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II. The Impact: Economic and Competitive Consequences

From the Essential Guide to the FAR Overhaul Crisis

The systematic dismantling of small business protections through the illegal regulatory maneuvering outlined above is not a technicality or abstract policy change—it is a clear and present economic danger. The practical consequences are already visible, with thousands of small businesses forced out of federal contracting and billions of dollars at risk in every congressional district.

A Shrinking Supplier Base and Market Concentration

Since 2008, small business participation in federal contracting has collapsed dramatically. Nationally, the number of small business federal suppliers has declined by approximately 49%, from nearly 125,000 vendors to fewer than 64,000 today.¹² This severe contraction occurred despite overall growth in small business creation nationwide, underscoring a disturbing trend: federal procurement policies increasingly favor a small cadre of large, incumbent contractors, limiting new entry and competition.

Leading acquisition experts have raised serious alarms, characterizing the current regulatory dismantling as “structural,” “accelerating,” and “largely invisible to those affected.”

Experts consistently warn about the dangers of market concentration: higher long-term prices, reduced innovation, and a loss of operational flexibility in critical supply chains.¹³

Local Economic Fallout: Congressional Districts at Risk

The consequences of diminished small business participation ripple across every state and congressional district, especially those reliant on federal contract dollars secured through set-asides.

• Texas District 25, chaired by the House Small Business Committee leader, faces immediate economic risks with 63% of federal small business contracts—worth over $130 million—threatened by the dismantling of the Rule of Two and related regulatory safeguards. The vendor decline of 57.3% since 2008 is not merely numbers—it represents lost jobs, stifled innovation, and economic stagnation.⁷
• New York District 01, chaired by the Subcommittee on Contracting and Infrastructure, confronts potential losses exceeding $90 million, directly linked to set-asides, with vendor participation already down nearly 29%.⁸

Loss of Innovation, Flexibility, and Resilience

Small businesses are engines of innovation, consistently outpacing larger firms in generating groundbreaking ideas and technological advancements. Reduced competition, fueled by regulatory dismantling, means fewer fresh ideas, diminished adaptability in rapidly evolving markets, and increased vulnerability to supply chain disruptions.¹³

Call to Action

The economic consequences are clear and dire. Congress must immediately enforce compliance with the APA, restore transparency, and enforce the Rule of Two rigorously to protect small businesses, local economies, and our national economic resilience. Without prompt action, we risk permanent damage to America’s economic vitality and competitive strength.

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