One of the most enduring principles of the Federal Acquisition Regulations (FAR) is that the federal government use its resources to direct as many contract awards as practicable to small businesses. The government considers small businesses a vital component of our national economy and encourages the use of small businesses in contracting.
With the adoption of sweeping changes to the FAR as a result of the Federal Acquisition Streamlining Act and the Federal Acquisition Reform Act in the mid -1990s, small businesses felt it became harder to compete for federal business. Specifically, the increased use of multiple award and multi-agency contracts and GSA schedule contracts has led to agencies consolidating buys that used to be on a local, annual basis into multi-year and multi-location umbrella contracts, making it easier to award and administer their contractual needs. Unfortunately, this also had the effect of eliminating small businesses from the opportunities, since the larger and more diverse IDIQ awards, many with much broader scopes of work, meant that only large businesses could respond to the government’s requirements.
There have been many solutions proposed and implemented to address the concerns of small businesses over the last twenty years. Most prominently, many agencies implemented procedures that specified requirements needed to be broken into separate actions that would allow a portion of the contract to be set-aside for small businesses and results in the solicitation and award of two separate requirements.
The SBA has issued a rule, effective December 31, 2013, implementing the 2010 Jobs Act concerning small business participation and providing guidance to federal agencies in the procedures to be used in establishing “reserves” for small business awards. (A case to modify the FAR to include implementation of the Act is in the works; and, as of November 2014, is being drafted by the FAR Council.) The Rule defines “reserve” as
(1) An acquisition conducted using full and open competition where the contracting officer makes–
(i) Two or more contract awards to any one type of small business concern (e.g., small business, 8(a), HUBZone, SDVO SBC, WOSB or EDWOSB) and competes any orders solely amongst the specified types of small business concerns if the “rule of two” or any alternative set-aside requirements provided in the small business program have been met;
(ii) Several awards to several different types of small businesses (e.g., one to 8(a), one to HUBZone, one to SDVO SBC, one to WOSB or EDWOSB) and competes any orders solely amongst all of the small business concerns if the “rule of two” has been met; or
(iii) One contract award to any one type of small business concern (e.g., small business, 8(a), HUBZone, SDVO SBC, WOSB or EDWOSB) and subsequently issues orders directly to that concern.
The SBA rule requires that agencies “reserve” one or more awards for small businesses on multiple award contracts that are established through full and open competition. Thus, agencies no longer have to issue parallel solicitations for large and small businesses. The rule does not change the requirement that a contracting officer has to consider setting aside a contract for small businesses if at least two small businesses can compete for the entire award. It merely provides a method to award a small business a contract even if they cannot perform the full scope of activities under the contract.
How this specifically effects small businesses and how they compete for these awards will be addressed in a second article.