HR-2804-119
Placed on the Union Calendar, Calendar No. 624.
Sponsored by Nydia Velázquez (D-NY)
What it does
This bill would amend the Small Business Act to codify the "Rule of Two" — a federal procurement policy currently existing only in regulation. Under the Rule of Two, a federal contracting officer must set aside a contract exclusively for small businesses when they reasonably expect at least two qualified small businesses to submit offers and that the contract can be awarded at a fair market price. The bill applies to contracts above the simplified acquisition threshold (currently $250,000) but explicitly excludes delivery orders and task orders placed against existing contracts.
Who benefits
Small businesses seeking federal contracts, particularly those in industries where they compete against large corporations for government work. Small business advocacy organizations. Members of Congress who have pushed for stronger small business contracting protections. Indirectly, communities with high concentrations of small businesses that depend on federal contracting revenue.
Who is hurt
Large federal contractors who currently compete for contracts that would, under this bill, be reserved exclusively for small businesses. Federal agencies that may face reduced flexibility in selecting contractors, potentially limiting their access to large firms with specialized capabilities. Taxpayers, if set-asides in some cases result in higher costs or reduced competition for complex contracts. Small businesses that grow beyond the "small" size threshold and lose eligibility for set-asides.
Supporters argue
Supporters argue that the Rule of Two has existed as an executive regulation for decades but remains vulnerable to administrative rollback, weakening or reinterpretation without congressional action. They contend that small businesses receive only about 23% of federal contract dollars despite a statutory goal of 23%, and that codifying this rule would give small businesses a legally enforceable right to compete on a level playing field, reducing the dominance of large contractors who currently win a disproportionate share of federal procurement dollars.
Opponents argue
Opponents argue that converting the Rule of Two from a regulation into a statute removes the executive branch's flexibility to adapt procurement policy to mission-critical needs, particularly for defense and national security contracts where large, specialized contractors may be the only viable option. They contend that mandatory set-asides — even when a fair market price is available — could slow procurement timelines, reduce competition quality, and increase costs in sectors where small businesses lack the scale, security clearances, or technical capacity to perform reliably.
Constitutional context
Congress has broad authority to set the terms of federal spending and procurement under the Spending Clause (Art. I, §8) and the Necessary and Proper Clause (Art. I, §8, cl. 18). No significant constitutional challenge is anticipated, as this bill shifts rulemaking authority from the executive branch back to Congress rather than delegating new power to an agency — which actually reduces nondelegation concerns raised in post-Loper Bright scrutiny of agency rules.
Checks and balances
Congress gains authority by locking the Rule of Two into statute, reducing executive branch discretion; contracting officers retain case-by-case judgment on whether the two-offer and fair-market-price conditions are met, and courts could review agency compliance with the statutory standard.
Historical precedent
The Rule of Two has existed as a federal acquisition regulation (FAR 19.502-2) since the 1970s; this bill would be the first time it is written directly into the Small Business Act as a statutory requirement.