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Supreme Court takes on “Rule of Two”: what the decision means for set-asides on Federal Supply Schedules

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You may have heard people talking about a recent U.S. Supreme Court decision (Kingdomware Technologies Inc. v United States of America), saying it’s given a “boost” to veteran-owned businesses. And that the “Rule of Two” is now mandatory at the U.S. Department of Veterans Affairs (VA). But does the Court action affect Federal Supply Schedule (FSS) task and delivery orders? And does it affect every agency?

The very short answer is “no, not at this time.” That’s because “Rule of Two” is a term used for both the VA and U.S. Small Business Administration (SBA) statutes and regulations – but they’re different rules with the same name. At this time, the Supreme Court decision applies only to VA contracting rules and is specific to Veterans Affairs and to VA awarded contracts. Unless there is a regulatory change, agencies other than the VA should recognize that there has been no policy change in regard to the discretionary nature of FSS set-asides.

So, you can jump into the fourth quarter buying season with confidence, knowing there has been no change in procedures for using the Federal Supply Schedules.

As you might expect, we’ve received many questions since this decision was announced. Here are a few of the most frequently asked ones, along with brief answers:

Are set-asides allowed against FSS contracts?

Yes. FAR 8.405-5 allows for set-aside acquisitions on FSS contracts. In accordance with FAR 8.405-5(a), ordering activity contracting officers may, at their discretion, set aside orders or blanket purchase agreements for any of the small business concerns identified in FAR 19.000(a)(3).

Are ordering activity contracting officers required to set aside task or delivery orders against FSS contracts if the “Rule of Two” is met?

No, it is not required unless agency specific statutes or regulations require set-asides. FAR 8.405-5(1) states “preference programs of part 19 are not mandatory in this subpart,” and ordering activity contracting officers are provided the discretionary authority to set aside FSS orders.

Could there be future policy changes in light of the Kingdomware decision?

Yes. The Office of Federal Procurement Policy (OFPP) will coordinate meetings between GSA and SBA to discuss this decision. However, unless there is a regulatory change, agencies other than VA should continue to follow policies recognizing the discretionary nature of set-asides under the FSS.

Who can I talk to if I have questions regarding acquisitions against FSS contracts?

Any questions regarding acquisitions against FSS contracts may be directed to Steve Hutchinson, MAS Policy Division, Federal Acquisition Service Office of Acquisition Management, by phone at (202) 573-6211 or by email

1. FAR 8.405 was updated through FAR Case 2011-024 published in the Federal Register at 76 FR 68032 which was based on updates to the statute, specifically 15 U.S.C. 644(r), Multiple Award Contracts.