Why expanding small-business contracting is more challenging than one rule

The Washington Business Journal covers SBA’s proposal to expand the rule of two to IDIQ order competition, co-signing without comment SBA’s news release statement that such a rule would drive more than $6 billion annually to small business.

What casual observers of the IDIQ trend miss is the concentration of small-business spend to fewer primes, because of IDIQ contract holders’ ability to delay small-business recertification beyond their outgrowth of the standards.

Task order competitions are already limited to those small businesses that have secured IDIQ positions, rather than opening opportunities to newer or smaller entities. As IDIQ contract holders are not required to recertify their size status—calculated on a five-year rolling average—the government lags in recognizing their actual size. This provides a significant advantage over other small businesses trying to sell federally, especially when the “large” smalls control the channel for small business spend.

Simply applying the rule of two at the program level will likely increase spend to this small pool of “winners,” who are already successful, without expanding the industrial base. Addressing contract access would likely do more to benefit small business.