Overview
FAR 19.503 establishes the discretionary authority for contracting officers to reserve one or more contract awards for small businesses during multiple-award, full-and-open competitions. This mechanism is utilized specifically when market research indicates that neither a total nor a partial set-aside is feasible.
Key Rules
- Discretionary Authority: Contracting officers may reserve awards in multiple-award procurements if market research shows a small business "Rule of Two" cannot be met for the entire requirement or for distinct portions of it.
- Conditions for Use: A reserve is only permitted if:
- A total set-aside is not feasible (no expectation of two or more small businesses performing the entire requirement at fair market price).
- A partial set-aside is not feasible (the requirement cannot be divided, or two or more small businesses cannot perform any specific portion).
- Teaming Arrangements: In cases of bundled requirements, reserves can be awarded to small businesses utilizing a Small Business Teaming Arrangement.
- Subcontracting Limitations: The Limitations on Subcontracting (LoS) and the Nonmanufacturer Rule (NMR) do not apply at the base contract level for reserves. However, they do apply to any individual task orders that are subsequently set aside or issued directly to a small business under that reserve.
- Eligibility: Standard program eligibility requirements for the specific small business categories remain in effect.
Practical Implications
- Reserves serve as a "safety net" for small business participation in large-scale, complex acquisitions where the total scope might otherwise exclude small firms from prime contract opportunities.
- Contractors benefit from increased flexibility at the contract award stage because subcontracting limitations are deferred; however, they must be prepared to demonstrate full compliance with those limitations when competing for specific task orders under the contract.