OFPP Implements “Rule of Two” Expansion for Small Businesses on Multiple Award Contracts

The Office of Federal Procurement Policy (OFPP) is concerned about the increasing amount of spending against governmentwide acquisition contracts and is pushing agencies to take steps to ensure that small businesses have ample opportunities to participate on these contracts. The Biden administration recently issued a memo to instruct agencies to make specific changes, such as on-ramps and applying the “rule of two,” to increase contracting opportunities for small and disadvantaged businesses. The Small Business Administration (SBA) Administrator Isabel Casillas Guzman supported the new guidance and emphasized the importance of diversifying the federal supplier base.

OFPP is also encouraging better communication with small businesses as well as the SBA’s Procurement Center Representatives (PCR) and agency small business specialists when developing multiple-award contracts. The memo comes as agencies have spent record amounts of money with small businesses, with nearly $163 billion going to small businesses in fiscal 2022. However, despite the healthy small business percentages, the number of small contractors continues to decline, posing a significant challenge that OFPP is aiming to address with this new guidance.

The memo introduces significant changes, including the application of the “rule of two” to multiple award contracts and the consideration of small business utilization when making procurement decisions. The memo also highlights the impending changes to the Federal Acquisition Regulations and encourages early adoption of the management steps outlined in the memo to help agencies meet their contracting goals.

Overall, OFPP’s memo represents a significant effort to support small and disadvantaged businesses and ensure a diverse and resilient federal marketplace. However, there have been concerns raised about the implications of these changes, particularly regarding the application of the “rule of two” and the potential impact on government contractors. Despite these concerns, the memo represents a proactive approach to addressing the challenges faced by small businesses in federal contracting.

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