SBA has proposed a new rule to guide agencies in setting aside orders on multiple award contracts, including GSA schedules.

Set-asides were authorized, but not required, in the 2010 Jobs Act and have been permitted since November under an interim rule. In issuing its guidance, SBA said set-asides “can open up new and previously untapped opportunities for small businesses.”

Multiple award contracts now account for at least one-fourth of contract dollars, and more by some calculations. The new rules apply to individual agency contracts as well as governmenwide vehicles such as the schedules.

Multiple award contracts must be set-aside under the rule of two. If the rule of two is not met, agencies have three options to enable greater participation by small businesses on multiple award contracts.

1. Partial set-aside. Agencies may choose to set-aside one or more contracts for small firms in any socioeconomic category.

2. Contract reserve. Without a formal set-aside, agencies may reserve one or more contracts for small firms, including teams, in any socioeconomic category. Under this procedure, task and delivery orders would have to be set-aside under the rule of two. SBA said a common complaint from small firms is that, after winning a place on a multiple award contract, they had to compete with large businesses for orders.

3. Mandatory or discretionary set-asides of orders on a full and open contract. An agency may decide to automatically set-aside task or delivery orders under the rule of two; or it may set aside orders at the contracting officer’s discretion. The agency’s policy would be spelled out in the contract solicitation, so small firms will know the terms before they submit offers.

Agencies are not required to adopt any of the three options; if they don’t, they must justify the decision. In deciding whether to use the set-aside tools, agencies should consider whether they are meeting small business goals.

“In sum, this rule seeks to provide adequate tools and assurances that agencies will maximize small business participation on multiple award contracts without compromising the greater flexibility and leverage agencies have in conducting procurements through multiple award contracts,” SBA said in its explanation of the proposed rule.

The rule provides that every order must be assigned a NAICS code and size standard. Only companies qualifying as small under the NAICS code would be allowed to compete for a set-aside order.

The proposed rule also requires a written justification for any decision to bundle or consolidate a contract. The 2010 Jobs Act created a new category of consolidated contracts, meaning a combination of two or more contracts, no matter whether they were performed by large or small businesses. The term “bundled contract” means a combination of contracts that were formerly performed by small companies.

However, the bundling and consolidation rule applies only to existing contracts, not new requirements.

The proposed rule is RIN 3245-AG20, published in the May 16 Federal Register. Comments are due July 16.