The House Small Business Committee unanimously advanced H.R. 2804, the Protecting Small Business Competitions Act of 2025, on a 23-0 vote, sending the bill to the full House for consideration. If enacted, the legislation would write the federal government's "Rule of Two" small business set-aside requirement directly into statute — a move its sponsors argue is necessary to shield a cornerstone of small business contracting from the current deregulatory wave sweeping through federal acquisition policy.
How the Rule of Two Works Today
The Rule of Two is the mechanism that triggers mandatory small business set-asides in federal contracting. Under the current standard, codified at Part 19 of the Federal Acquisition Regulation, a contracting officer must set aside a procurement exclusively for small businesses when they reasonably expect at least two responsible small businesses to submit offers and that award can be made at a fair and reasonable price. The rule is the primary reason small businesses capture roughly a quarter of federal contract dollars each year. But its authority rests entirely on regulation — not on an act of Congress — which means it can be modified or rescinded through the same administrative process that created it, without requiring a vote on Capitol Hill.
Why the Timing of H.R. 2804 Matters
That regulatory vulnerability has become a live concern. The administration's broader deregulatory agenda has raised concerns about non-statutory provisions in the Federal Acquisition Regulation. Because the Rule of Two exists only in FAR Part 19 — and not in the Small Business Act or any other statute — it sits in the category of provisions that could be weakened or removed through administrative action alone. H.R. 2804 would close that gap by embedding the Rule of Two in statute, requiring Congress to act before it could ever be weakened or removed. The bill's urgency stems directly from those ongoing FAR reform efforts targeting elimination of non-statutory provisions.
The Task Order Carve-Out
The version that cleared committee differs in one significant respect from the bill as originally introduced. As introduced, H.R. 2804 would have applied the Rule of Two to task orders and delivery orders issued under existing contract vehicles, in addition to base contracts. During markup, an amendment was adopted removing that coverage. The version passed by the committee applies the Rule of Two only to contracts above the simplified acquisition threshold — task orders and delivery orders are excluded. The Senate companion bill, S. 2656, takes a different approach and would apply the requirement to task orders and delivery orders as well. That divergence sets up a likely point of negotiation if the two chambers move toward reconciliation. For contractors who rely heavily on governmentwide acquisition contracts and other multiple-award vehicles, the House version preserves the status quo on those task-order-driven vehicles. The conference outcome on task orders is the most consequential single variable for large contractors managing GWAC portfolios.
Bid Protest Implications
Elevating the Rule of Two from regulation to statute carries legal consequences that go beyond protecting it from administrative repeal. Under the current regulatory framework, contracting officers have operated with a degree of discretion in how they apply the rule, and Government Accountability Office bid protest decisions have reflected that flexibility. Codification changes the legal footing. Former GSA Administrator Emily Murphy has noted that the statutory standard raises new protest opportunities because the current regulatory provision allows contracting officers some discretion that a hard statutory requirement would remove. In practice, a disappointed small business bidder could have stronger grounds to challenge a full-and-open solicitation if it can show that the contracting officer failed to conduct a proper Rule of Two analysis — a theory that has historically been harder to sustain under the regulatory standard alone.
What It Means for Contractors
For small businesses, H.R. 2804 is primarily a protective measure. Locking the Rule of Two into statute means that no future FAR Council directive or deregulatory executive order can quietly eliminate the requirement that drives the bulk of set-aside opportunities. Small businesses that depend on set-asides for their revenue base have a direct interest in seeing the bill advance and should engage their industry associations to push for Senate action on S. 2656, which has been introduced but not yet scheduled for markup.
But the bill is not without complexity. The shift to a statutory standard means contracting officers will have less room to improvise, and disputes about whether the Rule of Two was properly applied will now involve statutory interpretation — a higher-stakes arena than a regulatory compliance argument. Small businesses considering bid protests in set-aside disputes should track how the GAO and the Court of Federal Claims begin to interpret the statutory language once the bill becomes law.
For large businesses that compete on both full-and-open solicitations and small business set-asides through mentor-protégé joint ventures or teaming arrangements, the task order exclusion in the House version is the most immediately relevant detail. The bill as passed by committee does not alter how the Rule of Two applies to task orders on existing vehicles, meaning large primes holding governmentwide acquisition contracts will not face new set-aside requirements on those awards under the House version. The Senate version, however, would impose the statutory standard on task orders as well — a materially different outcome for large contractors managing task-order portfolios.
Both large and small contractors should also monitor the separate acquisition threshold provisions moving through the FY2027 NDAA chairman's mark. Title VIII of that proposal would require revisiting micro-purchase and simplified acquisition thresholds every three years instead of every five, and would establish a framework for consumption-based purchasing of IT and cloud services. Those changes, if enacted, would affect the baseline calculations contracting officers use when deciding whether the Rule of Two even applies to a given procurement.
