The rule of two requires that all contracts above the micro-purchase threshold be set-aside for small businesses, provided there is a reasonable expectation that two or more responsible small business concerns would submit offers at fair market prices and those offers are competitive in terms of quality and delivery. Under the recent overhaul of the Federal Acquisition Regulation (FAR), the rule of two was retained for contracts above the simplified acquisition threshold (SAT), in addition to the statutory requirement that the rule apply to contracts between the micro-purchase and simplified acquisition thresholds. Notably, the revised FAR part 19 removes the requirement for the government to consider socioeconomic set-asides before small-business set-asides. Furthermore, the revised FAR 19.104, which was previously located at FAR 19.502-2, clarifies that, while small business set-asides are required at the master contract level under the rule of two, set-asides are encouraged but not mandatory at the order level for multiple-award contracts. It is also within the contracting officer’s (CO) discretion to follow the rule of two for orders issued under the Federal Supply Schedule (FSS).

Government agencies often establish Blanket Purchase Agreements (BPAs) with General Services Administration (GSA) Federal Supply Schedule (FSS) contractors to meet their repetitive procurement needs in a flexible and streamlined manner. Such BPAs may be single or multiple award and may be utilized by one or more agencies with a period of performance of up to five years. The Federal Acquisition Regulation (FAR) 8.405-3, which contains ordering procedures for BPAs established under FSS contracts, states that a single award BPA may not exceed one year, although it may have up to four one-year options. Contractors should be mindful that such BPAs are not contracts in and of themselves and are awarded against and tied to a contractor’s underlying GSA FSS contract. In this regard, FAR 8.405-3(d)(3) provides that schedule contractors may be awarded BPAs that extend beyond the term of their FSS contract only if there are option periods remaining in their FSS contract that, if exercised, will cover the BPA’s period of performance. Consequently, if an FSS contractor’s schedule contract, including its options, is set to expire before the end of the BPA’s period of performance, then that contractor is ineligible to receive a BPA award.

Contractors frequently form joint ventures to respond to federal contracts solicitations that require the submission of past performance information. Since joint ventures are entities separate from their member firms, created in many instances to pursue specific federal opportunities, they may not have the necessary past performance history. As a result, joint ventures often rely upon the past performance history of their individual member firms. Meanwhile, procuring agencies are generally permitted to consider the past performance history of individual member firms during evaluation. This is true even when the solicitation expressly limits the use of past performance information to contracts performed as a prime contractor. When responding to such solicitations, joint ventures may utilize the past performance history of their individual member firms, as long as the member firm was a prime contractor on the referenced contract, and the past performance information is reasonably predictive of the quality of the joint venture’s future performance under the contract being awarded. Similarly, if reasonably predictive of performance, joint ventures may use the past performance history of their individual members, even when those members earned it as members of a different joint venture. Contractors should be mindful that while joint ventures can usually submit the past performance history of their member firms, an exception to this general rule is if the solicitation contains an express provision prohibiting the use of such past performance information.