[Federal Register Volume 89, Number 207 (Friday, October 25, 2024)]
[Proposed Rules]
[Pages 85072-85077]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-24716]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 89 , No. 207 / Friday, October 25, 2024 / 
Proposed Rules

[[Page 85072]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 125

RIN 3245-AH95


Small Business Contracting: Increasing Small Business 
Participation on Multiple Award Contracts

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would apply the Rule of Two to multiple-
award contract task and delivery orders, with some exceptions. Under 
the Rule of Two, unless an exception applies, an agency must set aside 
the award for small businesses where there is a reasonable expectation 
of receiving offers from two or more small-business contract holders 
under the multiple-award contract that are competitive in terms of 
price, quality, and delivery. Documentation requirements apply where 
the agency decides not to move forward with a set-aside order.

DATES: Comments must be received on or before December 24, 2024.

ADDRESSES: You may submit comments, identified by RIN 3245-AH95, and/or 
Docket Number SBA-2024-0002 by any of the following methods:
    <bullet> Federal eRulemaking Portal: https://www.regulations.gov 
and follow the instructions for submitting comments.
    <bullet> Mail (for paper, disk, or CD-ROM submissions): Donna 
Fudge, Lead Procurement Policy Analyst, Office of Policy Planning and 
Liaison, U.S. Small Business Administration, 409 Third Street SW, 
Washington, DC 20416.
    Instructions: All submissions received must include the agency name 
and docket number or Regulatory Information Number (RIN) for this 
rulemaking. All comments received will be posted on https://www.regulations.gov. If you wish to submit confidential business 
information (CBI) as defined in the User Notice at https://www.regulations.gov, please submit the comments to Donna Fudge and 
highlight the information that you consider to be CBI and explain why 
you believe this information should be held confidential.

FOR FURTHER INFORMATION CONTACT: Donna Fudge, Lead Procurement Policy 
Analyst, Office of Policy Planning and Liaison, Small Business 
Administration, at <a href="/cdn-cgi/l/email-protection#24404b4a4a450a4251404341645746450a434b52"><span class="__cf_email__" data-cfemail="23474c4d4d420d4556474446635041420d444c55">[email protected]</span></a>, (202) 205-6363.

SUPPLEMENTARY INFORMATION: This proposed rule would expand the use of 
the small-business Rule of Two in multiple-award contracting and make 
other regulatory revisions to encourage the use of small businesses 
when creating new multiple-award contracts. In issuing this proposed 
rule, SBA implements recommendations of the Office of Federal 
Procurement Policy (OFPP) in its memorandum titled ``Increasing Small 
Business Participation on Multiple-Award Contracts,'' dated January 25, 
2024.
    Section 15(a)(1)(C) of the Small Business Act, 15 U.S.C. 
644(a)(1)(C), provides that the Small Business Administration (SBA) 
shall ``assur[e] that a fair proportion of the total purchases and 
contracts for goods and services of the Government in each industry 
category . . . are awarded to small business concerns.'' To further 
this statutory provision, SBA's regulations and the Federal Acquisition 
Regulation (FAR) provide that an acquisition shall be set aside for 
small business concerns whenever there is reasonable expectation that 
offers will be obtained from at least two responsible small business 
concerns that are competitive in terms of fair market prices, quality, 
and delivery (13 CFR 125.2(f); 48 CFR 19.502-2). This provision in 
SBA's regulations and the FAR is commonly referred to as the Rule of 
Two.
    The Rule of Two dates back to 1964, when the Department of Navy 
first adopted it. Additional agencies implemented the rule afterward, 
and the FAR extended the Rule of Two for governmentwide application in 
1984. The Rule of Two is the cornerstone of the Federal Government's 
support for small-business prime contracting. In Fiscal Year (FY) 2023, 
set-aside awards accounted for 65% of contracting dollars awarded to 
small businesses, the highest percentage since data became available in 
2010. Those set-aside dollars pushed the government's spending with 
small business prime contractors to $178 billion in FY23, or 28.4%. 
Prior to the government-wide application of the Rule of Two in 1984, 
the Federal Government spent just 21% of its procurement dollars with 
small businesses.
    This proposed rule would clarify the applicability of the Rule of 
Two to multiple-award contracts by directing that an agency set aside 
an order under a multiple-award contract for small business contract 
holders when the contracting officer determines there is a reasonable 
expectation of obtaining offers from two or more small business 
contract holders under the multiple-award contract that are competitive 
in terms of market prices, quality, and delivery. Like the OFPP 
memorandum, the proposed rule provides several exceptions, such as 
orders under the Federal Supply Schedule, or where an exception to fair 
opportunity or an agency-specific exception applies. When an agency is 
unable to set aside an order over the micro-purchase threshold and an 
exception does not apply, the contracting officer must document their 
rationale and provide the documentation to the agency's small business 
specialist or the Office of Small and Disadvantaged Business 
Utilization (OSDBU) or, for the Department of Defense, the Office of 
Small Business Programs (OSBP). An SBA procurement center 
representative (PCR) can review the documentation and may submit 
recommendations to increase small business opportunities.
    These proposed changes result from an interagency negotiation among 
SBA, the FAR Council, and other agencies. SBA initiated this 
negotiation for three reasons.
    First, the Small Business Act specifies that a fair proportion of 
the total ``purchase and contracts'' for goods and services shall be 
awarded to small business concerns. The statute does not limit the fair 
proportion language only to contracts. Rather, it applies it to both 
``purchase[s] and contracts.'' The Federal Government is directed to 
assure that a fair proportion of purchases and contracts are awarded to 
small businesses. SBA believes that the use of the words ``purchase 
and'' means that the Rule of Two should not apply only when an agency 
is considering the

[[Page 85073]]

award of a contract. It should also apply to all purchases of goods and 
services, as well. As such, SBA believes that it makes sense to apply 
the Rule of Two to orders issued under multiple-award contracts. Again, 
it should apply to all ``purchases,'' not just to all new contracts.
    Second, the proposed rule would provide certainty on how to apply 
the Rule of Two to task and delivery orders under multiple-award 
contracts and eliminate confusion created by an unresolved question in 
dispute between the Court of Federal Claims and the Government 
Accountability Office (GAO). The Court of Federal Claims agreed with 
the small-business plaintiffs in Tolliver Group that ``an agency must 
apply the Rule of Two before an agency can even identify the possible 
universe of procurement vehicles which may be utilized for a particular 
scope of work.'' 151 Fed. Cl. at 104. In a GAO protest decided after 
the court's ruling, GAO maintained its longstanding interpretation, 
which differs from the Court's position, that, in 15 U.S.C. 644(r), 
Congress intended to clearly delineate a distinction between a 
procuring agency's mandatory set-aside obligations when establishing a 
contract, and an agency's discretion with respect to setting aside task 
or delivery orders under a multiple-award contracts, i.e., indefinite 
delivery indefinite quantity (IDIQ) contracts. Itility, LLC, B-419167, 
Dec. 23, 2020, 2020 CPD P412 at 18. The proposed change to require 
application of the Rule of Two to task and delivery orders under 
multiple-award contracts, with certain exceptions, should eliminate 
lingering confusion.
    Third, for similar reasons as those described in the OFPP 
memorandum, the proposed rule advances equity in Federal procurement 
practices. This rule is expected to create more contract opportunities 
for small businesses, particularly small disadvantaged businesses 
(SDBs). Executive Order 14091 established a government-wide goal of 
awarding 15 percent of Federal contract spending to SDBs in FY 2025, 
and this proposed rule would put the government in a better position to 
achieve that goal.
    This proposed rule rests on the authority in the Small Business 
Jobs Act of 2010, Public Law 111-240, sec. 1331, codified at 15 U.S.C. 
644(r), for SBA and the FAR Council to establish guidance under which 
Federal agencies may, at their discretion and notwithstanding fair 
opportunity requirements, set aside orders placed against multiple-
award contracts for small business concerns. Under this proposal, 
agencies are required to document their decisions not to set aside an 
order for small businesses. Such a decision might be based on one of 
the exceptions in the regulation, or because the Rule of Two is not 
satisfied--i.e., where there are zero small businesses or only one 
small business that are responsible, available, and reasonably priced.
    The OFPP memorandum, footnote 4, stated that Federal Supply 
Schedule orders are not covered by the term ``multiple-award contract'' 
as used in the memorandum. The memorandum stated that Schedules are 
continually open to new entrants and highly accessible to small 
businesses. Similarly, this proposed rule would not cover the Federal 
Supply Schedule. This also mirrors the treatment of the Federal Supply 
Schedule by the Court of Federal Claims, which exempted the Schedule 
from the Rule of Two in VSolvit, LLC v. United States, 151 Fed. Cl. 678 
(2020), because of specific language providing so in FAR subpart 8.4.

Severability

    SBA intends for the provisions of this proposed rule, if finalized, 
to be severable from each other such that if a court were to hold that 
any provision is invalid or unenforceable as to a particular person or 
circumstance, the rule would remain in effect as to any other person or 
circumstance.

Section-by-Section Analysis

13 CFR 125.2(c)(1)(i)
    The proposed rule adopts the updated terminology of ``certified 
service-disabled veteran-owned small businesses concerns,'' given that 
SBA now certifies service-disabled veteran-owned small businesses.
13 CFR 125.2(c)(2)
    The proposed rule would add a new Sec.  125.2(c)(2) with new 
documentation and coordination requirements when an agency plans to 
establish a multiple award contract without an order set-aside 
provision. The current Sec.  125.2(c)(3) only requires notification at 
least 30 days prior to the solicitation's issuance when an agency would 
issue a bundled requirement or one that would be unlikely for award to 
a small business. SBA believes that 30 days is not enough time to 
intervene in a large procurement when, oftentimes, the agency has been 
planning the procurement for over a year. The proposed rule would 
require small business specialists to notify the PCR as early in the 
acquisition planning process as possible where the multiple-award 
contract exceeds the substantial bundling threshold (even if the 
contract is not bundled), and the number of small business awardees is 
expected to be less than 30 percent of the total number of awardees. 
With the notification, the contracting officer must include market 
research and documentation explaining why the multiple-award contract 
is not set-aside or reserved with an expectation of at least 30 percent 
for small businesses. In the future, if this proposed rule is 
finalized, small business should make up at least 30 percent of new 
multiple-award contract holders and that should make the Rule of Two 
more effective on orders issued under those multiple award contracts.
    The 30-percent threshold is based on the current proportion of 
multiple-award contract dollars going to small business, and agencies 
can reach that threshold by using contract reserves. Contract reserves 
are a procurement strategy available only for multiple-award contracts 
in which the agency sets aside some of the contract awards for small 
businesses (or a small business program such as 8(a) or HUBZone), and 
then competes orders only among those set-aside awardees.
13 CFR 125.2(c)(4)
    The proposed rule incorporates the OFPP memorandum's recommendation 
that agencies share with small-business specialists documentation of 
the basis for not setting aside orders over the micro-purchase 
threshold, unless an exception applies. Small business specialists are 
agency staff, typically working with the agency's OSDBU or OSBP. Small 
business specialists play a vital role in ensuring that the agency 
prioritizes small-business participation when planning acquisitions. 
Under the proposed rule, the agency would also document, and share with 
its small business specialist, the decision to place an order under a 
multiple-award contract with only one or no small business contract 
holders.
13 CFR 125.2(e)(6)
    The proposed rule would revise the regulation on setting aside 
orders, Sec.  125.2(e)(6)(i), to require the set-aside of orders over 
the micro-purchase threshold where the Rule of Two is satisfied with 
respect to small-business contract holders. The only exceptions to 
applying the Rule of Two are for orders under Federal Supply Schedule 
contracts, when an exception to fair opportunity applies, or where 
agency procedures reflect an appropriate exception. When one of these 
three exceptions does not apply, the agency

[[Page 85074]]

would be required to document its determination not to issue a set-
aside and coordinate that documentation with the small business 
specialist. If the agency chooses to issue an order under a multiple 
award contract that has one or no small business contract holders, the 
agency must document the rationale for that decision, including the 
market research conducted by the agency, coordinate that documentation 
with the small business specialist, and ensure that the small business 
specialist has a reasonable opportunity to respond. This requirement 
would not apply to orders under the Federal Supply Schedule, where an 
exception to fair opportunity applies, or an agency-specific exception 
applies.
    Through this proposed rule, SBA seeks to expand small-business 
participation on multiple-award contracts. Unlike the Tolliver 
decision, this proposed rule does not require the application of the 
Rule of Two prior to choosing a particular multiple-award contract 
vehicle. Thus, although the proposed rule would permit an agency to use 
existing multiple award vehicles, agencies would be required to conduct 
the Rule of Two analysis on the selected multiple-award contract before 
issuing an order (unless an exception applies). Agencies are not 
expected to amend ordering procedures of existing multiple-award 
contracts that did not provide for order set-asides, but they could 
choose to do so if there is adequate time remaining on the contract 
(i.e., more than one year), to permit small business concerns to fully 
perform or deliver under an order.
    Exceptions to the application of the mandatory Rule of Two would 
apply for orders under the Federal Supply Schedule, where an exception 
to fair opportunity applies (such as there being only one responsible 
source), and agency-specific exceptions. For example, agencies may use 
an agency-specific exception to address supply chain and national 
security risks, to address goods or services that no small businesses 
provide and would not provide in the future, or to respond to a major 
disaster or emergency. The proposed rule would require that agency 
exceptions be developed in consultation with both the agency OSDBU or 
OSBP and SBA, and made public before they are used. The exception 
procedures must have an appropriate mechanism to ensure responsible 
use.

Compliance With Executive Orders 12866, 12988, 13132, 13563, the 
Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory 
Flexibility Act (5 U.S.C. 601-612)

Executive Order 12866

    The Office of Management and Budget (OMB) anticipates that this 
rulemaking will be a significant regulatory action and, therefore, is 
subject to review under section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. Accordingly, 
the next section contains SBA's Regulatory Impact Analysis.

Regulatory Impact Analysis:

    1. Is there a need for the regulatory action?
    This action implements recommendations made in OFPP's memorandum 
titled ``Increasing Small Business Participation on Multiple-Award 
Contracts''. It also addresses confusion from the contradictory 
decisions between the Court of Federal Claims and the Government 
Accountability Office (GAO). The Court of Federal Claims agreed with 
the small-business plaintiffs in Tolliver Group that ``an agency must 
apply the Rule of Two before an agency can even identify the possible 
universe of procurement vehicles which may be utilized for a particular 
scope of work.'' 151 Fed. Cl. at 104. In a GAO protest decided after 
the court's ruling, GAO ruled that agencies may set aside orders even 
if the underlying multiple-award contract does not notify contract 
holders to future set-asides. Itility, LLC, B-419167, Dec. 23, 2020, 
2020 CPD P412 at 18. GAO has ruled agencies may set aside orders even 
if the underlying does not notify contract holders to future set-
asides. Marine Hydraulics Int'l LLC, B-420562, May 25, 2022, 2022 CPD 
P122 at 10. This rulemaking is intended to eliminate any confusion and 
ensure that the policy is consistently implemented across all agencies. 
The proposed rule also supports Administration efforts to develop a 
competitive small-business contracting base and increase spending with 
small disadvantaged businesses (SDBs).
    2. What is the baseline, and the incremental benefits and costs of 
this regulatory action?
    Based on SBA's analysis of FY 2019 to FY 2023 data, as shown in the 
table below, this change could add up to $6 billion per year in small 
business contract spending. The table below shows the dollar gap 
between small-business spending on non-set-aside multiple-award task 
and delivery order contracts, and that same spending government wide, 
when the governmentwide numbers are adjusted to use the same NAICS-code 
distribution present in the non-set-aside multiple-award task-order 
contracts:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Small business                                      Potential     Gap between
     Dollars and potential dollars in multiple-award         Total      dollars on MACs    MAC small      Overall small      MAC small      actual and
                      contracts FY                         dollars on   (not set aside)    business %   business % (NAICS    business      potential SB
                                                           MACs ($B)          ($B)                          adjusted)      dollars ($B)    dollars ($B)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2019....................................................        $75.5              $14.2         18.8                24.8         $18.8             $4.5
2020....................................................         92.5               16.9         18.3                25.2          23.3              6.4
2021....................................................         78.5               16.6         21.2                25.7          20.1              3.5
2022....................................................         84.4               17.0         20.2                24.3          20.6              3.5
2023....................................................        100.7               19.2         19.1                25.1          25.3              6.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In the table above, the fifth column (Overall Small Business % 
(NAICS adjusted)) is multiplied by total dollars (second column) to 
determine the numbers in the sixth column (Potential MAC Small Business 
Dollars ($B)). SBA presumes that applying the Rule of Two to task and 
delivery orders would close the dollar gap between small-business 
spending on non-set-aside multiple-award contracts and small-business 
spending, governmentwide, as adjusted. The action could add up to $6 
billion to small-business contract spending. With contract spending 
exceeding $600 billion annually, this equates to less than 1 percent of 
all Federal contract spending.
    This rulemaking will impose costs to the acquisition workforce to 
comply with the market-research, documentation, and coordination 
requirements when the Rule of Two is not applied, as specified in the 
rulemaking. Although some agencies currently apply the Rule of Two when 
ordering under a multiple-award

[[Page 85075]]

contract vehicle and may have documentation and coordination 
procedures, SBA will assume for the purpose of calculating the 
potential cost that no agencies currently require the application of 
the Rule of Two.
    In FY23, agencies awarded 130,246 orders to other-than-small 
businesses off multiple-award contracts, not including the Federal 
Supply Schedule. Many of those orders went repeatedly from the same 
agency to the same other-than-small contractors. The proposed rule 
allows agencies to use market research conducted within the past 18 
months, so if an agency were ordering to the same other-than-small 
contractor repeatedly under the same multiple-award contract, the 
agency would, most likely, reuse market research from prior awards. 
After eliminating orders that went to the same other-than-small 
contractor on a single vehicle from the same agency, only 5,513 orders 
remain that would require new small-business market research annually. 
The actual number of affected orders is likely less because the 5,513 
orders presume annual market research (i.e., every 12 months), but the 
proposed rule allows for market research to be used from up to 18 
months prior.
    Contracting officers must base a decision on sufficient facts, 
considering market research, to demonstrate a reasonable assessment of 
the availability of small businesses on the selected multiple-award 
contract. Market research may include but is not limited to a review of 
procurement history, search of databases such as SBA's Dynamic Small 
Business Search (DSBS), consultation with SBA Procurement Center, or 
internet searches. Because of the variety of market research methods, 
SBA estimates that the time required for justification of a decision 
ranges from a half-hour to search relevant databases to several hours 
for more extensive open-market research, with the distribution of 
methods skewed toward database searches rather than intensive market 
research. SBA therefore estimates that the mean time required for 
justification is 60 minutes for an estimated annual number of 5,500 
affected contracts, resulting in an estimated annual burden to the 
government for market research of $683,870.\1\
---------------------------------------------------------------------------

    \1\ As performed by a GS-13 Step 5 (DC locality in 2024 of 
$62.17 with 100% added for benefits and overhead).
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    Additionally, agency small-business specialists would review 
documentation for orders not set-aside above the micropurchase 
threshold. FAR section 7.104(d) currently requires such a review for 
orders not set-aside above the substantial bundling threshold. The 
number of additional orders to be reviewed annually (excluding those 
going from the same agency to the same contractor for the reasons 
explained in the last paragraph) is 3,700. SBA estimates that the time 
required for a small-business specialist to review this order 
documentation is 60 minutes. This considers that the orders are 
relatively low-dollar. SBA therefore estimates the annual burden to the 
government for small-business specialist review to be $460,000.
    3. What are the alternatives to this rulemaking?
    SBA considered a rule that would require the agency to assess the 
Rule of Two prior to choosing an existing contracting vehicle. That 
approach could increase consideration of small businesses that may not 
presently be on a multiple-award contract, but fails to recognize that 
the capabilities and capacity of many qualified small businesses 
already on multiple-award contracts are not being fully leveraged by 
agencies. SBA's research suggests that the changes proposed by this 
rulemaking to increase opportunities for small business contract 
holders on multiple-award contracts could advance diversity and 
resilience by adding up to $6 billion per year in contract awards to 
small businesses. Requiring application of the Rule of Two prior to 
selecting an existing contracting vehicle would, in many cases, 
duplicate the small business market research that agencies have 
conducted when establishing the multiple-award contract and could 
undermine important benefits that these vehicles were designed to 
create, including the ability to meet mission needs in a timely manner 
at lower cost and the ability to implement Governmentwide priorities.

Executive Order 12988

    This action meets applicable standards set forth in sections 3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden. The action does not 
have retroactive or preemptive effect. While this rulemaking will have 
no effect on task and delivery orders already awarded, it will apply to 
all new multiple-award contracts, the orders placed under those 
contracts, and a new order entered into on existing multiple-award 
contracts where ordering procedures allow for the set aside of the 
order.

Executive Order 13132

    For the purposes of Executive Order 13132, SBA has determined that 
this rulemaking will not have substantial, direct effect on the States, 
on the relationship between the national government and the States, or 
on the distribution of power and responsibilities among the various 
levels of government. Therefore, for the purpose of Executive Order 
13132, Federalism, SBA has determined that this rulemaking has no 
federalism implications warranting preparation of a federalism 
assessment.

Executive Order 13563

    Executive Order 13563, Improving Regulation and Regulatory Review, 
directs agencies to, among other things: (a) afford the public a 
meaningful opportunity to comment through the internet on proposed 
regulations, with a comment period that should generally consist of not 
less than 60 days; (b) provide for an ``open exchange'' of information 
among government officials, experts, stakeholders, and the public; and 
(c) seek the views of those who are likely to be affected by the 
rulemaking, even before issuing a notice of proposed rulemaking. As far 
as practicable or relevant, SBA considered these requirements in 
developing this proposed rule, as discussed below.
    Did the agency use the best available techniques to quantify 
anticipated present and future costs when responding to Executive Order 
12866 (e.g., identifying changing future compliance costs that might 
result from technological innovation or anticipated behavioral 
changes)?
    To the extent possible, the agency utilized the most recent data 
available in the Federal Procurement Data System--Next Generation, 
DSBS, and SAM.
    Public participation: Did the agency: (a) afford the public a 
meaningful opportunity to comment through the internet on any proposed 
regulation, with a comment period that should generally consist of not 
less than 60 days; (b) provide for an ``open exchange'' of information 
among government officials, experts, stakeholders, and the public; (c) 
provide timely online access to the rulemaking docket on 
Regulations.gov; and (d) seek the views of those who are likely to be 
affected by rulemaking, even before issuing a notice of proposed 
rulemaking?
    The proposed rule will have a 60-day comment period and will be 
posted on www.regulations.gov to allow the public to comment 
meaningfully on its provisions. SBA has also discussed some of the 
proposals in this rulemaking with stakeholders at various

[[Page 85076]]

small business on-line and in-person procurement conferences.
    Flexibility: Did the agency identify and consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public?
    The proposed rule is intended to eliminate confusion in the small 
business acquisition community arising due to contradictory decisions 
of the Court of Federal Claims and the GAO, and increase procurement 
opportunities for small businesses.

Paperwork Reduction Act, 44 U.S.C. Ch. 35

    This rulemaking does not impose additional reporting or 
recordkeeping requirements under the Paperwork Reduction Act, 44 U.S.C. 
chapter 35.

Regulatory Flexibility Act, 5 U.S.C. 601-612

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires 
administrative agencies to consider the effect of their actions on 
small entities, small nonprofit enterprises, and small local 
governments. Pursuant to the RFA, when an agency issues a rulemaking, 
the agency must prepare a regulatory flexibility analysis which 
describes the impact of the rule on small entities. However, section 
605 of the RFA allows an agency to certify a rule, in lieu of preparing 
an analysis if the rulemaking is not expected to have a significant 
economic impact on a substantial number of small entities.
    This proposed rule implements an OFPP memorandum and seeks to 
resolve confusion created by differing interpretations of the Rule of 
Two by the Court of Federal Claims (Tolliver Group, 151 Fed. Cl. 70) 
and the GAO (iTility, B-419167). It does not impose any costs on small 
business, but rather increases procurement opportunities for small 
business. Therefore, SBA does not believe the rulemaking would have a 
disparate impact on small entities or would impose any additional 
significant costs on them. For the reasons discussed, SBA certifies 
that this proposed rule does not have a significant economic impact on 
a substantial number of small entities.

List of Subjects in 13 CFR Part 125

    Government contracts, Government procurement, Reporting and 
recordkeeping requirements, Small businesses, Technical assistance.

    For the reasons discussed in the preamble, the Small Business 
Administration proposes to amend 13 CFR part 125 as follows:

PART 125--GOVERNMENT CONTRACTING PROGRAMS

0
1. The authority citation for part 125 continues to read as follows:

    Authority:  15 U.S.C. 632(p), (q), 634(b)(6), 637, 644, 657f, 
657q, 657r, and 657s; 38 U.S.C. 501 and 8127.

0
2. Amend Sec.  125.2 by:
0
a. In paragraph (c)(1)(i), removing the words ``small business concerns 
owned and controlled by service-disabled veterans'' and adding, in 
their place, the words ``certified service-disabled veteran-owned small 
business concerns'';
0
b. Redesignating paragraphs (c)(2) through (6) as (c)(3) through (7), 
respectively;
0
c. Adding new paragraph (c)(2);
0
d. Adding new paragraphs (c)(5)(iv) and (v);
0
e. Removing paragraphs (e)(6)(ii) and (iii);
0
f. Redesignating paragraphs (e)(6)(i), (iv), and (v) as (e)(6)(iii), 
(v), and (vi), respectively;
0
g. Adding new paragraphs (e)(6)(i) and (ii);
0
h. Removing the first sentence of newly redesignated paragraph 
(e)(6)(iii); and
0
i. Adding new paragraph (e)(6)(iv).
    The additions and revisions read as follows:


Sec.  125.2  What are SBA's and the procuring agency's responsibilities 
when providing contracting assistance to small businesses?

* * * * *
    (c) * * *
    (2) PCR notification and early coordination on certain Multiple-
award Contracts. (i) The agency's small business specialist must notify 
SBA's Procurement Center Representative during the development of the 
acquisition plan as early in the planning process as possible if:
    (A) The dollar value of the Multiple-award Contract exceeds the 
agency's threshold for substantial bundling, though this requirement is 
not limited to bundled requirements; and
    (B) the number of small business contract holders is expected to be 
under 30 percent of all expected holders.
    (ii) When the number of small business contract holders on a 
multiple-award contract exceeding the substantial-bundling threshold is 
expected to be under 30 percent of all expected holders, the agency 
must document the acquisition plan with the rationale, including market 
research conducted, for not setting aside or reserving the contract for 
small business. The explanation should be reviewed by the agency's 
small business specialist.
* * * * *
    (5) * * *
    (iv) When placing an order valued over the micro purchase threshold 
under a multiple-award contract that has no or only one small business 
contract awardee, agencies must document and provide to its small 
business specialist:
    (A) How the market research of small business contract holders, 
including small businesses that are not contract holders on the 
multiple award contract against which the order would be placed, and 
mission needs informed the agency's decision for selecting the multiple 
award contract to fulfill its needs
    (B) The market research the agency conducted within the past 18 
months regarding the multiple award contract.
    (C) The requirement of this paragraph (c)(5)(iv) does not apply to 
orders under the Federal Supply Schedule, where an exception to fair 
opportunity applies, when an agency exception applies, or to repetitive 
orders, including orders placed using automated ordering procedures, 
issued by an agency when a prior order was documented and coordinated 
within the prior 18 months.
    (v) When placing an order valued over the micro-purchase threshold 
under a multiple award contract that has two or more small business 
contract awardees but the agency does not set-aside the order for small 
business, agencies must document and provide to its small business 
specialist the basis for not setting aside the order, and ensure the 
specialist has an opportunity to respond. The agency small business 
specialist must notify the SBA PCR when the value of such an order 
exceeds a dollar amount negotiated between the agency and the PCR. This 
documentation and coordination requirement does not apply to orders 
placed under the Federal Supply Schedule, citing an exception to fair 
opportunity, or using an agency-specific exception.
    (e) * * *
    (6) * * *
    (i) Notwithstanding the fair opportunity requirements set forth in 
10 U.S.C. 3406(c) and 41 U.S.C. 4106(c), and unless the order is under 
a Federal Supply Schedule or an agency exception in accordance with 
agency procedures applies, a contracting officer shall set aside orders 
valued over the micro-purchase threshold (MPT) for small business 
contract holders when the contracting officer determines there is a 
reasonable expectation of obtaining

[[Page 85077]]

offers from two or more small business contract holders under the 
multiple-award contract that are competitive in terms of fair market 
price, quality, and delivery.
    (ii) When placing an order valued over the MPT under a multiple 
award contract, and the contracting officer does not set-aside the 
order for small business, the contracting officer must document and 
provide to its small business specialist the basis for not setting 
aside the order, in accordance with paragraph (c)(4)(v) of this 
section.
* * * * *
    (iv) Agencies may develop procedures for the use of agency-specific 
exceptions. Exception procedures must be developed in consultation with 
both the agency small business director and SBA, and made available to 
the public. Exception procedures must have an appropriate mechanism to 
ensure responsible use.
* * * * *

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2024-24716 Filed 10-24-24; 8:45 am]
BILLING CODE 8026-09-P


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