New Guidance Calls on Agencies to Provide Small Businesses With More Access to Multiple Award Contracts

On Jan. 25, 2024, the Office of Federal Procurement Policy (OFPP), the Small Business Administration (SBA), and the Federal Acquisition Regulatory Council (FAR Council) released a set of recommendations to guide agencies in increasing the number of multiple-award contracts – which are, generally, contracts that the government awards to more than one vendor for the same service or supply – set-aside for small businesses. The memorandum outlining those recommendations indicated that the SBA and the FAR Council are already working on the rulemaking that will formalize those suggestions. Agencies were encouraged to adopt the recommendations before the rulemaking process was complete.

The guidance provided some details on how agencies are to implement those recommendations.

Apply the SBA’s “Rule of Two” to Contract Orders More Broadly.

The most noteworthy portion of this guidance is the direction for agencies to set aside any orders over the micro-purchase threshold (MPT), which is currently set at $10,000, for small business contract holders when the contracting officer determines that there is a reasonable expectation of obtaining offers from two or more small businesses under the multiple-award contract that are competitive in terms of market prices, quality, and delivery. While the guidance excludes any situations where an order cites an exception to competition, to fair opportunity, or to agency procedures for the exceptions, it directs contracting officers to document their basis for following an alternative approach and to provide a copy of that documentation to the small business specialist for any order beyond the MPT, even in cases where the multiple-award contracts have only one small business contract holder or none.

In other words, the guidance seeks to expand how often agencies apply the policy usually referenced as the SBA’s “Rule of Two,” which agencies apply in certain cases. The direction is especially significant because, in recent years, the Government Accountability Office (GAO), has taken the view that agencies do not have to apply the “Rule of Two” in all instances involving multiple-award contracts.

Maximize Orders to Small Businesses under the Simplified Acquisition Threshold (SAT) to the Maximum Extent Practicable.

The guidance expresses some concern that a significant portion of orders under the Simplified Acquisition Threshold (SAT), currently set at $250,000, does not go to small businesses. Now, it directs agency contract teams to work with their small business directors to identify and ensure that small businesses receive exclusive set-aside opportunities for re-competes of any orders under SAT where market research shows that the small businesses could perform the order.

Engage Agency Small Business Specialists Earlier in the Acquisition Planning for Multiple Award Contract Strategies.

In line with the approach that some have encouraged at least as far back as OFPP’s Feb. 18, 1999, Memorandum on the Best Practices for Multiple Award Task and Delivery Order Contracting, the new guidance reinforces the need for agencies to consider obtaining small business awardees for the multiple-award contract earlier in the acquisition process.

Consider On-Ramps When Developing the Acquisition Strategy.

Agencies must now also explicitly address the use of on-ramps, which allow small and large businesses to be added during the performance period for long-term contracts, as part of the acquisition plan.

Encouraging the Use of Best-in-Class (BIC) Contracts.

The guidance touts the benefits of BIC contracts, which are “enterprise multiple-award contracts that meet a rigorous set of criteria,” as defined by Office of Management and Budget (OMB).” They include use of category and performance management strategies and small business best practices. The BIC status is reviewed annually and calls on agencies seeking that designation to “demonstrate a commitment to small business considerations by developing and executing a plan to maintain or increase small business participation whenever possible,” through the above-mentioned recommendations.

Final Thoughts.

Although this guidance emphasizes getting small businesses more involved in multiple-award contracts and sets out at least one major policy update, small business contractors will have to wait to see how closely the agencies choose to follow this guidance. Despite encouraging agencies to take early action on these recommendations, it may take some time before agencies actually put these recommendations into action. Until then, small businesses should emphasize this guidance in their efforts to have agencies set aside more multiple-award contracts with an eye toward small business involvement.

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