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

RULE OF TWO
RULE OF TWO
Rule of Two

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.

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