What Changed and Why It Matters

Congress didn’t repeal the law. But executive orders instructed agencies to eliminate the regulations that implemented it, enforced it, and made it transparent.

The Shift No One Saw Coming

For decades, the Rule of Two protected small business access to federal contracts. It required that if two or more small businesses could perform the work at a fair market price, the contract must be set aside for them.

But starting in April 2025, federal agencies began eliminating the regulations that enacted and made this rule enforceable — replacing them with temporary “class deviations” and unregulated commercial purchasing practices.

This wasn’t a change in law. It was a removal of oversight — done quietly, without Congress, and without public debate.

Why It Matters Now

  • Small business opportunities may vanish without notice.
  • Small business federal suppliers have already declined 49% since FY2008.
  • Local communities may each lose millions in revenue, jobs, and innovation opportunities.
  • Agencies may now bypass fair competition — falsely calling consolidation “efficiency.”

What’s Replacing the Law

Instead of following the Federal Acquisition Regulation (FAR), agencies are now using:

  • Class Deviations — temporary memos that override regulation without public notice or comment
  • “Commercial Products” exemptions — used to avoid small business competition altogether
  • Category Management — consolidating contracts to fewer, larger vendors

These practices sideline the Rule of Two, reduce transparency, and increase the exclusion of small businesses from fair competition.

The Risk Going Forward

If left in place, these administrative actions could become the new normal:

  • Permanent exclusion of small businesses from major federal markets
  • Elimination of protest rights and oversight mechanisms
  • AI procurement tools that embed exclusion by design
  • Accelerated job loss, competition decline, and regional economic damage

What Must Be Done

The law is still on the books. But the rules to enact and enforce it are gone.

Congress must act — to restore transparency, stop exclusionary tactics, and require that the statutory Rule of Two be followed again.

Small businesses, advocates, and associations must speak out now — before these changes become permanent.