Small-business programs
What is the rule of two in government contracting?
The rule of two is the requirement that a contracting officer set an acquisition above the simplified acquisition threshold aside for small business whenever there is a reasonable expectation that offers will be obtained from at least two responsible small business concerns and that award will be made at fair market prices.
Also written as: two responsible small business concerns, FAR 19.502-2(b).
FAR 19.502-2(b) states both halves of the test, and both must be satisfied: two or more responsible small businesses expected to offer, and award expected at fair market prices. It is not discretionary once the expectation exists.
The expectation is formed from market research — which in practice means the responses to a sources-sought notice or RFI, the firms registered in SAM.gov under the relevant NAICS code, and the agency's own award history. That is the mechanism by which answering a market-research notice changes what gets set aside.
Below the simplified acquisition threshold the reservation is stronger still: FAR 19.502-2(a) reserves acquisitions above the micro-purchase threshold and not over the SAT exclusively for small business unless the contracting officer determines there is no reasonable expectation of two competitive small business offers.
What this means when you bid
If a requirement in your trade keeps going unrestricted, the fix is usually that no capable small business answered the market research. Answer it.
Where this definition comes from
Federal contracting is one of the few fields where the authoritative answer is free, public and one click away. These are the sources this page is built from — go and read them.
- FAR 19.502-2→
Total small business set-asides.
- FAR 10.001→
Market research policy.
This page explains a term in plain English and cites the authority it comes from. It is not legal advice, and the regulation governs where this page and the regulation differ.
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Rule of two— common questions
- What is the rule of two in government contracting?
- The rule of two is the requirement that a contracting officer set an acquisition above the simplified acquisition threshold aside for small business whenever there is a reasonable expectation that offers will be obtained from at least two responsible small business concerns and that award will be made at fair market prices.
- Why does the rule of two matter when you are bidding?
- If a requirement in your trade keeps going unrestricted, the fix is usually that no capable small business answered the market research. Answer it.
Related terms
- Set-aside
- RFI — Request for Information
- Simplified acquisition threshold — Simplified Acquisition Threshold (SAT)
- Size standard
- Capability statement