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WASHINGTON- The Federal Acquisition Regulation Council released new changes to the main small business section of the government’s contracting regulations, retaining a key policy that allows small businesses to enter, compete, and have success in the federal marketplace.

“Despite the Administration’s efforts to rewrite the government’s procurement rules without transparency, accountability and small business involvement, small government contractors rallied and successfully secured the retention of a key small business policy in the latest version of the FAR released today,” said Rep. Nydia M. Velázquez (D-NY), Ranking Member of the House Small Business Committee. “Now Congress must listen and pass my Protecting Small Business Competitions Act. Codifying the Rule of Two ensures that small business competitions are protected and will continue this year, four years from now, and permanently into the future.”

A September 10, 2025 hearing in the Small Business Subcommittee on Contracting and Infrastructure entitled: “Leveling the Playing Field: Fostering Opportunities for Small Business Contractors,” highlighted the strong, bipartisan support for codifying the Rule of Two:

• Ms. Sue Tellier, President and Owner of JetCo Federal, invited by Committee Democrats stated: "The Rule of Two has historically been a bedrock protection for us. Its erosion results in a less welcoming environment—reducing opportunities for small innovative firms and instead accelerating consolidation. Retaining and codifying the Rule of Two, making it a true 'shall' requirement applied consistently across vehicles, is essential to keeping small firms engaged in the federal marketplace."

• Mr. Michael Ramos, President of Raymond Global, invited by Committee Republicans stated: "If we remove the Rule of Two, that will be damaging to the defense industrial base. I think that's pretty critical to understand. If you remove that rule and you do not codify it, you have this scenario where not only will [small businesses] leave, but you will just create massive entrenchment of the existing larger small businesses."

The hearing’s witnesses gave a boost to the hundreds of small businesses and stakeholder groups representing thousands of small businesses across the country who have made their voices heard—calling for retention of the Rule of Two in the FAR Rewrite and supporting the Ranking Member's legislation.

Statements from leaders in the small business community:

In a letter to Congress, calling the Protecting Small Business Competitions Act “necessary and timely,” a broad coalition of small businesses and advocacy organizations wrote:

‘The Rule of Two is critical to preserving the small business industrial base and efforts to reverse this decline, as well as America’s long-term economic resilience and competitiveness. We urge all Members of Congress to support its swift passage in both chambers.”

-GovCon Small Business Coalition, GovEvolve, HUBZone Contractors National Council, ITVAR Modernization Coalition, Montgomery County Chamber of Commerce (MCCC), Multicultural Business Alliance (MBA), National Small Business Association (NSBA), National Veteran-Owned Business Association (NaVOBA), Native American Contractors Association (NACA), Native Hawaiian Organization Association (NHOA), Small Business Majority, U.S. Black Chambers (USBC), VET-Force, Veteran Women's Enterprise Center (VWEC), Veterans In Business (VIB) Network, Women Construction Owners and Executives (WCOE), Women Impacting Public Policy (WIPP), Women Veterans Business Coalition (WVBC),  Women's Procurement Circle (WPC)

"H.R. 2804 brings much-needed certainty and accountability to federal procurement...Ensuring strong competition from a wide pool of small firms is the most effective bulwark against the price creep and vendor lock-in that occurs when markets are dominated by a few large prime contractors."

-American Small Business Chamber of Commerce

“Rule of Two review process and guarantees are crucial to maintaining a robust pipeline of small businesses in the federal procurement process, which ensures government agencies maintain access to the innovative solutions small businesses are uniquely capable of providing."

- National Small Business Association

“[Mid-tier firms] exist in a uniquely vulnerable position—too large to qualify for small business set-asides, but too small to consistently compete against billion-dollar incumbents for full and open competitions. Yet, we are firm in stating that mid-tier firms would not exist without the small business contracting programs that enabled their entry into the federal market.”

-Mid-Tier Advocacy, Inc

"For many small businesses, federal or state procurement opportunities represent untapped revenue streams. These opportunities remain untapped because small businesses often face significant challenges when navigating the federal procurement system, including issues accessing capital needed to complete work to outright discrimination or anticompetitive behavior. In order to level the playing field for small firms, we highly encourage an approach to procurement that ensures small businesses have a fair chance to compete for lucrative federal contracts, and one of the best ways to help make sure small businesses have access to these opportunities is by setting aside dedicated contracts for small firms."

-Small Business Majority

“A critical component of [the FAR] modernization is ensuring that small businesses continue to have fair access to federal contracting opportunities, which is why codifying the Rule of Two through H.R. 2804, Protecting Small Business Competitions Act of 2025, is so important.”

-The Women’s Procurement Circle

‘Codifying the “Rule of Two” will enhance competition for all small business opportunities and strengthen our industrial base.”

-National Veteran Small Business Coalition (NVSBC)

"For women-owned businesses, who continue to face barriers in gaining fair access to federal contracts, this rule is a vital pathway to opportunity."

-U.S. Women’s Chamber of Commerce

“[The rule of Two] has been instrumental in ensuring that small businesses—particularly those that are minority-, women-, and veteran-owned—can successfully enter and compete in the federal marketplace. Over the decades, it has driven growth in small business participation, strengthened local economies, and provided the government with diverse and innovative suppliers, helping to maintain a robust and resilient industrial base.”

The Regional Presidents of the National Minority Supplier Development Council (NMSDC)

“We support passage of H.R. 2804 as an approach to ensuring small firms have a fair opportunity to enter, compete, and succeed within the federal procurement landscape. The Rule of Two is essential to federal efforts to meet and exceed statutory small business contracting goals.”

-The Center for Entrepreneurial Opportunity

"This longstanding rule has opened doors for thousands of small businesses, fostering economic growth and entrepreneurial opportunity. Its potential removal, due to a lack of statutory foundation, poses a significant threat, not only to the businesses it benefits, but also to the broader economic growth that small businesses contribute nationwide."

-Minority Business RoundTable

"Codifying the Rule of Two would ensure that government acquisition guidelines continue to permit small businesses to participate in and win a share of government contracts... For WOSBs, this could preserve opportunities while maintaining competition."

-Women Construction Owners and Executives (WCOE)

" As federal procurement evolves, we must ensure that small businesses are not forced to compete against global giants... No small business can compete on price alone with multibillion-dollar  corporations operating at massive scale. Without targeted protections and balanced policies, small firms risk being crowded out of the marketplace.”

-Workplace Solutions Association

“For the past forty years, since its enaction in 1985, the Rule of Two has been the backbone of small business participation in federal government contracting, including by Alaska Native Corporations, Tribes, and NHOs... The Rule of Two’s built-in safeguards ensure it only applies when two or more responsible small businesses can perform work at fair market prices, making its potential elimination both economically harmful and unnecessary.”

-Native American Contractors Association (NACA)

"In a marketplace that consistently uses large buying vehicles, protecting and empowering small businesses is good policy and essential for their continued participation. For these reasons, the Council supports H.R. 2804, introduced by the Committee’s Ranking Member, Nydia Velázquez."

-HUBZone Contractors National Council

“The "Rule of Two" is a foundational principle of federal procurement, designed to ensure that a fair proportion of government contracts are awarded to small businesses. For decades, this policy has served as a vital mechanism for promoting competition, fostering innovation and driving economic growth."

-Native Hawaiian Organizations Association

“Too often, large prime contractors dominate IT awards, leaving innovative small firms – who are frequently at the cutting edge of cybersecurity, cloud, and emerging technologies – without a fair shot to compete. By embedding the rule of two into statute, Congress would ensure that contracting officers consistently set-aside opportunities when multiple capable ITVARs exist, creating a more predictable and equitable procurement environment.”

-GovEvolve

"For decades, one of the fundamental underpinnings of federal procurement has been what is

commonly referred to as 'The Rule Of Two' .... [It] is at risk and can only be protected with a statutory solution."

-Cherokee Nation

"[P]reserving the integrity of the Rule of Two safeguards the small business industrial base, prevents unnecessary consolidation of federal contracts, and upholds the Congressional intent of the Small Business Act to foster competition and diversity within the federal marketplace."

-National Congress of American Indians

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