Codifying the Rule of Two and Recalibrating Defense Acquisition: Congressional Reform in Motion
In a recent Federal News Network discussion, Terry Gerton interviewed Emily Murphy, Senior Fellow at George Mason University’s Baroni Center for Government Contracting and former Administrator of the General Services Administration, concerning pending legislative developments in federal procurement. Their exchange usefully frames two related but distinct currents in contemporary acquisition reform: the effort to preserve small business competition through statutory codification of the “rule of two,” and the continuing congressional effort to accelerate Department of Defense procurement through changes to thresholds, contracting systems, workforce policy, and commercial acquisition practices.
The proposed Protecting Small Business Competitions Act of 2025, H.R. 2804, reflects congressional concern that small business protections embedded in regulation may be vulnerable to administrative reinterpretation. As Murphy explains, the rule of two requires a set-aside where at least two responsible small businesses are expected to compete at fair and reasonable prices. Although this rule has long functioned as a central feature of small business procurement policy, it is regulatory in origin and derives from broader statutory authority in Section 15 of the Small Business Act. Codification would therefore create a firmer legal foundation and could reduce the ability of future administrations to narrow the rule through policy guidance or regulatory discretion.
The most significant issue is not merely whether the rule of two survives, but how far it reaches. As introduced, the legislation would have applied to task and delivery orders above the simplified acquisition threshold. As marked up, however, the provision appears to preserve application to contracts while leaving greater flexibility for task order competitions. That distinction matters. Modern procurement increasingly relies on multiple-award vehicles, schedules, and indefinite-delivery contracts, where agencies often compete work at the order level. If the statutory rule applies only to contracts, its practical effect may be narrower than small business advocates originally sought. At the same time, preserving agency discretion at the task order level may reflect the operational reality that ordering processes are designed for speed, flexibility, and mission responsiveness.
Murphy also notes that codification may create new protest opportunities. Once a procurement rule receives a statutory anchor, disappointed offerors may have a stronger basis to challenge agency decisions not to set aside requirements. The analogy to Kingdomware is instructive, although not identical. Statutory language can alter the balance between agency discretion and enforceable procurement preference. Contractors should therefore monitor not only the bill’s passage, but also its precise wording.
The discussion then turns to the National Defense Authorization Act and broader acquisition reform. Murphy identifies several recurring themes: increased acquisition thresholds, faster threshold reviews, Department-wide contract writing reform, scrutiny of defense audit functions, refined use of other transaction authorities, limits on lowest-price technically acceptable procurement, and renewed focus on the acquisition workforce. Particularly notable is the proposal to support consumption-based purchasing for IT, cloud, and artificial intelligence services. This approach would better align federal buying with commercial practice, while requiring safeguards against Anti-Deficiency Act risk.
Together, these reforms suggest that Congress is pursuing a dual agenda: protecting competition where statutory priorities are implicated, while accelerating procurement where mission needs demand flexibility. The unresolved tension is whether Congress will truly delegate judgment to agencies when local, political, or industrial-base interests are affected. That tension is not new, but it remains central to federal acquisition reform.
Disclaimer:
This post is for general informational purposes only and does not constitute legal advice. Contractors should consult qualified counsel regarding the application of procurement statutes, regulations, and solicitation-specific requirements to particular facts.