The SBA dropped a bombshell proposed rule last week that it estimates could result in an additional $6 billion in government contract task or delivery orders going to small businesses.
The rule would confirm that the the advantageous (though occasionally maligned) Rule of Two applies to competitions under multiple award contracts (MACs).
The increased use of large multi-award contracts helps and hurts small businesses
These huge contracting vehicles—Government-Wide Acquisition Contracts, Multi-Agency Contracts, Blanket Purchase Agreements—are generally indefinite delivery, indefinite quantity (“IDIQ”) where those companies that hold the contracts later compete for task or delivery orders placed by authorized agencies. Over the last decade or so, these vehicles have grown in popularity. Though they almost always include a small business reserve, some advocates have complained that the small businesses even if they are awarded are elbowed out when it comes time to compete for orders by super-massive contractors able to offer lower costs and more technological advantages.
The numbers somewhat bear this out. While the government has been successful in meeting its small business contracting goals, this has not led to more small businesses getting in to government contracts—the opposite. The number of small businesses receiving federal government contracts is shrinking and has been for awhile. And while about a quarter of all government spending goes to small businesses, only 19 percent of MAC spending goes to small businesses.
Therein lies the problem SBA seeks to solve.
SBA to the rescue?
This rule would make clear that the Rule of Two applies to competitions under MACs. This means that if the government has a reasonable expectation that it will get offers from two or more small business MAC holders that are competitive in terms of price, quality, and delivery, the task or delivery order should be set aside.
The proposed rule is implementing part of the recommendations in the Office of Federal Procurement Policy (“OFPP”) January memorandum “Increasing Small Business Participation on Multiple-Award Contracts“.
This would likely be a boon for small businesses contractors with MACs or in position to win MACs. However, it makes such contracts even more essential for small businesses to hold. To that end, hopefully the government will also implement the other main recommendation of the OFPP memo—ensuring such vehicles have built in on-ramps for small businesses that miss out on the initial offering.
If the rule goes in to effect, only GSA schedule MACs would be categorically exempt. Other exemptions would be possible—as in the case of national security, for example, as is already the case for Rule of Two procurements—on a case by case basis.
Comments are open from now until Christmas Eve.
SBA proposed rule would set aside more task orders for small businesses was last modified: October 28th, 2024 by