CLAIMS COURT PROVIDES SOME DIRECTION ON WHEN THE RULE OF TWO APPLIES
The “Rule of Two” in government contracting refers to the requirement that the government set-aside a procurement for small businesses if they find that two or more small firms are capable of doing the work. The timing on when the rule applies is a consistent question for both small and large firms and can be equally frustrating. A recent decision from the US Court of Federal Claims (See Tolliver Grp., Inc. v. United States, No. 20-1108C (Fed. Cl. Nov. 30, 2020) clarifies that the Rule of Two analysis applies before an agency elects to procure a requirement from a multiple-award contract (MAC) vehicle under FAR Part 16.5. It also reinforces that there is no requirement for an agency to apply the Rule of Two prior to it electing to use FAR Part 8 FSS contracts for acquisitions. Here, the Army wanted to use a specific MAC vehicle to make a procurement. The MAC, already in place, did not have any small businesses as prime contractors. The Army believed that they did not have to conduct a Rule of Two analysis prior to making the buy and could simply buy via the MAC, so long as the acquisition was in-scope. The Claims Court disagreed. All acquisitions, except those made via GSA FSS contracts, must include a Rule of Two determination according to the Court. The determination must be made before selecting a contract method, unless that contract method is a GSA FSS contract. This has potentially wider implications for MAC or GWAC usage as any acquisition given to a large business could be subject to scrutiny unless it was clear that a small business analysis had been part of the acquisition planning process. This is similar in nature to the Government Accountability Office’s decision in Delex (B-400403) where that body found that IDIQ task orders must be set aside for small companies when two or more small businesses hold prime contractor status on that IDIQ. Delex was the subject of considerable federal agency legal analysis, most of it concluding that the decision did not apply to those agencies’ IDIQ contracts. The impact of the Claims Court ruling here, therefore, is also difficult to determine. Smart contractors, however, should make sure that their customers conduct a small business analysis before deciding whether to use a non-Schedule IDIQ.