What Is the Rule of Two?
The rule of two requires a set-aside for small businesses when at least two responsible small businesses are expected to offer at fair market prices.
Rule of two in plain English
It applies to buys above the $15,000 micro-purchase threshold. The offers must also be expected to be competitive on market price, quality and delivery.
Contracting officers decide using market research, which is why answering sources sought notices matters. Each capable small business that responds helps show the agency it can set the work aside.
The rule moved in the FAR overhaul text agencies have adopted, from FAR 19.502-2 to 19.104-1. Setting aside orders under multiple-award contracts stays at the contracting officer's discretion.
Related terms
- Set-aside: A set-aside is a contract reserved for small businesses, or for one type of small business such as HUBZone or women-owned firms. Others can't bid.
- Sources sought notice: A sources sought notice is market research: an agency asks which businesses can do a job before it decides how to buy. Answering it isn't a bid.
- Micro-purchase threshold: The micro-purchase threshold is $15,000. Agencies can make most buys at or below it without competing quotes, often with a government purchase card.
- Contracting officer: A contracting officer is the government official with authority to enter into, manage and end contracts. Only a contracting officer can bind the agency.
Put it to work
- How to respond to a sources sought notice
- Browse open sources sought notices
- Set-aside contracts explained
Looking for another term? Browse the full glossary or the government contracting glossary guide.