Small business set-aside policy is once again drawing attention in Congress. On May 20, 2026, the House Committee on Small Business voted 23-0 to advance H.R. 2804, the Protecting Small Business Competitions Act of 2025. The legislation seeks to codify the Rule of Two within the Small Business Act, strengthening one of the most important principles supporting small business participation in federal contracting.
The Rule of Two requires contracting officers to reserve acquisitions for small businesses when two conditions exist. First, the agency must reasonably expect offers from at least two responsible small businesses. Second, award must be achievable at a fair market price. This requirement, currently reflected in FAR 19.502-2, plays a significant role in determining whether an acquisition becomes a small business set-aside or remains full and open competition.
The proposed legislation would provide stronger statutory support for this requirement. However, contractors should understand that the bill remains under consideration and has not yet become law.
A key development involves the bill’s scope. The original version of H.R. 2804 extended Rule of Two protections to contracts, task orders, and delivery orders above the simplified acquisition threshold. During committee markup, amendments narrowed the House version by removing task and delivery orders from coverage. This distinction is particularly important because many federal purchases now occur through multiple-award contracting vehicles such as GSA Multiple Award Schedules, GWACs, and agency IDIQ contracts.
Companion legislation in the Senate reportedly maintains broader coverage, including task and delivery orders. If the House and Senate continue to differ, additional negotiation and legislative review will be required before any final version moves forward.
For GSA Schedule contractors, the implications are significant. Strengthened Rule of Two protections for standalone contracts could create greater predictability for certain procurements. However, if task orders remain excluded, small businesses may continue to experience inconsistent treatment across multiple-award vehicles where much of the federal marketplace operates.
This legislative effort also intersects with broader FAR reform discussions. Supporters view codification as a way to preserve the Rule of Two and reduce uncertainty surrounding non-statutory procurement requirements. Greater legal durability would provide contractors with improved visibility for capture planning, teaming arrangements, and long-term growth strategies.
While the legislation remains pending, contractors should continue strengthening the fundamentals. Maintaining accurate SIN alignment, strong capability statements, relevant past performance, and competitive pricing will position small businesses more effectively as agencies conduct market research and evaluate set-aside opportunities.
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