FAR Part 19 Rewrite: Key Developments For Small Business Contracting

The Federal Acquisition Regulatory (FAR) Council recently released its long-awaited overhaul of FAR Part 19, the section governing small business programs. While the rewrite is part of the Trump administration's broader initiative to reduce the FAR to statutory and "essential" provisions, the changes to Part 19 carry significant implications for both small and large contractors.

Rule of Two

Perhaps the most closely watched issue in this rewrite was the outcome of the Rule of Two, which requires that acquisitions be set aside for small businesses if the contracting officer has a reasonable expectation that two or more small businesses will submit offers and awards will be made at fair market prices. While this requirement is statutory for procurements between the micro-purchase threshold (MPT) and the simplified acquisition threshold (SAT), it is not statutory for procurements over the SAT. Effective October 1, the MPT increases to $15,000 and the SAT increases to $350,000 for most procurements.

For that reason, as we noted in a prior post, many in the small business community feared the rule might be eliminated as part of the streamlining effort. Fortunately, the FAR Council retained this requirement for procurements above the SAT as "essential to sound procurement." For contractors, this is a relief. Small businesses continue to have guaranteed access to set-asides at the contract level.

With regard to orders under multiple delivery contracts, the rewrite makes clear that the Rule of Two does not apply. Instead, contracting officers have discretion to decide whether to set aside an order under a multiple-award contract. The updated text further emphasizes that this discretionary decision—whether to set aside or not—cannot serve as the basis for a bid protest.

Simplification of Representations

The rewrite also eliminates re-representation requirements for certain orders under multiple award contracts. Contractors will no longer need to automatically update their size and socioeconomic status when responding to orders under multiple award contracts absent a triggering event; instead, size determinations remain fixed at the contract level, with updates triggered only by major events such as novations, acquisitions, or option exercises. Contracting officers maintain the discretion to request re-representations on an order-by-order basis pursuant to 13 CFR § 121.404(c).

8(a) Program

In addition, the FAR Council adjusted how agencies must approach acquisitions under the 8(a) Business Development Program. Contracting officers are now required to first attempt a competitive 8(a) acquisition using Small Business Administration (SBA)-approved governmentwide acquisition contracts (GWACs) before turning to a sole source award below the applicable thresholds. In addition, the rewrite allows requirements to be automatically released from the 8(a) program when the follow-on procurement will be set aside for other SBA programs, such as HUBZone, SDVOSB, or WOSB. This change eliminates the need for SBA's pre-approval of such releases, adding flexibility but also raising questions about how these transitions will be managed in practice.

Redirection of Efforts to Foster Small Businesses

Some of the provisions, including the retention of the Rule of Two, are clearly favorable to small businesses, but others, such as the apparent elimination of the requirement previously at FAR 19.201 that each agency with contracting authority establish an Office of Small and Disadvantaged Business Utilization, may indicate a reduction in resources dedicated to fostering small business enterprises (but note that FAR 19.202 retained the requirement that contracting officers consider recommendation of the agency director of such offices).

In addition, the rewrite eliminates some of the actions at FAR 19.202-1 that contracting officers "shall take" "when applicable" to give small businesses "an equitable opportunity to compete for all contracts," including:

• Dividing proposed acquisitions of supplies and services into "reasonable small lots ... to permit offers on quantities less than the total requirement."
• Ensuring delivery schedules "are established on a realistic basis that will encourage small business participation."
• Encouraging prime contractors to subcontract with small business concerns (although the small business subcontracting plan requirements at FAR Subpart 19.7 remain).

The requirements at FAR 19.202-2 that contracting officers "make every reasonable effort to find additional small business concerns" before issuing solicitations has also been eliminated. While much of this type of non-mandatory guidance has been moved to the FAR Companion Guide, which the administration views as non-binding, at least some of the changes seem to confirm the rewrite's prioritization of procurement goals above socio-economic goals.

Looking Ahead

Like the FAR rewrite revisions we discussed previously in this blog post, the FAR Part 19 rewrite modernizes the language, simplifies certain compliance requirements, and provides greater contracting officer discretion. In the main, it demonstrates the government's continuing commitment to set aside contracts for small businesses where the small business community is capable of delivering the required goods and services at a fair market price.

Today, the FAR Council released its rewrites to the remaining Parts 15, 16, 22, 23, 25, 32, 42, and 53. We will be publishing a separate post highlighting the most significant updates in this final set of revisions.

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