Hypothetical Rule of Two Questions

1. Yes

FAR 2.101 -  "Acquisition means the acquiring by contract with appropriated funds of supplies or services (including construction) by and for the use of the Federal Government through purchase or lease, whether the supplies or services are already in existence or must be created, developed, demonstrated, and evaluated. Acquisition begins at the point when agency needs are established and includes the description of requirements to satisfy agency needs, solicitation and selection of sources, award of contracts, contract financing, contract performance, contract administration, and those technical and management functions directly related to the process of fulfilling agency needs by contract."

2. As it reads - Yes

19.502-2(b) - "Before setting aside an acquisition under this paragraph, refer to 19.203(c). The contracting officer shall set aside any acquisition over the simplified acquisition threshold for small business participation when there is a reasonable expectation that-

           (1) Offers will be obtained from at least two responsible small business concerns; and

           (2) Award will be made at fair market prices. . . "

3. No

A single small business receiving the award is not a set aside and would not comply.

Getting away from good ole FAR, as there is some logic missing. 

On 3/21/2021 at 1:47 PM, Vern Edwards said:

the government has a single-award IDIQ contract for services

GSA has thousands of contracts that agencies can order from. If someone is sitting at DOE and wants to place a task order against a SAIDIQ, on FSS, with a LB and not consider small business concerns first, we all know how that turns out. 

But, if someone sitting at DOE has a "local" SAIDIQ, with a LB and the rule of two was applied to it, I believe it falls under the realm of an "established contract."

FAR 2.101 - "Task order means an order for services placed against an established contract or with Government sources."

If the answers in my first post hold true 100% of the time, we might as well throw half of FAR 16 out window as a SAIDIQ could never be ordered against, no matter the company's mall business status.

On 3/21/2021 at 1:47 PM, Vern Edwards said:

2.  Must the government make a "rule of two" determination in accordance with FAR 19.502-2(b) before issuing an order against that IDIQ contract?

In my opinion, no.  As I read FAR section 19.502, I see three equal subsections--

1. 19.502-2 for total set-asides,
2. 19.502-3 for partial set-asides, and
3. 19.502-4 for (i) reserving parent IDIQ contract awards for small businesses, (ii) setting aside parts of parent IDIQ contracts, and (iii) setting aside orders under IDIQ contracts or schedule contracts.

If the question is related to a particular order, we're under 3.  I cannot give meaning to 19.502-2, -3, and -4 at the same time for the same action.

And, 19.502-5 also plays in my calculus -- if I am doing a total set-aside under 19.502-2, my choices are FAR part 13, 14, or 15 -- clearly, this cannot work for an ordering situation.  This supports my belief that 19.502-2 and -3 apply to open market actions while -4 applies to ordering.

Constricting Officer said:

2. As it reads - Yes

19.502-2(b) - "Before setting aside an acquisition under this paragraph, refer to 19.203(c). The contracting officer shall set aside any acquisition over the simplified acquisition threshold for small business participation when there is a reasonable expectation that-

           (1) Offers will be obtained from at least two responsible small business concerns; and

           (2) Award will be made at fair market prices. . . "

Under an IDIQ with a large business you don’t have a reasonable expectation that offers will be obtained from at least two responsible small business concerns, right?

Thanks all for the comments!

Have you all seen Tolliver v. U.S., 151 Fed.Cl. 70 (Nov. 2020) and ITility, LLC, GAO B-419167 (Dec. 2020)?

If so, who do you think is right?

Jamaal Valentine said:

Under an IDIQ with a large business you don’t have a reasonable expectation that offers will be obtained from at least two responsible small business concerns, right?

I agree with you in practice. The question was posed this way b/c if an acquisition, as defined by FAR 2.101, is bring planned and there are two small business concerns what right down we have not to set it aside. 

Vern Edwards said:

Have you all seen Tolliver v. U.S., 151 Fed.Cl. 70 (Nov. 2020) and ITility, LLC, GAO B-419167 (Dec. 2020)?

I posted my reaction - Applying the "Rule of Two" to MATOCs - Contract Award Process - The Wifcon Forums and Blogs. 

I agree with GAO. 

With that, I think we are walking into a different conversation from discussing a SAIDIQ/if we can use it or not compared to a MAIDIQ/whether or not to set aside some under it.

If I am wrong let me know. I am here to learn and occasionally help when I can.

Vern Edwards said:

If so, who do you think is right?

I think the GAO has it right. The COFC's interpretation renders 15 USC 644(r)(2) meaningless. There would never be a situation where the contracting officer would have the discretion to set aside an order. If the rule of two were met among the contractors holding a multiple-award contract, the acquisition would have to be set aside--either among the SB IDIQ holders or as a competition for a new contract. 15 USC 644(r)(2) has to mean something.

I'll join the chorus that GAO is right.

Don Mansfield said:

The COFC's interpretation renders 15 USC 644(r)(2) meaningless.

@Don Mansfield So what? Even if that is true—though it may not be—why would that make the court's decision about the application of the rule of two wrong?  

Quote

15 USC 644(r)(2) has to mean something.

Maybe it means what it says: "[N]otwithstanding the fair opportunity requirements under section 2304c(b) of title 10 and section 4106(c) of title 41, [agencies may] set aside orders placed against multiple award contracts for small business concerns, including the subcategories of small business concerns identified in subsection (g)(2)..."

Constricting Officer said:

I agree with GAO.

Why?

ji20874 said:

I'll join the chorus that GAO is right.

Why?

Vern Edwards said:

Why?

I'm not a lawyer, but here are my thoughts  -- they might not be sufficient for you, but they are honest...

(1) I have more confidence in the collective, deliberate, and long-standing wisdom of the GAO than a single COFC judge.

(2) The Tolliver case is messy -- it involves prior protests and corrective actions and contract terminations and RFQ cancellations and so forth.  Sometimes, messy cases make bad law.

(3) As you mentioned in another thread, the Government is appealing the Tolliver decision -- this is a big deal and is meaningful, as the Government rarely appeals in contracts cases.

(4) The GAO interpreted and applied 15 USC 644(r) with intentionality in a way that gives it meaning.

(5) The rule-of-two will already have been considered in the acquisition to establish the parent IDIQ contract -- a mandatory re-application of the rule-of-two to every ordering situation is contrary to the principles of fair opportunity.

(6) The DAR Council and CAA Council went through a rule-making process for the text of FAR 16.505(b)(2)(i)(F) and gave discretion to contracting officers -- the COFC case erases that discretion, as well as the discretion that 15 USC 644(r) gave to agencies.

(7) In 15 USC 644(r), the Congress and President gave authority to the OFPP Administrator, SBA Administrator, and GSA Administrator to establish the regulation to implement the statute -- not a single judge at COFC.

(8) The Tolliver case is hard reading, and seems convoluted.  In contrast, the GAO decisions are straight-forward and easier for me to understand.

(9) I like to think of ordering as a matter of post-award contract administration, rather than a brand-new acquisition.  I like to think of an ordering situation as a continuation or implementation of an on-going acquisition (the parent IDIQ contract) rather than the start of a wholly new acquisition.

For all of these reasons, I think the GAO is right.

ji20874 said:

I'm not a lawyer, but here are my thoughts  -- they might not be sufficient for you, but they are honest...

@ji20874 I appreciate your thoughts, and I thank you for sharing them.

You don't have to preface your remarks about anything by saying you are not a lawyer. I am not a lawyer. You and I are acquisition practitioners of long-standing. I do not come here for the opinions of lawyers. I know plenty of lawyers and some of the best in the country. I can call or write to them when I want to discuss a legal issue with them. Besides, they don't necessarily know the answer. They learn about this stuff the same way we do—by reading, thinking, talking, and listening. But what lawyers are especially good at is researching a problem, thinking about it in a special way, and constructing special kinds of arguments. We can do that, too—but we can't give legal advice or represent clients.

Of course your thoughts are honest! Why wouldn't they be? You and I don't always agree, but so what? In this case I have developed a preliminary opinion, which has been published, but I'm still pondering the issue, so I came here to see what others think. What I want to do is find a solution to the problem that makes sense. But I think we have to work our way through it in order to get there.

Thanks for contributing to this thread. Don't go away. I hope this is more interesting than trying to answer unclear questions.

I have a feeling I'm in the minority here, but I keep reading 15 USC 644(r) and 19.502-4. Is there any credence to the thought that the reason 19.502-4 says may is to allow for the exception to fair opportunity required in 15 USC 644(r)?  Or in other words, because fair opportunity is required under a IDIQ, the FAR clause is written to allow for the exception so the rest of FAR 19 can be followed.  Do we really think Congress wrote a law that intentionally gave the government a route to avoid all other SB requirements of the FAR? Because in practice (and contractually according to GAO ) if the government decides to use a IDIQ, they are no longer required to follow the rest of FAR part 19.  

Again, I am probably in the minority but the more I read Toliver I understand the fundamental point, the government's responsibility to maximize SB participation isnt minimized by using an IDIQ.

Vern Edwards said:

Why?

1-GAO specializes in this realm.

2-GAO cites precedent to support their decision and it is logical:

GAO in B-419167 (Itility):

"We further expounded on our statutory interpretation of Section 644(r) in Aldevra, B-411752, Oct. 16, 2015, 2015 CPD ¶ 339. In Aldevra, the protester, supported by the SBA, argued that because a proposed Federal Supply Schedule (FSS) order had an anticipated value between the micropurchase and simplified acquisition thresholds, the agency was required to comply with small business set-aside requirements. We disagreed based on the discretionary language of 15 U.S.C. § 644(r). Specifically, we explained that:

Given the language of the Jobs Act, as well as regulatory provisions implementing the Jobs Act, it is readily apparent that the general small business set-aside rule . . . implemented under FAR § 19.502-2, does not apply when placing orders under the FSS program. In this regard, the Jobs Act clearly provides for granting agency officials discretion in deciding whether to set aside orders under multiple-award contracts (EA)."

3-COFC does not handle these decisions day in and day out.

4-COFC:

"In sum, what the government really seems to be arguing is that the agency, having awarded its preferred TMS MAIDIQ without any set-aside component, is now exempt from applying the Rule of Two to any proposed procurement (or acquisition) of services that might be obtained using the TMS MAIDIQ. Put yet differently, the government asserts that, having exercised its discretion not to set-aside any portion of the TMS MAIDIQ scope or any of the TMS MAIDIQ‘s contract awards for small business, the agency can utilize the TMS MAIDIQ for any acquisition – and avoid the Rule of Two – so long as the contemplated scope of work is within the TMS MAIDIQ’s scope. No statutory or regulatory language, however, supports such a sweeping inference (EA).

If they can't point to something that "says no," I would not say nothing "says yes." That "sweeping inference" is the same thing as an agency/CO's decision. 

If there was anything else I had to add, @ji20874 covered it better than I ever could.

sdvr said:

Do we really think Congress wrote a law that intentionally gave the government a route to avoid all other SB requirements of the FAR?

Congress really did write a law that intentionally gives agencies the discretion to do a set-aside for an order against a multiple-award IDIQ contracts, rather than mandating a set-aside under the mandatory application of the rule-of-two.  By the way, the rule-of-two would already have been mandatorily applied in the acquisition for the parent IDIQ contract.

sdvr said:

Again, I am probably in the minority but the more I read Toliver I understand the fundamental point, the government's responsibility to maximize SB participation isnt minimized by using an IDIQ.

What if I said SB had already had their chance to compete for SAIDIQ and didn't make it? 

What if I said that the SB is a member of the MAIDIQ and agreed to the terms of such? Isn't fair opportunity defined by the contract at that point?

ji20874 said:

Congress really did write a law that intentionally gives agencies the discretion to do a set-aside for an order against a multiple-award IDIQ contracts, rather than mandating a set-aside under the mandatory application of the rule-of-two.

Read the statute, 15 USC 644(r)(2):

Quote

(r)Multiple award contractsNot later than 1 year after September 27, 2010, the Administrator for Federal Procurement Policy and the Administrator, in consultation with the Administrator of General Services, shall, by regulation, establish guidance under which Federal agencies may, at their discretion... (2) notwithstanding the fair opportunity requirements under section 2304c(b) of Title 10 and 4106(c) of Title 41 set aside placed against multiple award contracts for small business concerns, including the subcategories of small business concerns identified in section (g)(2)....

Note the specific references to the two statutes.

I think that could be interpreted as sdvr suggests: it frees agencies from the requirement to provide a fair opportunity to "all contractors" so they can make set asides in accordance with the rule of two; it does not free agencies from the requirement to comply with the rule of two when placing orders. Before the law the fair opportunity statute conflicted with the rule of two regulation, statute taking precedence. FAR 15 USC 644(r)(2) eliminated the conflict.

Why shouldn't it be read that way? If you read it that way, then when considering whether to proceed under a MATOC a CO might be able to comply with the rule of two by setting an order aside. That would eliminate any issue about the applicability of the rule of two to MATOCs. If the rule of two applies, and if a MATOC has no small business contractors, or only one, then the CO would have to award a new contract instead of placing an order. That approach would be consistent with national small business policy as set forth in 15 USC 644(a), which has been in place for decades.

I doubt very much that Congress intended that agencies be able to bypass the rule of two simply by choosing to proceed under a MATOC. The rule of two has been around since 1979. When OFPP once proposed to eliminate it Congress threatened to make it statutory instead of just regulatory. Do you think they intended to abandon it when they passed the Small Business Jobs Act of 2010?

Just now, Constricting Officer said:

#1 What if I said SB had already had their chance to compete for SAIDIQ and didn't make it? 

#2 What if I said that the SB is a member of the MAIDIQ and agreed to the terms of such? Isn't fair opportunity defined by the contract at that point?

#1 - I dont think it makes a difference. When does an acquisition start? If the government is considering a purchase, dont they need to consider SB first? 

#2 -  This is my point. All members of an IDIQ are required to get Fair Opportunity, 19.502-4 allows for the exception

By the way, agencies do have discretion with respect to the rule of two. It is discretion with respect to the determination whether there are two or more responsible small businesses that can do the work, not with respect to complying with the rule if there are two or more such small businesses.

See AeroSage, LLC. GAO B-414917, Oct. 17, 2017:

Quote

Generally, under Federal Acquisition Regulation (FAR) §19.502–2(b), a procurement with an anticipated dollar value of more than $150,000 must be set aside for exclusive small business participation when there is a reasonable expectation that offers will be received from at least two responsible small business concerns, and that award will be made at a fair market price. This standard is commonly referred to as the “rule of two.” The decision whether to set aside a procurement may be based on an analysis of factors such as the prior procurement history, the recommendations of appropriate small business specialists, and market surveys that include responses to sources-sought announcements or requests for information. Commonwealth Home Health Care, Inc., B–400163, July 24, 2008, 2008 CPD ¶140 at 3. The determination as to whether the rule of two is satisfied is a matter of business judgment within the contracting officer's discretion that we will not disturb absent a showing that it was unreasonable. Information Ventures, Inc., B–400604, Dec. 22, 2008, 2008 CPD ¶232 at 3.

Emphasis added. The determination as to whether there are two responsible small businesses. Maybe that's the discretion that the CO gets to exercise pursuant to 15 USC 644(r)(2) when deciding whether to comply with the fair opportunity statutes.

Vern Edwards said:

I think that could be interpreted as sdvr suggests: it frees agencies from the requirement to provide a fair opportunity to "all contractors" so they can make set asides in accordance with the rule of two

I disagree.  Words have meaning.  The statute did not say that the agency shall use a set-aside used when certain conditions for a set-aside exist; rather, the statute gives agencies discretion to do set-asides in ordering situations.  To me, the Tolliver decision erases any meaning for the word discretion and makes set-asides mandatory if certain conditions exist.

Vern Edwards said:

By the way, agencies do have discretion with respect to the rule of two. It is discretion with respect to the determination whether there are two or more responsible small businesses that can do the work, not with respect to complying with the rule if there are two or more such small businesses.

I disagree.  When the rule-of-two applies, agencies must apply it and must do a set-aside if certain conditions exist.  There is no discretion:  "The contracting officer shall set aside any acquisition . . . when there is a reasonable expectation that. . ."  As I see it, there is room for some professional judgment with the rule-of-two, but not discretion.

Anyway, I'm not the decision-maker.  I'm glad to be in the company of the GAO and the Justice Department on this matter.  I hope ordering is kept available and streamlined -- the ordering process is already over-burdened by too much baggage.  Having to do extensive market research and apply the rule-of-two before each and every ordering situation where there might be a large business contractor defeats the purpose of even having an ordering methodology.

ji20874 said:

I disagree.  When the rule-of-two applies, agencies must apply it and must do a set-aside if certain conditions exist.  There is no discretion:  "The contracting officer shall set aside any acquisition . . . when there is a reasonable expectation that. . ."  As I see it, there is room for some professional judgment with the rule-of-two, but not discretion.

@ji20874You didn't read carefully. The discretion is not with respect to complying with the rule when there are two small businesses. The discretion is with respect to whether there are two small businesses. I'm relying on your precious GAO, of which you think so highly. They said the CO has discretion in that regard.

ji20874 said:

I hope ordering is kept available and streamlined

@ji20874I hope it becomes streamlined. But setting an order aside shouldn't make it any less streamlined.

I tellin' ya: If the GAO is right the small business lobby is going to go to work on Congress and the rule of two is going to become statutory.

I have to sign off for a while. You guys have at it.

Vern Edwards said:

You didn't read carefully.

I did read carefully, and I responded carefully.  Deciding whether there are two small businesses for the rule-of-two might be a matter of professional judgment, but is not a matter of discretion.  We might have differing understandings of the word "discretion."

Vern Edwards said:

But setting an order aside shouldn't make it any less streamlined.

Having to do and document a mandatory rule-of-two analysis before every ordering situation where a large business contractor holds one of the IDIQ contracts (or a large business contractor holds a single-award IDIQ or other indefinite delivery contract) is not a move towards streamlining.

ji20874 said:

I disagree.  Words have meaning.  The statute did not say that the agency shall use a set-aside used when certain conditions for a set-aside exist; rather, the statute gives agencies discretion to do set-asides in ordering situations.  To me, the Tolliver decision erases any meaning for the word discretion and makes set-asides mandatory if certain conditions exist.

So to be clear, you feel as though the shall(s) in 19.502-1 and -2 are overwritten by the may in -4?

Vern Edwards said:

I'm relying on your precious GAO, of which you think so well.

Precious?  What does that mean?

Yes, in this matter I agree with the GAO.  Apparently, the Justice Department does, too, inasmuch as you reported that the government is appealing the Tolliver decision.  I think the GAO got it right.  Please don't mock me for thinking that way.

Vern Edwards said:

So what? Even if that is true—though it may not be—why would that make the court's decision about the application of the rule of two wrong?

Because such an interpretation would violate an "elementary canon of construction that a statute should be interpreted so as not to render one part inoperative." (quoting from Colautti v. Franklin, 439 U.S. 379, 392 (1979)).

Vern Edwards said:

Maybe it means what it says: "[N]otwithstanding the fair opportunity requirements under section 2304c(b) of title 10 and section 4106(c) of title 41, [agencies may] set aside orders placed against multiple award contracts for small business concerns, including the subcategories of small business concerns identified in subsection (g)(2)..."

Which implies there is such a thing as a nonmandatory set-aside. However, there would be no such thing under the COFC's interpretation.

ji20874 said:

Deciding whether there are two small businesses for the rule-of-two might be a matter of professional judgment, but is not a matter of discretion.  We might have differing understandings of the word "discretion."

@ji20874I think we may indeed have different understandings of the word discretion. Mine is based on law. See the entry for discretion in Black's Law Dictionary:

Quote

discretion (di-skresh-ən) (14c) 1. Wise conduct and management exercised without constraint; the ability coupled with the tendency to act with prudence and propriety. 2. Freedom in the exercise of judgment; the power of free decision-making. 3... 4. A public official's power or right to act in certain circumstances according to personal judgment and conscience, often in an official or representative capacity. — Also termed discretionary power.

Agency and CO decisions that require judgments require exercises of discretion. There are more than 2,000 GAO decisions which stand for that proposition. Now, I will rely again on the GAO. See Owens & Minor Distribution, Inc. GAO B-218223.5, Feb. 3, 2021:

Quote

An agency's judgment that the features identified in the proposal did not significantly exceed the requirements of the RFP, and thus did not warrant the assessment of unique strengths, is a matter within the agency's discretion and one that we will not disturb where the protester has failed to demonstrate that the evaluation was unreasonable.

When determining whether the rule of two has been satisfied, a CO must decide whether there are at least two responsible small businesses. Determinations of responsibility are judgments that are within the CO's discretion. See HomeSafe Alliance LLC, GAO B-418266.5, Oct. 21, 2020:

Quote

In most cases, responsibility determinations involve subjective business judgments that are within the broad discretion of the contracting activity. Mountaineers Fire Crew, Inc., et al., B–413520.5 et al., Feb. 27, 2017, 2017 CPD ¶77 at 10.

Again, my research has found more than 2,000 GAO decisions in which it is stated that judgments are matters of discretion. Determinations of responsibility are matters of judgment. And that is why I said, "By the way, agencies do have discretion with respect to the rule of two."

So that is my understanding of discretion. What is yours?

ji20874 said:

Precious?  What does that mean?

@ji20874According to my dictionary (Chambers) it means, among other things, "very highly esteemed."

Don Mansfield said:

Because such an interpretation would violate an "elementary canon of construction that a statute should be interpreted so as not to render one part inoperative." (quoting from Colautti v. Franklin, 439 U.S. 379, 392 (1979)).

@Don MansfieldFrom Reading Law: The Interpretation of Legal Texts (2012) by Antonin Scalia and Bryan Garner, from the section, Fundamental Principles:

Quote

3. Principle of Interrelating Canons: No canon of interpretation is absolute. Each may be overcome by the strength of differing principles that point in other directions.

In any case, I'm not yet ready to accept GAO's assertion that applying the rule of two to MATOCs would render 15 USC 644(r)(2) meaningless. I think it would depend on how it is applied.

Vern Edwards said:

So that is my understanding of discretion. What is yours?

When FAR 16.505(b)(2)(i)(F) says "contracting officers may, at their discretion, set aside orders for . . . small businesses," I understand that to mean a contracting officer may, at his or her discretion, set aside an order for small businesses.  There's a quote from somewhere, "My soul delights in plainness" -- that's me.  My understanding jives well with Black's Law Dictionary.  I don't agree with a reading of discretion that means that a contracting officer must apply the rule-of-two in an ordering situation and then must set aside an order for small businesses if application of the rule-of-two points in that direction; or that use of the MATOC is prohibited if the rule-of-two points to small businesses outside the MATOC -- to me, that is not discretion. 

I will withdraw from this thread and let you have the last word.  I am content with my understanding, and I will be interested in the Federal Circuit's decision.

@ji20874Why withdraw? What's up with you? We're talking about stuff, that's all. There's nothing at stake here. We're working it out. Thinking.

On second thought, go ahead and withdraw. I think you mostly enjoy quick-answer in-and-out, which I don't really care for. But I understand.

When I got started in this business as an intern I used to watch and listen to the GS-12 contract specialists, real pros, argue off and on for days about various contracting issues. I learned a lot that way. I miss that. I don't enjoy answering poorly-worded elementary questions that people could answer for themselves through a little research and thought.

Yes, ji20874, withdraw. It's for the best. People who don't like to argue shouldn't do it.

"I am content with my understanding." Wow. A virtual repudiation of Western civilization. It's a good thing not everybody thinks that way. Nobody should ever be content with their understanding. I'm not content with mine about much of anything. I'm not content with mine about this topic.

I found this on Headspace.com, in an article by Jeremy Deaton entitled, "The case for owning your self-doubt":

Quote

Einstein once described his method by saying, “I think and think for months and years. Ninety-nine times, the conclusion is false. The hundredth time I am right.” You may read this as a lesson in persistence, but it is just as much a lesson in self-doubt. Assume that you are never right, that your work is never good enough, and maybe you will produce something worthwhile.

I argue because I'm not sure of myself and want to test my beliefs.

Vern Edwards said:

@Don MansfieldFrom Reading Law: The Interpretation of Legal Texts (2012) by Antonin Scalia and Bryan Garner, from the section, Fundamental Principles:

I understand that and am open to "strength of differing principles that point in other directions".

Another canon of interpretation that points in favor of the GAO is lex specialis over lex generalis. That is, the specific rule for discretionary set-asides under multiple-award contracts takes precedence over the general Rule of Two.

BTW, I think you were too hard on @ji20874 in your last post. And that's coming from me.😀

@Don Mansfield You expressing concern for ji20874's feelings. Talk about strange bedfellows.

How about the whole-text canon, the presumption against effectiveness canon, and the harmonius-reading canons? 15 USC 644 is long. Read 15 USC 644(a) and 15 USC 644(r)(2) and ask yourself if GAO's interpretation of the latter and its logical consequence make sense in terms of the former. Did the Congress really want to undermine the effectiveness of the rule of two by making it inapplicable to MATOCs?

ITility argued that application of the rule of two prior to the selection of an acquisition method and satisfaction of the two set-aside criterion should block proceeding under a MATOC, and I have thought that way, too. But what if it meant only that when the rule of two is satisfied an agency cannot proceed under a MATOC that does not include at least two small businesses. What if it meant that the agency could proceed under the MATOC if it could set the order aside?

Some of you have argued that 15 USC 644(r)(2) makes setting an order aside a matter of unfettered discretion. Read the statute again. What if the discretion is to restrict the fair opportunity process to small businesses as necessary?

And consider this quote from Tolliver:

Quote

Moreover, where the FAR intends to make the Rule of Two entirely inapplicable to the selection of a particular procurement vehicle, the FAR knows how to do so. See FAR 8.404(a) (“Use of Federal Supply Schedules”) (providing that FAR “Parts 13 (except 13.303-2(c)(3)), 14, 15, and 19 (except for the requirements at 19.102(b)(3) and 19.202-1(e)(1)(iii)) do not apply to BPAs or orders placed against Federal Supply Schedules contracts (but see 8.405-5)”). Accordingly, there is no requirement for an agency to apply the Rule of Two prior to an agency’s electing to use a FAR Part 8 FSS procurement, although the agency has the discretion to set-aside such procurements after deciding to utilize FAR Part 8, just as the Army did here with respect to the 13F and JFOC Solicitations. See FAR 8.405-5(a) (“Although the preference programs of part 19 are not mandatory in this subpart, in accordance with section 1331 of Public Law 111-240 (15 U.S.C. 644(r)) - (1) Ordering activity contracting officers may, at their discretion - (i) Set aside orders for any of the small business concerns identified in 19.000(a)(3)”).

In contrast, no provision similar to FAR 8.404(a) – exempting the selection of an FSS procurement from FAR Part 19 – exists in FAR part 16, generally, or FAR 16.5, in particular.

Vern Edwards said:

ITility argued that application of the rule of two prior to the selection of an acquisition method and satisfaction of the two set-aside criterion should block proceeding under a MATOC, and I have thought that way, too. But what if it meant only that when the rule of two is satisfied an agency cannot proceed under a MATOC that does not include at least two small businesses. What if it meant that the agency could proceed under the MATOC if it could set the order aside?

So you're asking if the discretion at 15 U.S.C. 644(r) means the discretion to either conduct a set-aside under the MATOC or a set-aside for a new contract? So the choice is how to set aside, not whether to set aside?

I think that if the rule of two is satisfied, then an agency must either set aside an acquisition for award of a new contract or set an order aside under a MATOC.

I think that a reasonable interpretation of 15 USC 644(r)(2) is that it lets COs depart from the requirements of the two statutes it mentions, which means that they do not have to not give "all" contractors a fair opportunity. It specifically mentions discretion with respect to those two statutes. It makes no mention of FAR, of which FAR 19.502-2(b) is a part.

I don't think 15 USC 644(r)(2) was written to relieve COs from the requirement to set-aside an acquisition when there are two or more responsible small businesses simply by choosing to proceed under a MATOC. If that were the case, why didn't the FAR councils write something for MATOCs like they did in FAR 8.404 for GSA FSS? All they had to say was:

When deciding whether to conduct an acquisition by placing an order under a multiple-award contract, or when issuing an order under a multiple-award contract, agencies need not comply with FAR 19.502-2(b). However, they may set an order aside for small businesses in general, or for any subcategory of small businesses, without providing a fair opportunity to other businesses.

I cannot believe that Congress has intentionally allowed agencies to disregard the rule of two simply by choosing to issue an order against a MATOC.

On 4/1/2021 at 11:33 AM, Constricting Officer said:

I agree with you in practice. The question was posed this way b/c if an acquisition, as defined by FAR 2.101, is bring planned and there are two small business concerns what right down we have not to set it aside.

It seems like a procedural step in the contract formation process. For now, let’s agree that’s the contract formation process is as follows:

1. Initiation of want or need

2. Market research (FAR Part 8 and 19 considerations)

3. Describe agency needs

4. Acquisition planning

Market research includes determining if sources capable of satisfying the government’s requirement exists and whether the acquisition should utilize any of the small business programs in accordance with FAR Part 19. Presumably this includes checking required sources of supply and services. FAR Parts 10 and 8 logically occur before considering FAR Part 19. (You can’t consider a small business program until you identify capable sources)

Skip to FAR 8.004, which reads, in part:

”When satisfying requirements from non-mandatory sources, see 7.105(b) and part  19 regarding consideration of small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including 8(a) participants), and women-owned small business concerns.”

I’m willing to argue that when using a non-mandatory source such as a MATOC, that consideration of FAR Part 19 small business programs is required. However, when the MATOC is also a MAC (multi-agency contract) I think the Rule of Two is applied to the MAC. Agencies are encouraged, by FAR, to consider satisfying requirements from or through MACs before going to commercial sources in the open marketplace.

That being said, its long-standing practice to apply a similar response (apply the Rule of Two) to MATOCs and not the open marketplace. Doesn’t seem SBA has an issue with it unless I missed something. If the FAR is silent (at least not expressly requiring) and there is long-standing practice, it might be okay until SBA or the FAR Councils, or legislative branch decide otherwise.

This discussion reminds me of the Kingdomware and Latvian decisions and resultant legislation - Things change, stay awake!

To add some fuel - from the original federal notice where the FAR was amended in 2016:

https://www.federalregister.gov/documents/2016/12/06/2016-28432/federal-acquisition-regulation-set-asides-under-multiple-award-contracts

Comment: One respondent stated that a written justification should be required for order set-asides under multiple-award contracts.

Response: The interim rule did not change FAR subpart 6.2, which provides that a written justification is not required for small business set-asides or set-asides to any small business concern participating in the socioeconomic programs identified at FAR 19.000(a). In addition, section 1331 (15 U.S.C. 644(r)) established an exception to the fair opportunity requirements for set-asides of orders under multiple-award contracts, which was incorporated into FAR subparts 8.4 and 16.5 under the interim rule. However, contracting officers are required to adhere to the criteria at FAR 19.502-2 to determine whether or not a small business set-aside is feasible before proceeding with this acquisition strategy.

The intent was never to get around 19.502-2. It was to allow for the exception in fair opportunity.

sdvr said:

The intent was never to get around 19.502-2. It was to allow for the exception in fair opportunity.

On 4/2/2021 at 6:27 PM, Vern Edwards said:

I cannot believe that Congress has intentionally allowed agencies to disregard the rule of two simply by choosing to issue an order against a MATOC.

I also doubt that Congress intentionally allowed agencies to get around the rule of two by moving work to an unrestricted MATOC that would otherwise be set aside. However, I don't think Congress foresaw that happening.

Assuming the purpose of the Small Business Jobs Act was to create more opportunities for small business concerns, I don't see how permitting set-asides "inside" a MATOC that would otherwise have to be set aside "outside" of a MATOC creates more opportunities for small business concerns. All that does is, perhaps, make the contracting process easier. I think the intent was to permit set-asides under MATOCs to create more opportunities for small business. What we're seeing are the unintended consequences.

On 4/3/2021 at 12:21 PM, Jamaal Valentine said:

1. Initiation of want or need

2. Market research (FAR Part 8 and 19 considerations)

3. Describe agency needs

4. Acquisition planning

I would make it 1, 3, and then 2/4. 

On 4/3/2021 at 12:21 PM, Jamaal Valentine said:

Agencies are encouraged, by FAR, to consider satisfying requirements from or through MACs before going to commercial sources in the open marketplace.

"Encouraged."

Don Mansfield said:

However, I don't think Congress foresaw that happening.

They didn't, but if they were better at writing legislation it would have said the intent. 

Once a rule has been applied and a contract results at the local level, not only legally but also conceptually, it makes no sense to apply it again.

What’s noticeable is the express exclusions found at FAR 19.304 (HUBZone), 19.404 (Service Disabled Veteran Owned Small Business), and 19.504 (Woman Owned Small Business).

”Orders under indefinite-delivery contracts (see subpart 16.5). (But see 16.505(b)(2)(i)(F) for discretionary set-asides of orders)”

On 4/5/2021 at 3:43 PM, Constricting Officer said:

I would make it 1, 3, and then 2/4.

I’m not against reordering the events; keep in mind FAR 11.002 policy, which states “...agencies shall [s]pecify needs using market research...”

It makes sense that we start with an identified capability gap or innovative opportunity that triggers market research. Market research helps determine how we should describe the agency need(s) for synopsis and solicitation purposes.