and
(2) Award will be made at fair market prices.
Total small business set-asides shall not be made unless such a reasonable expectation exists.
Task or Delivery Orders under Multiple Award Contracts. The Office of Management and Budget (OMB) issued a memo titled, “Increasing Small Business Participation on Multiple-Award Contracts” (1/25/2024) requiring that, except for orders citing an exception to competition (as allowed in accordance with FAR Subpart 16.505(b)(2), exceptions to fair opportunity, or agency procedures), that orders over the micro-purchase threshold should be set aside 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.”
The Department of Defense (DoD) also issued its own memo (4/19/2024) stating,
a. “Under multiple-award contracts, acquisition teams should consider setting aside orders over the micro-purchase threshold (MPT) for small business contract holders (to include specific small business socio-economic set asides as applicable) 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 contracts that are competitive in terms of market prices, quality, and delivery.”
b. “If there are not at least two small business contract holders that are competitive for the requirement, the contracting officer is reminded to document the basis for not using an order set-aside via a DD Form 2579, "Small Business Coordination Record" in accordance with DFARS 219.201(c)(10)(B), agency procedures and the referenced OMB memorandum.”
Partial Set Asides to Small Businesses. Whan an acquisition is not appropriate for a total small business set-aside, but a logical portion or portions of the work (except for construction) lends itself to a partial small business set-aside, the “Rule of Two” is also applied. FAR 19.502-3(a) mandates that the Contracting Officer shall set aside that portion or portions exclusively for small business participation when—
(1) Market research indicates that a total set-aside is not appropriate (see 19.502-2),
(2) The requirement can be divided into distinct portions,
(3) The acquisition is not subject to simplified acquisition procedures,
(4) Two or more responsible small business concerns are reasonably expected to submit offers on the set-aside portion or portions of the acquisition that are competitive in terms of fair market prices, quality, and delivery,
(5) The specific program eligibility requirements identified in this part apply, and
(6) The solicitation will result in a contract other than a multiple-award contract (see 2.101 for definition of multiple-award contract).”
What Does the Contracting Officer Consider When Applying the “Rule of Two”?
Going back to the rule, let’s break down what the Contracting Officer’s considerations must be.
Are there two or more responsible small business concerns? The Contracting Officer may look at procurement history, past and current market research using the methods outlined in FAR Part 10 given the scope, complexity, and value of the action in question, and determine if the work falls within that which small businesses can reasonably perform, applying the general standards at FAR Subpart 9.104-1. The general standards must all be met by prospective contractors:
(a) Have adequate financial resources to perform the contract, or the ability to obtain them.
(b) Be able to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and governmental business commitments.
(c) Have a satisfactory performance record. A prospective contractor shall not be determined responsible or nonresponsible solely because of a lack of relevant performance history, except as provided under FAR Subpart 9.104-2.
(d) Have a satisfactory record of integrity and business ethics.
(e) Have the necessary organization, experience, accounting and operational controls, and technical skills, or the ability to obtain them (including, as appropriate, such elements as production control procedures, property control systems, quality assurance measures, and safety programs applicable to materials to be produced or services to be performed by the prospective contractor and subcontractors).
(f) Have the necessary production, construction, and technical equipment and facilities, or the ability to obtain them.
(g) Be otherwise qualified and eligible to receive an award under applicable laws and regulations.
Small businesses must also be determined capable of meeting the limitations on subcontracting, as required by the type of work performed (i.e., supplies, services, construction).
Are those same small business concerns expected to submit offers? The Contracting Officer may determine if those small businesses have submitted offers in the past for same/similar work and the likelihood they would submit an offer now, to include seeking statements of interest.
These two questions above are why it is SO important that if you are remotely thinking this opportunity is something you could perform as a small business prime or could team with another small business to perform, you MUST answer the RFI. Those RFI responses inform the answers to these two questions.
Will the offer be competitive in terms of fair market price(s), quality, and delivery? If the small business has submitted an offer in the past for same/similar work, the Contracting Officer may choose to look at the competitiveness of the pricing submitted at that time. The Contracting Officer may explore contractor websites, look at current Federal and private sector award info, catalog or market pricing available, or current contract pricing (i.e., GSA Schedule, other agency contracts, etc.).
Are other factors considered?
- Shifting economic or industrial factors may result in changes in the market since the last purchase was made.
- The Contracting Officer should consider additional market research using the methods in FAR Part 10, as appropriate for the dollar value of the action, before locking in the acquisition strategy.
- The Contracting Officer may also look at SAM.gov exclusions, responsibility, and qualification information.
- Risk if offers are not received from at least two responsible small business offerors. There could be reprocurement costs if the single offer is not responsive (i.e., does not meet the requirements set forth in the Request for Quote (RFQ) or Request for Proposal (RFP).
o In DoD in particular, if only one offer is received in response to a competitive solicitation that the offer but comply with statutory requirements for certified cost or pricing data (see DFARS Clause 252.215-7008 Only One Offer).
o If less than 30 days was provided for the receipt of offers and only one offer was received, the Government may be required to revise the opportunity to promote more competition and resolicit for an additional 30-day period. This could add risk depending on the duration of the funds available for obligation and/or mission requirements.
What is with all the “Shalls” and “Shoulds” and “Musts” and “May”?
Did you pick up on those throughout this article? Well, those tell you what the Contracting Officer is directed by the regulation to do versus what they only need to consider doing. “Shall” and “must” are mandatory; “should” and “may” are not.
Those last two are where the “gray area” of contracting comes into play and the Contracting Officer’s judgement is used to determine if they need the info or not.
And this is how the Rule of Two doesn’t always mean that a solicitation will have an acquisition strategy that is a small business set-aside even when two small businesses appear to be interested and qualified. A simple rule isn’t always as simple to follow when subjectivity is part of the process and can come into play. The Contracting Officer doesn’t make these decisions in a vacuum; they have a team of advisors like the Project Manager, agency Small Business Specialist, SBA PCR, and others. Together, they will decide how these factors apply and are met by small businesses as it relates to the acquisition strategy for an opportunity based on their collective knowledge of the industry, the market, and competition pool and its competitiveness.
And as Paul Harvey used to say…”now you know the rest of the story.”
(Aug 2024)
.webp)
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The FAR Overhaul: Long-Deferred Maintenance on the Government's Procurement Highway
If you’ve ever worked in federal procurement — as a contracting professional, program manager, small business, prime, sub, or advisor — you’ve probably had this moment:
You’re doing your best to follow the rules…and suddenly you hit a clause, a cross-reference, or a requirement that feels like it came out of nowhere.
That’s because the Federal Acquisition Regulation (FAR) isn’t just a set of rules. It’s a highway system. A massive, heavily traveled road network that’s been patched, expanded, and rerouted for decades — and in many areas, it’s operating with years of deferred maintenance.
Let’s talk about what that really means using the highway analogy to explain why the Revolutionary FAR Overhaul isn't as "revolutionary" as some might think.
The FAR is like a Well-Traveled Federal Highway
The FAR is the main road that nearly every federal acquisition travels on. And like any highway system:
- Everyone uses it
- Everyone depends on it
- And over time, it’s been modified in ways that made sense in the moment… but created complexity later
If you look at any highway on Google Maps it shows a rather clean route. FAR, we were taught, was set up to be the same way: requirements, procedures, clauses, and guidance. But once you’re actually “driving” that road? Well, you realize the terrain is full of twists and turns. It's more complicated than you realized.
Hidden Guardrails: The Rules You Don’t See Until You Need Them
Some of the FAR’s most critical compliance safeguards are like guardrails buried under weeds or snow. They’re there for a reason: to prevent waste, protect fairness, ensure accountability. But they’re not always easy to spot. In practice, you often discover them when someone asks:
“Did you document that?”
“Where’s your justification?”
“Why didn’t you compete this?”
“Which clause applies here?”
That’s when you realize the guardrails were present the whole time — just not visible.
Guardrails are added all the time or in the process of being fixed (via rulemaking). But all that construction can clog up traffic and make the time for arrival (contract award) continually recalculate.
Hazards & Risks: Potholes, Speed Traps, and Fog
Now add in the hazards:
- Potholes = ambiguity and unclear language
- Fog = inconsistent interpretation across offices and agencies
- Construction zones = evolving policy updates, executive orders, and new mandates
- Speed traps = protests, audits, IG scrutiny, and compliance reviews
And these hazards hit different people differently. The same stretch of FAR may feel smooth to one team and treacherous to another. That’s not because the people are bad at driving — it’s because the road is uneven.
Side Roads & Gray Areas: The Detours Everyone Knows About
Then there are the side roads. Some are official alternate routes: simplified acquisition procedures, flexibilities, exceptions, and FAR “shortcuts” that exist for good reasons. Those are the routes people take because they’ve always taken them. Indicators might be hearing yourself or your peer say --
“We’ve always done it this way.”
“That’s how the last CO handled it.”
“This should be faster.”
“It’ll probably be fine.”
Side roads aren’t automatically wrong. But they come with risks, Eventually someone asks, “Why did you go that way instead of the main route?”
Others are the gray areas -- the gravel roads and roads only the locals (experienced COs/KOs) know. Those routes have to be navigated very carefully and even the best driver can have issues even if there is less traffic. Many times they beat those on the highway to their destination, but it's only because they know where all the seen and unseen hazards are from their years driving that route.
So What Is the FAR Overhaul, Really?
Here’s the key point:
✅ It is NOT building a new road.
✅ It is NOT bulldozing the FAR and replacing it.
✅ It IS road maintenance -- the kind that should've been done years ago.
And when you have decades of deferred maintenance, it takes a lot of work to make that road appear to be what it was all along.
But that's not "revolutionary". That's finally doing the work you've been putting off because you couldn't get to it.
The County (in this case, the FAR Council, being the governing body over the FAR and its contents) could always do a little better job at maintenance than they do. But their budget and resources are low and their workload demands are very high (just take a look at the FAR Open Case Report). Sometimes it takes a new Sheriff In town (a new Administration) driving down the highway see what those too close to it should have been aware of all along. Layers upon layers of deferred maintenance.
The FAR Overhaul is best understood as freshening up the same highway.
- Clearing overgrowth = outdated and redundant material and non-regulatory clutter.
- Improving signage = clarity and usability.
- Standardizing merges and exits = better consistency and flow.
- Removing obsolete detours = non-regulatory clutter, outdated terminology, and rules that no longer serve their purpose.
And a bonus is the updated maps available for your travels (FAR Companion and Practitioner Albums)
The destination isn’t changing. But the route is FAR more functional -- see how I did that. ;)
Why This Metaphor Matters
When people hear the word “overhaul,” they often assume “Everything is changing.” But what this effort really signals is “We are fixing the road we’ve been driving on for decades.” That’s important because procurement has become more complex, acquisition timelines are under pressure, and both agencies and industry need guidance that is easier to understand, apply, and defend.
If the FAR Overhaul is the same old FAR highway with better pavement, clearer signs, fewer surprises, and, hopefully, less time lost in detours, fewer compliance collisions, and a smoother drive for everyone. The biggest difference is that now all travelers know what the locals knew all along. How to get from point A to point B in less time using an updated road system and map.
Safe travels on the FAR Highway in 2026!
The FAR Is a Highway System… and the Revolutionary FAR Overhaul Is Long-Overdue Road Work
Contract Types and Contract Vehicles: The Difference Matters
Nuances matter in Federal Contracting. Those who haven't lived the Federal Contracting experience day in and day out may believe it's minor details that don't make a difference. They don't pick up on the nuances.
For those that have lived it from behind the walls of an agency know how those nuances can make a difference between how you are perceived building relationships with primes, potential team members and, most importantly, agency decision-makers.
One nuance -- Contract Types and Contract Vehicles.
Contract TYPES are defined by the pricing structure and risk ratio between the parties. They are:
✅️ Firm-Fixed-Price (FFP) to include FFP with Economic Price Adjustment (FFP w/EPA), Prospective Price Determination, Fixed-Ceiling Priced Contracts with Retroactive Price Redetermination, and those with a Level-of-Effort term (FFP-LOE).
✅️ Cost Reimbursement (or "Cost-Plus" ("CP")) to include cost sharing, Cost-Plus-Fixed-Fee (CPFF), Award Fee (CPAF), and Incentive Fee (CPIF).
✅️ Time-and-Materials (T&M) with materials on a fixed-price or cost-reimbursement basis.
✅️ Labor-Hour (L-H).
Contract VEHICLES provide the performance and administrative structure for the Contract Type. Those are:
✅️ Definitive Contracts are for specific stand-alone project(s) that fall above the Simplified Acquisition Threshold (SAT).
✅️ Indefinite Delivery Vehicles (IDVs) include Indefinite Delivery Indefinite Quantity contracts (IDIQs), Definitely Quantity, and Requirements vehicles. They include, but are NOT exclusively, governmentwide (GWACs), agency-specific, or GSA Multiple Award Schedules (MAS).
➡️➡️ Under the IDV umbrella falls task orders (services) & delivery orders (products) and specific instructions for who can order and how.
✅️ Agreements such as Basic Agreements, Basic Ordering Agreements (BOAs), and Blanket Purchase Agreements (BPAs).
➡️ ➡️ They are most often an umbrella for calls / orders (agencies call them both of these things even where FAR / RFO is specific, so it is easy to get confused), but don't have to be.
✅️ Purchase Orders (POs) (actions that fall under SAT).
✅️ Letter Contracts.
Yea, I know. FAR (even the RFO) lumps them all together as "Contract Types" in Part 16. But none stand alone. In my opinion, the FAR rewriters blew their chance to clarify this important piece of the procurement puzzle. For example:
▶️ IDIQs for services may include the ability to issue multiple types of task orders like fixed-priced, cost, T&M, and L-H under them, or only one type.
▶️ Definitive contract vehicles can be any contract type or combination thereof (hybrid) as indicated in the contract line items (CLINs) and for which terms and conditions are included.
Bottom line is -- There is not a complete understanding of a contract vehicle without defining its contract type(s).
If you see folks lumping TYPES and VEHICLES together in a discussion without explaining the difference, you know they aren't familiar with the nuances of this part of the FAR / RFO.
Follow those that are and have. Visit fedsubk.com and Expand your Federal Contracting knowledge today.
There are nuances in every FAR / RFO Part, including Part 16. We talk about why it is important to know and understand them in this marketplace.
FedSubK Feature: Be Seen! Why Your SBS Profile is So Important
UPDATED November 2025 to incorporate changes from the SBA Dynamic Small Business Search (DSBS) to the new SBA Small Business Search (SBS)
I’ve posted on LinkedIn a lot recently about ways to be seen as a little fish in the big pond that is the Federal marketplace. Every GovCon consultant has a take on the best entry points with agencies. My take is there is only one place small businesses MUST put their best foot forward to be quickly and easily seen by Federal buyers for potential opportunities and influence small business set-asides.
The Small Business Administration (SBA) Small Business Search (SBS) is THE PLACE you must be on your A-game.
The Small Business Search (SBS) is a database in which SBA houses information on the current pool of certificated small businesses. Presently, small businesses that do not have certifications or are self-certified, may also create a profile in this database. The SBS is used by contracting officers, small business specialists, large prime contractors, and other small businesses looking for teaming partners to find small businesses that can help meet Federal requirements and identify businesses that can help the Government (or a prime contractor) meet its small business goals. SBS is one of the first--and often only--sources used in market research by agencies to determine the numbers of small businesses able to provide products or services by North American Industry Classification System (NAICS) code.
You can see why this might be an important place to pay attention to, eh?
Businesses have forgotten about the SBS in the last few years because SAM.gov no longer sends small business registrants directly to SBS at the end of their registration to complete the profile like it used to. I HUGE bummer. Businesses now must wait for their SAM.gov registration to be activated, then they can establish an SBA SBS account, claim their entity record, and fill in their company profile in the SBS system. Federal buyers are looking for detailed information from SBS to use as part of their market research efforts.
SBS isn’t only for market research.
Even more importantly, the SBS shows Federal buyers the status of any pending certification applications for the purpose of determining whether you are eligible to compete for a set-aside action. For example, an Economically Disadvantaged Woman Owned Small Business (EDWOSB) can still submit an offer for an WOSB set-aside even with a pending application for certification showing in the SBS. Contracting Officers often use SBS as a source to confirm the socioeconomic certification status and 8(a) program participation along with SAM.gov.
While MySBA Certifications automatically sends socioeconomic certification status to SAM.gov and updates the requisite reps and certs to reflect the correct socioeconomic status, recently it has taken weeks for that migration to occur. WOSBs and EDWOSBs have reported not seeing their correct socioeconomic status reflected in their SAM entity record.
Businesses should always check their SAM entity record to ensure that the proper status is shown within a reasonable time after receipt of an active certification status; usually within 14 business days. If the record is not accurately reflected, you can contact answerdesk@sba.gov or the SBA socioeconomic program under which your business was certified for assistance. If a Contracting Officer says that your SAM record does not reflect the status claimed, ask the Contracting Officer to check SBS for the more accurate information because of these delays.
So now let’s talk about BEING SEEN in SBS and walk through each part of the registration.
Understanding how to maximize the fields in SBS is how you can make the best possible first impression so that Federal buyers want to learn more about YOU!
The Key Words
Often businesses pluck these from thin air and over-generalized based on what they think the Government wants to see. Key words need to reflect and incorporate aspects of your primary NAICS, secondary NAICS, and what you can provide under those NAICS. If you use key words that don’t reflect your primary NAICS, you’ll leave the Government scratching their head about you. They won’t understand the message you’re sending about your company. Be consistent and specific with key words while tying into your NAICS codes in order to leave the best impression. You have 500 characters -- use them wisely.
The Website
Be sure that you include the URL for any website you have. Make it be more than a landing page. It needs to tell your story. It needs to include information about your company, what you sell, past customers, and products or solutions you provide. And most of all, it must be polished. Scrub your site hard for formatting, typos, grammatical errors, etc. Acquisition personnel using the SBS will often quickly click on the site to see just how polished it is. When it looks good, they get the impression you know your stuff and pay attention to details.
The Capabilities Narrative
This is the written equivalent of your elevator pitch. This section should include all the things you’d include in that two-minute speech. Hit hard on what your company specialized in and its core product or service areas. Show the business’s focus and avoid being all over the map by overpromising on the breadth of work the business performs.
Near the end of the capabilities narrative, list any socioeconomic certifications Why not lead with it? Because that certification is only part of your business, and it alone does not get you interest from the Contracting Officer. End with that information so the Contracting Officer can easily see it in a quick query and get your business into their market research counts.
Lastly, identify any government contract vehicle or GSA Schedule your company may hold. If you can catch their eye that you have an existing GSA Schedule or your business participates in the 8(a) program, you’ll get counted and likely get a look in terms of the Contracting Officer wanting to know more. If they need to meet a socioeconomic goal, they can see quickly. You’re helping the Contracting Officer do their job. They LOVE that! (And made another great first impression!)
SBS now also includes a field to add a link to your online capabilities statement. Use it!
“Extras” You Should Never Skip
Performance History
I cannot say this enough…if you history doing work for any Government or quasi-Government entity at any level -- Federal, State, or Local level -- list them! Don’t play the “they’ll see that when I propose” game. Showing performance history—even if it is minimal or commercial and not Government--helps. How? It proves the viability of the business and the size and types of projects you’ve completed. Those goes a long way to determining eligibility of the business based on performance on same / similar work of a same / similar dollar value (“Rule of Two” stuff – you can read more about that here).
Review Your Profile
Go out to the SBS site and use the filters for your NAICS, business name, geographic location, and business types. Make sure your show up and see how your profile measures up to your competitors. Look at their records and see what they included that you haven’t. Use the good ideas of others, but don’t plagiarize. Contracting Officers will see that and that won’t look good for either of you.
Keep Evolving
Your SBS isn’t something that you can just set and forget either. Make reviewing your profile in SBS something you do when you renew your SAM.gov registration every year. If something major changes in your business focus, NAICS, or socioeconomic status, make associated changes in SBS.
What GovCon doesn't always talk about -- The SBS Influence
When doing market research and trying to determine if an acquisition should be set-aside for small businesses, the Government is not only counting about the numbers of small businesses that claim they can do the work under a NAICS code in SBS. They are analyzing your SBS profile to see if your business could be one of the "... two or more responsible small business concerns that are competitive in terms of fair market prices, quality, and delivery" and they have “…a reasonable expectation of obtaining an offer…” from you. (There’s that pesky “Rule of Two” again.)
In other words, based on what they see, could you submit a proposal likely to win? And how does a Contracting Officer determine that? Simply put... the your answers to everything we just covered.
Completing your profile helps tip the market research scales toward a small businesses set-aside and possibly a specific socioeconomic set-aside. If you're all over the map in your SBS narrative, the Government will not consider you viable eligible contractor towards that “Rule of Two” and could possible choose to go another way with their acquisition strategy, away from a small business set-aside. Or worse, they set it aside but remember your name from the market research as one of the businesses that didn’t make their initial market analysis cut.
Influence where you can! SBS is the place where you have a lot of influence!
Have I convinced you to get out there and create or update your SBS profile yet?
While the system is no longer got the word "Dynamic" in the title, don't forget its meaning. Life is dynamic, business is dynamic, and your SBS profile should still be dynamic, too. Get it completed ASAP. You can’t afford not to.
Remember again, SBS IS WHERE FEDERAL BUYERS GO TO FIND SMALL BUSINESSES and where other small businesses go to find teaming partners and subcontractors.
Get out there, GET NOTICED, BE SEEN, and STAY DYNAMIC!
(former title: FedSubK Feature: Be A Dynamic Small Business!)
