The Rule of Two to small business procurements explained

March 1, 2016

GAO: Rule of Two Not Satisfied Where Businesses Do Not Manufacture Products

Source: SmallGovCon, Matthew Schoonover, February 16, 2016

Where an agency buys manufactured goods, the FAR’s Rule of Two is satisfied when two or small business manufacturers of the end products exist. It is not enough, as GAO recently held, for two or more small business distributors of manufactured products to exist.

In Manus Medical, B-412331 (Jan. 21, 2016), GAO denied a protest claiming that the Department of Veterans Affairs erred by not setting aside the solicitation for service-disabled veteran-owned small businesses. The solicitation called for a contractor to “provide all labor, materials, transportation, equipment and supervision . . . to provide a Custom Sterile Procedure Pack program” for the VA’s Central Region medical facilities. “The packs,” the solicitation continued, “shall be available for distribution by the Medical Surgical Prime Vendor . . . or by direct purchase, at the discretion of the local facility.”

Manus—an SDVOSB—protested the VA’s decision to issue the solicitation on an unrestricted basis, claiming that at least two SDVOSBs expressed an interest in submitting offers under the solicitation. It did not assert, however, that either of these SDVOSBs actually manufactured the products sought; instead, it claimed that the SDVOSBs could perform the requirements based on “established distribution relationships with large manufacturers of the custom packs[.]”   Read More …

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