Skip to content Skip to left sidebar Skip to right sidebar Skip to footer

Selling to the government

The Rule of Two to Transform Small Businesses

The SBA proposed a rule on October 25, 2024, aiming to transform small business contracting by requiring agencies to apply the “Rule of Two” to task and delivery orders under multiple-award contracts (MACs). The Rule of Two ensures contracts go to small businesses when at least two qualified small firms can meet price, quality, and delivery standards. This rule will apply to orders exceeding the micro-purchase threshold, with exemptions for orders placed under the General Services Administration’s Federal Supply Schedule or in cases where there are supply chain risks or national security concerns. (HSToday.US November 7, 2024)

Driven by concerns over declining small business participation, the SBA estimates this rule could increase small business contracts by $6.1 billion annually. It supports the Biden administration’s goal of 15% federal contract spending with small disadvantaged businesses (SDBs) by 2025. In fiscal 2023, 28.4% of federal contract dollars went to small businesses, yet new entrants to federal contracting have dropped nearly 60% since 2010. (ibid)

The SBA proposal requires agencies to document their decision when they choose not to set aside a contract under the Rule of Two. Agencies must conduct market research, justify their rationale, and coordinate with small business specialists. For orders under MACs with fewer than two small business contract holders, agencies must explain their decision, with exceptions for contracts under the Federal Supply Schedule and other specific exemptions. (ibid)

This proposal builds on a January 2024 memorandum from the Office of Federal Procurement Policy, which directed agencies to document such decisions. The SBA aims to address inconsistencies in applying the Rule of Two, which arose from differing interpretations by the Court of Federal Claims and the GAO regarding its use in MACs.aiming to improve compliance and Public comments are open until December 24, 2024, with the SBA encouraging input from stakeholders. If adopted, the rule promises to level the playing field, boost small business participation, and diversify the federal supply chain. (ibid)

Questions concerning the Rule of Two? Give us a call.

Rising Civilian IT Spending Trends for FY 2025

IT spending among federal civilian agencies has surged in recent years. It is expected to continue with spending priorities for fiscal 2025 to include cybersecurity, AI, enhancing public services, and IT modernization. The total civilian IT budget has grown by 8.1% since 2023, reaching $76.8 billion for 2025. The Department of Education, Social Security Administration, and Department of Homeland Security are set to see the largest budget increases, while Veterans Affairs, NASA, and Agriculture face reductions. (Washington Technology October 7, 2024)

Key FY2025 Civilian IT Priorities:

  • Cybersecurity: Spending increases by 15% to $13 billion, with a focus on public safety, implementing Executive Order 14028, Federal Zero Trust Strategy, and other software supply chain security and OMB memorandums. Agencies must prioritize zero-trust principles and cryptography, especially in vulnerable, sensitive systems. (ibid)
  • Artificial Intelligence (AI): Major funding supports Executive Order 14110, establishing chief AI officers and allocating $300 million for AI risk management, plus $40 million for hiring and training AI talent. (ibid)
  • Digital Public Experience: Efforts to improve digital services for the civilian sector under Executive Order 14058 and the 21st Century Integrated Digital Experience Act. (ibid)
  • Data as a Strategic Asset: Emphasizing better use of data in decision-making, guided by the Federal Data Strategy.
  • IT Modernization: Adoption of modern technologies and retiring legacy systems, with an additional $75 million for the Technology Modernization Fund. (ibid)

Agency Highlights:

  • VA: Despite reduced budget requests, the VA is innovating AI integration, allocating $420.7 million for CRM, streamlining veteran services, and piloting AI for better productivity. (ibid)
  • CISA: The Cybersecurity and Infrastructure Security Agency seeks $442 million for its CADS program, aimed at advancing cybersecurity analytics and data systems to detect, mitigate, and prevent cyber threats. (ibid)

As federal budgets are finalized, IT providers might align their solutions with these key programs and priorities for success.

Questions about Fiscal Year 2025 spending? Give us a call.

-–

SBA Certifications Upgrade: What You Need to Know

The Small Business Administration (SBA) will upgrade the process for applying for and managing federal contracting certifications. Here’s what you need to know:

The SBA’s certification upgrade begins August 1, 2024. During the upgrade, the SBA will not accept initial certification applications. The upgraded system should be available for new certifications in early September. (certify.sba.gov)

What Does This Mean for My Firm?

  • Most certified firms will not be impacted by the application pause.
  • New or prospective applicants should wait to apply after the upgrade.
  • The SBA will process applications submitted before August 1, 2024, in the order received.
  • Firms needing to renew should receive guidance from their certification program.
  • Firms facing a critical contracting deadline can contact certifications@sba.gov and provide the proposal number, agency, and bid due date. (ibid)

Which Certifications Are Impacted by the Upgrade?

  • Women-Owned Small Business (WOSB)
  • Economically Disadvantaged Women-Owned Small Business (EDWOSB)
  • 8(a) Business Development Program
  • Veteran Small Business Certification (VOSB)
  • Service-Disabled Veteran-Owned Small Business (SDVOSB)
  • Historically Underutilized Business Zones (HUBZone) Program (ibid)

The SBA will provide more resources and guidance in the coming days.

Have questions or need additional guidance, give us a call.

The Bad, the Ugly and some Good

Small businesses experienced a mixed bag in their pursuit of federal contracts during fiscal year 2023. On one hand, the government allocated a record-breaking $178.6 billion to small businesses, marking a significant increase from previous years. However, this surge in funding was accompanied by a concerning trend: a decline in the number of small businesses securing prime government contracts, dropping by 2.2 percent compared to the previous fiscal year. (INC. May 1, 2024)

Despite receiving a larger share of federal contracting dollars, small businesses faced formidable challenges in competing for contracts. The competitive landscape remains dominated by larger, more established players, placing smaller enterprises at a disadvantage due to their limited resources. Contract bundling further exacerbates the issue by consolidating contracts into larger, more complex opportunities that are often inaccessible to smaller firms. (ibid)

Another hurdle for small businesses is the complexity of federal contracts, which can be daunting to navigate. The House of Representatives recently passed a bill aimed at simplifying the language within federal contracts to make them more accessible and comprehensible to small businesses. This initiative seeks to level the playing field and enhance the competitiveness of smaller players in the federal contracting arena. (ibid)

Despite these challenges, the Small Business Administration (SBA) under Administrator Isabel Guzman has implemented initiatives to expand contracting opportunities for small businesses. This includes revising size standards to broaden access to agency programs, benefitting thousands of entrepreneurs across various industries. While progress has been made in meeting procurement spending targets for certain small-business categories, there is still work to be done to ensure that all small businesses have equitable access to federal contracting opportunities. (ibid)

Do you have questions about size standards or a particular upcoming opportunity? Please give us a call.

Too Small, Too Big, or Just Right

Midsized government contractors find themselves in a challenging position, squeezed between the advantages afforded to small businesses and the resources available to large corporations. While small firms benefit from set-aside contracts and large enterprises have the capacity for significant growth, midsized companies often struggle to compete for both small and large contracts due to restrictive requirements and certifications. (Washington Technology May 2, 2024)

The government contracting landscape favors small businesses, with an increasing number of contracts set aside for socio-economically disadvantaged enterprises. Conversely, large corporations have the financial backing and resources to pursue growth through acquisitions. This leaves midsized firms in a precarious position, with limited opportunities for growth and survival. (ibid)

Structural impediments further compound the challenges for midsized contractors. Stringent compliance requirements and certifications are necessary to win larger contracts, but acquiring these credentials can be a catch-22. For instance, firms may need certifications like the Contractor Purchasing System Review (CPSR) to qualify for certain contracts, but they can only undergo these reviews if they already have contracts that require them. (ibid)

For instance, the Defense Contract Management Agency (DCMA) may require companies to undergo a Contractor Purchasing System Review (CPSR) to verify their efficiency and effectiveness in managing government funds once their anticipated annual sales surpass $50 million. This requirement is logical. However, if a firm lacks an ongoing contract mandating the DCMA audit, they cannot undergo the review, making it nearly impossible to pursue new contracts with similar requirements. This lack of flexibility defies logic. (ibid)

Despite these challenges, midsized firms can leverage the Goldilocks Effect to their advantage. By combining the agility of small businesses with the resources and experience of larger corporations, they can offer tailored solutions and personalized attention to agency customers. Strategies such as tailoring solutions, demonstrating delivery success, and cultivating long-term relationships can help midsized contractors establish themselves as reliable and innovative partners for government agencies. Through patience and differentiation, midsized firms can transform obstacles into opportunities and position themselves as valuable partners in the government contracting ecosystem. (ibid)

Midsized firm looking to capitalize on your experience through innovative partnerships with government agencies? Give us a call.