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Comments Deadline and Overview

Comments are due by December 24, 2024.

On October 25, the Small Business Administration (SBA) proposed a significant rule aimed at boosting participation of small businesses in multiple-award contracts. The proposed regulation seeks to implement the "Rule of Two" for task and delivery orders issued under these contracts, albeit with specified exceptions. Notably, the rule will not interfere with an agency’s discretion regarding which contract vehicle to utilize for any given requirement. The core objective behind this initiative is to compel contracting agencies utilizing multiple-award contracts with small-business awardees to commit to setting aside a greater number of task and delivery orders specifically for those small businesses.

Key Highlights of the Proposed Rule

The proposed SBA rule presents several critical takeaways:

1. Understanding the Rule of Two: The Rule of Two is an established SBA regulation that mandates agencies to reserve contract opportunities for small businesses (including 8(a) firms, HUBZone entities, etc.) if market research indicates that there are at least two capable small businesses that can perform the work competitively.

2. Court Conflicts: legal interpretations have been inconsistent regarding the applicability of the Rule of Two to task and delivery orders under multiple-award contracts. One court decision asserted that the Rule of Two must be applied, whereas a different ruling indicated it was not necessary in such cases.

3. Application of the New Rule: The SBA’s proposed regulation clearly asserts that henceforth, agencies will be required to apply the Rule of Two to task and delivery orders issued under multiple-award contracts.

The SBA aims to enhance the opportunities available to small businesses by increasing the volume of task and delivery orders specifically withheld for these entities. This change is especially targeting multiple-award contracts where both small and large businesses hold seats.

How to Submit Comments

Should you wish to comment on the proposed rule, you can do so electronically via the eRulemaking Portal at Regulations.gov or traditionally by mail to Donna Fudge, Lead Procurement Policy Analyst, Office of Policy Planning and Liaison, U.S. Small Business Administration, located at 409 Third Street SW, Washington, DC 20416. In your submission, please reference RIN 3245-AH95 or Docket Number SBA-2024-0002.

The Rule of Two Explained

The Rule of Two is articulated in 13 C.F.R. § 125.2(f) and 48 C.F.R. § 19.502-2. It obliges federal acquisitions exceeding the Simplified Acquisition Threshold (currently set at $250,000 as of 2024) to be reserved for small businesses when there’s reasonable assurance that offers will be received from at least two responsible small business entities that can provide competitive market prices, quality, and delivery timeliness. Notable conflicts have emerged from court rulings that debate the Rule’s applicability to task and delivery orders issued under multiple-award contracts.

Proposed Resolution and Intent

The SBA’s new proposal seeks to eliminate the existing dichotomy in court interpretations by establishing a consistent requirement that the Rule of Two must be applied to task and delivery orders stemming from multiple-award contracts. The proposed regulation directs agencies to set aside orders for small business contract holders when there is a realistic expectation of receiving offers from at least two such entities that can compete in terms of both pricing and qualifications.

Exclusions and Documentation Requirements

According to the proposal, the requirement to set aside orders based on the Rule of Two would not apply under certain exceptions. If none of these exceptions are valid and an agency opts not to reserve a task order for a small business, that agency is mandated to document its rationale and share it with the SBA. Similarly, should an agency decide to go forward with an order through a multiple-award contract that has no small-business award holders, it is required to document its decision-making process, including market research findings, and provide this to the SBA, allowing for an adequate timeframe for feedback.

Implications for Small Business Opportunities

Although the proposed rule primarily addresses task orders under multiple-award contracts, it does not influence how agencies choose their contracting vehicles. This means that small businesses could still miss out on certain opportunities if a contracting agency decides to go with a multiple-award contract lacking small business awardees. Conversely, should an agency engage a multiple-award contract that includes small business holders, it will generally need to conduct a Rule-of-Two analysis for each task order exceeding the micro-purchase threshold.

Proposed Regulatory Changes

The regulation requires a comprehensive re-evaluation and updating of procurement strategies within federal agencies to enable better small business participation and a decreased reliance on large contractors. The proposed changes provide:

• Clear responsibilities for agencies regarding small business considerations.
• Guidelines for market research processes necessary to support compliance with the Rule of Two.
• Defined parameters for documenting decisions related to small business set-asides.

How AI legalese decoder Can Assist

Navigating the complexities of federal regulations can be daunting, especially for small businesses trying to comply with new requirements like the proposed SBA regulations. This is where the AI legalese decoder comes into play. By breaking down legal jargon into straightforward, digestible language, AI legalese decoder can help stakeholders understand the implications of proposed rules, assist in preparing comments for submission, and ensure compliance with newly established requirements. This tool can empower small business owners and procurement officers alike, enabling them to make informed decisions about how best to utilize their opportunities within the federal contracting landscape.

By utilizing AI legalese decoder, stakeholders can demystify the proposed regulations, engage effectively in the comments process, and bolster their strategies for navigating federal contracts in compliance with the new rules.

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