Rule of Two

The Federal Acquisition Regulations (“FAR”) implements the Small Business Act ¹, in part, by requiring ² Contracting Officers to set aside acquisitions in excess of $100,000 for small business if there is a reasonable expectation that two (2) or more responsible and responsive small businesses will submit fair market price offers.  Therefore contracts with an expected value exceeding
$100,000 must be set aside exclusively for small business if there is a reasonable expectation that (1) offers will be received from two (2) or more small businesses concerns offering the products and services of different small business concerns and (2) award will be made at fair market prices.

This requirement was originally thought to apply only to new acquisitions and new contracts, not to new task or delivery orders under a multiple award contract.

That theory was challenged in the protest filed with the General Accountability Office (“GAO”) by Delex Systems, Inc., (“Delex”), File B-400403, dated October 8, 2008.  Delex held an indefinite delivery / indefinite quantity (“ID/IQ”) contract with the Naval Air Systems Command (“NAVAIR”) for training systems.  NAVAIR awarded eight training systems contracts four to large businesses and four to small businesses.  NAVAIR issued a Delivery Order Proposal Request (“DOPR”) for General Aviation Training Products and contemplated a small business set aside.  Shortly thereafter, the Small Business Administration (“SBA”) changed regulations pertaining to small business size status.  NAVAIR requested the small businesses to re-certify their size status and two business concerns self-certified as small business.

The Contracting Officer (“CO”) decided two proposals from small businesses would not be received, and reissued the solicitation as full and open competition among all ID/IQ contract holders.  Delex then protested the failure by the CO to comply with the Rule of Two.

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