Small Business Fallout & Compliance Pressure: What GovCons Need to Know Now

jharper166
19 minutes ago
2 min read

The government contracting landscape is shifting rapidly, and small businesses are feeling the pressure. Two developments in particular are reshaping the playing field: renewed scrutiny of small-business set-aside policies under the Rule-of-Two and the growing weight of contractor performance ratings (CPARS) in award decisions. Together, these changes create both risk and opportunity for government contractors navigating today’s competitive market.

Rule-of-Two Under Review & MAS Transparency on the Rise

The Rule-of-Two has long been a cornerstone of small-business participation in federal contracting. It requires that if at least two responsible small businesses can perform the work at a fair price, the opportunity must be set aside for small business competition.

But recent regulatory shifts have placed this safeguard under review. In mid-2025, the FAR Council withdrew a proposed rule that would have clarified Rule-of-Two application in multiple award contracts. At the same time, legislative efforts are underway to codify the Rule-of-Two into law – highlighting the tension between deregulation advocates and small-business champions.

Meanwhile, agencies are increasing transparency in Multiple Award Schedule (MAS) task orders, making it easier for competitors and oversight bodies to challenge awards. For small contractors, this means two things:

More competition for set-aside work, particularly within MAS.
Greater compliance scrutiny, with eligibility, pricing, and performance under a brighter spotlight.

The takeaway: small businesses can no longer assume set-asides will provide a guaranteed pipeline. Staying competitive requires sharper compliance, pricing discipline, and operational readiness.

CPARS Ratings: More Impactful Than Ever

At the same time, past performance ratings are becoming the ultimate deciding factor in federal contract awards. Contracting officers, pressed to make faster, lower-risk decisions, are leaning heavily on CPARS scores.

The challenge? Even one marginal or satisfactory rating can follow a contractor for years, reducing competitiveness in future bids. Courts have reinforced this reality, and lawmakers are debating reforms that could shift evaluation models further.

For small businesses with limited performance history, the margin for error is razor thin. Administrative slip-ups in invoicing, compliance, or HR can turn into performance downgrades – jeopardizing long-term growth.

What This Means for GovCons

Together, these developments send a clear message:

Compliance pressure is increasing.

Set-aside eligibility and MAS participation will be closely watched.

Performance standards are tightening.

CPARS ratings are no longer a background factor – they are central to contract viability.

The playing field is shifting.

Small firms must run tighter, more professional operations to stay competitive against both peers and larger incumbents.

How CRI Helps GovCons Stay Ahead

At CRI, we know that government contractors don’t just need compliance checklists—they need a partner who can help them operationalize change and build resilience.

Rule-of-Two & MAS Compliance: We ensure your documentation, size standards, and contract submissions are airtight—helping reduce the risk of protests or disqualification.
Competitive Pricing & Efficiency: Our back-office outsourcing model strengthens accounting, contracts, and HR so you can price competitively without eroding margins.
Protecting CPARS Scores: By stabilizing your operations—finance, HR, systems—we reduce the risk of administrative slip-ups turning into performance downgrades. We also guide you in proactively managing and responding to CPARS evaluations.
Future-Proofing Your Business: From systems management to executive-level consulting, we give small GovCons the infrastructure they need to grow with confidence in a more demanding environment.