On Wednesday, May 20, the House Committee on Small Business is scheduled to consider legislation that would codify the Rule of Two into federal law. Stakeholders have a near-term opportunity to show support by filling out this form to sign onto an industry letter urging the Committee to advance H.R. 2804, the Protecting Small Business Competitions Act of 2025, ahead of the Full Committee Markup.
Background on the Rule of Two
For decades, the Rule of Two has been a cornerstone of the federal procurement system. The rule requires agencies to set aside procurements for small businesses when there is a reasonable expectation that at least two responsible small business concerns can submit offers at fair market prices. Through this mechanism, the Rule of Two has played a central role in ensuring that small businesses have meaningful opportunities to compete for federal contracts.
Why Codification Is Being Considered Now
Recent efforts to streamline the Federal Acquisition Regulation (FAR)—including proposals to eliminate regulatory provisions not expressly authorized by statute—renewed attention on the Rule of Two’s legal footing. Although the FAR Council ultimately retained the Rule of Two, those proposals highlighted that the rule is grounded in regulation rather than explicit statutory authorization.
While the continued inclusion of the Rule of Two in the FAR reflects the government’s recognition of the vital role small business contractors play in meeting federal needs, small business advocates have increasingly called for Congress to place the Rule of Two on firmer footing through legislation, arguing that statutory codification would provide greater certainty, stability, and predictability for agencies and contractors alike.
Pending Legislation
During its May 20 Full Committee Markup, the House Committee on Small Business may consider H.R. 2804, sponsored by Representative Nydia Velázquez (D-NY). The bill would codify the Rule of Two into law, insulating it from future regulatory rollback and reinforcing Congress’s longstanding commitment to small business participation in federal contracting—particularly at a time when agencies increasingly rely on large, consolidated procurement vehicles.
Why the Rule of Two Matters
The Rule of Two is widely viewed as essential to maintaining a competitive and innovative federal marketplace. By preserving meaningful small business set-asides, the rule enables agencies to access the agility, innovation, and specialized expertise that small businesses bring to government missions. It also promotes economic growth by creating more predictable contracting opportunities, allowing small businesses to expand, hire, and invest in their local communities.
More broadly, preserving the Rule of Two helps sustain a balanced federal industrial base and supports the long-term strength of the U.S. economy.
Industry Letter of Support and Call to Action
A coalition of small business advocates and government contractors has circulated a letter urging the House Committee on Small Business to mark up and pass H.R. 2804. Organizations and companies interested in supporting the legislation are encouraged to fill out this form to sign on to the letter by 9:00 a.m. ET on Monday, May 18, and to share the letter within their networks to build additional support ahead of the Markup.
For questions about the Rule of Two, its application in federal procurements, or the potential implications of H.R. 2804, please contact Tony Franco, Jackie Unger, or another member of the Firm’s Government Contracts practice group.
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