SBA, GSA, and OFPP Can’t Agree on ‘Rule of Two’ Application

May 3, 2017

by Shelley Hall

The Small Business Administration (SBA) is attempting to expand the Supreme Court’s Kingdomware ruling, applying the “rule of two” to all task and delivery orders under the Simplified Acquisition Threshold (SAT) if the request for proposals comes under the General Services Administration’s (GSA) Schedule.

In the June 2016 Kingdomware case , the Supreme Court made a unanimous decision and ruled that the Veterans Affairs Department must continue to apply the “rule of two” for veteran-owned small businesses even if the agency surpassed its annual prime contracting goal. The “rule of two” states if an agency can find two or more qualified small businesses through market research of a contract under the Simplified Acquisition Threshold — between $3,000 and $150,000 — it must set aside the solicitation.

SBA issued a memo on Oct. 20 2016 telling its Procurement Center Representatives (PCRs) that the Kingdomware decision should apply to similar statutes because task or delivery orders under multiple-award contracts are considered contracts.

SBA briefed GSA, OFPP and the federal Office of Small and Disadvantaged Utilization (OSDBU) before issuing the memo, but GSA and OFPP didn’t sign on to the interpretation right away.

John Shoraka, SBA’s associate administrator for Government Contracting and Business Development, said if GSA schedules were held to the “rule of two” requirement, it would add another $756 million to the small business totals, raising it to about $91 billion in fiscal 2015 — a 0.21 percent increase.

But SBA’s interpretation creates a major policy shift that’s reversing previous opinions that task and delivery orders were not “contracts” under the FAR and other legal definitions.

From a CO’s perspective, I think it depends.  I can see cases where a TO/DO would be considered a contract and others where they would not.  It’s not a black and white decision.  The battle will likely end up back with the Supreme Court to get a final response as to whether they were considering orders as contracts.

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