Overview
This section prescribes the policies and procedures for setting aside federal acquisitions for small business participation, establishing the mandatory "Rule of Two" to ensure small businesses receive a fair proportion of government contracts. It details the criteria for total and partial set-asides, the process for withdrawing set-asides, and the Small Business Administration’s (SBA) right to appeal contracting officer decisions.
Key Rules
- The Rule of Two: Contracting officers must set aside acquisitions when there is a reasonable expectation that offers will be obtained from at least two responsible small business concerns and award will be made at fair market prices.
- Threshold Requirements:
- Acquisitions between the micro-purchase threshold and the simplified acquisition threshold (SAT) are automatically set aside for small businesses unless the Rule of Two cannot be met.
- Acquisitions above the SAT must be set aside if the Rule of Two is met.
- Partial Set-Asides: If a total set-aside is not appropriate, a portion of an acquisition (excluding construction) may be set aside if the requirement is severable and the Rule of Two applies to that specific portion.
- Insufficient Reasons to Avoid Set-Asides: Agencies cannot skip a set-aside based solely on factors such as the acquisition being classified, having a short 30-day response time, using a "brand name or equal" description, or because small businesses already hold a large percentage of previous contracts.
- Withdrawal and Dissolution: A set-aside may be withdrawn if it is detrimental to the public interest (e.g., prices exceed fair market value). It is automatically dissolved if no acceptable small business offers are received.
- SBA Appeal Rights: The SBA may appeal a contracting officer's decision not to set aside a requirement. This follows a specific hierarchy from the Head of the Contracting Activity (HCA) up to the Agency Head.
Practical Implications
- Market Research is Critical: Contracting officers must document robust market research to justify not setting aside a requirement, as the default position for most mid-range acquisitions is a small business set-aside.
- SBA Oversight: The SBA Procurement Center Representative (PCR) acts as a powerful advocate; if they disagree with a procurement strategy, they can legally compel the agency to suspend the acquisition during the appeal process.