No Guaranteed Rule of Two Set-Asides for Small Business Under The Federal Supply Schedule
The small business community has been watching the Revolutionary FAR Overhaul closely, and for good reason. Changes released today to FAR Part 19 could reshape key protections like the “rule of two,” which refers to the requirement that federal agencies set aside contracts for small businesses when at least two qualified firms are expected to submit offers at fair market prices.
But even before those reforms take effect, a recent decision from the Government Accountability Office (GAO) reminds us that small business set-asides already face a serious challenge: the growing use of the GSA Multiple Award Schedule (MAS), where agencies may choose to set aside opportunities for small businesses, but are not required to do so.
The Case: Development InfoStructure, LLC (Devis)
In a recent case, Development InfoStructure, LLC (doing business as Devis) protested the State Department’s decision to award a task order under the Federal Supply Schedule (FSS) without setting it aside for small business.
GAO denied the protest in a ruling dated September 15, 2025 (B-422776.2).
The task order supported the Bureau of Population, Refugees, and Migration. It involved a wide range of services at refugee processing centers, including IT infrastructure, data analytics, case processing, and cybersecurity compliance.
Before issuing the order, the agency conducted market research. More than 50 companies responded, including 41 small businesses. However, the agency concluded that no small business could meet all the technical and scale requirements. Based on that, it issued the task order as an unrestricted competition among Multiple Award Schedule (MAS) contractors.
Later, after program changes reduced the staffing needs by 55%, Devis argued that the agency should have canceled the task order and reconsidered whether a small business could now meet the requirement under the “rule of two.”
GAO disagreed.
GAO’s Decision
GAO reaffirmed a legal distinction: the small business rules found in FAR Part 19, including the well-known “rule of two,” do not apply to orders placed under the Federal Supply Schedule (FSS). Instead, agencies may choose to set aside MAS orders for small businesses, but they are not required to.
As GAO explained in its decision:
“The FAR also provides… that the small business rules under FAR part 19, including FAR 19.502-2, are not mandatory, but fully at the discretion of the ordering agency, for orders issued under the FSS program. In this regard, our Office has explained that agencies are not required to follow the rule of two or other small business regulations under FAR part 19 when issuing orders or establishing blanket purchase agreements under the FSS.”
Because this task order was issued under FAR Subpart 8.4, which governs FSS procedures, the agency was under no obligation to revisit its set-aside decision, even after reducing the scope of work.
This legal distinction is part of a larger trend that affects how small businesses compete, and win, under the Schedule.
The Rule of Two: Longstanding Protection for Small Businesses
For decades, the “rule of two” has been a cornerstone of federal small business contracting policy. Found in FAR 19.502-2, it requires contracting officers to set aside acquisitions for small businesses when two conditions are met:
At least two responsible small business concerns are expected to submit offers, and
Award can be made at a fair market price.
This safeguard was designed to ensure small businesses have access to a fair share of government contracts, especially in competitive markets. It reflects a longstanding federal commitment to supporting small business growth and participation.
But this commitment does not apply uniformly across all federal buying methods.
Why the Rule of Two Does Not Apply to GSA Schedule Orders
While the rule of two remains a cornerstone of open-market federal contracting, it does not apply to task or delivery orders placed under the GSA MAS.
Under FAR Subpart 8.4, which governs Schedule orders, agencies have the option to set aside orders for small businesses, but they are not required to do so. Even when market research shows that two or more qualified small businesses could compete, the agency is not obligated to apply the rule.
The GSA Acquisition Manual (GSAM 519.502-4) confirms this discretion:
“Although FAR 19.502-2(b) requires set-asides when the rule of two is met, this requirement does not apply to orders placed against Federal Supply Schedules. Ordering activities may, at their discretion, set aside orders for any of the small business concerns identified in FAR 19.000(a)(3).”
In effect, the rule of two loses its mandatory force once an agency chooses to buy through the MAS. This has major implications for small business contractors who may be eligible under FAR Part 19 but overlooked in MAS-based acquisitions.
A Pattern in GAO Decisions Shows a Clear Legal Trend
The Devis ruling is not an outlier. It fits into a growing body of GAO decisions that reinforce one message: small business set-asides are not mandatory under the GSA Schedule.
For example: Financial & Realty Services (B-422858, Nov. 25, 2024): GAO reaffirmed that agencies have discretion, not obligation, when it comes to small business rules under the FSS.
Each case reflects the same legal principle: once a procurement moves onto the Schedule, the “rule of two” no longer applies as a mandate. Instead, it becomes an option, left to the agency’s discretion. This pattern matters because it shows that the legal framework is already shifting away from mandatory small business protections in Schedule-based acquisitions. The Devis case simply continues that shift.
Why This Matters for Small Businesses
The Devis decision reflects broader procurement trends that small business contractors need to watch closely. Three realities stand out:
1. The MAS Contract is becoming more frequently utilized in upcoming procurements.
More agencies are consolidating needs and using the Schedule to buy faster and more efficiently. This means more contract dollars are moving through a system where small business set-asides are optional, not required.
2. Market research does not guarantee a set-aside.
Even when agencies gather extensive data, consult the SBA, or review vendor capacity, those steps do not change the legal standard. Under FAR 8.4 and GSAM 519.502-4, the decision to set aside an order remains discretionary.
The rule of two is losing ground.
Regulatory reform through the FAR Overhaul may or may not adjust small business rules. But the growing reliance on the Schedule is already shrinking the space where the rule of two applies. This shift does not mean small businesses are shut out, but it does mean the strategies that once guaranteed access are no longer sufficient on their own.
Looking Ahead: What Small Businesses Should Take from Devis
The takeaway from Devis is not that the rule of two is gone; rather, its reach is narrowing. As more federal acquisitions move onto the MAS Contract, fewer are governed by the mandatory set-aside protections that small businesses have historically relied on.
This trend is already reshaping how small firms compete. Even if the Revolutionary FAR Overhaul leaves the rule of two intact, the growing use of Schedule vehicles means that fewer opportunities will trigger it in the first place.
For small businesses, now is the time to stay engaged. Structural trends matter just as much as policy debates. Tracking procurement patterns, not just regulatory reform, will be essential for staying competitive. The legal groundwork for discretionary set-asides under the Schedule is firm. Small business contractors must adapt their strategies accordingly.
