Lizzie Sullivan has been pushing the Rule of Two through Congress for years now, and this year is the best shot to get that vital rule for small businesses into statutory law, she says. But opposition from an unexpected source has popped up.
Sullivan, the president of Madison Services Group, joined me on GovCon Intelligence to discuss the prospect of Congress passing the Rule of Two—which would boost small business set-asides for years to come. We also talked about why 151 is a bad number of IT value-added resellers, the bill that would end the women-owned small business program, and what to expect out of SBA on size standards.
Links
Elizabeth Sullivan on LinkedIn: https://www.linkedin.com/in/esullivanmsgi/
Madison Services Group:
Women’s Procurement Circle:
H.R. 2804, Protecting Small Business Competitions Act of 2025: https://www.congress.gov/bill/119th-congress/house-bill/2804/text
GSA Summary of Results of Request For Information (RFI) about IT hardware procured through Value Added Resellers (VARs): https://buy.gsa.gov/interact/community/6/activity-feed/post/ed096e0c-4d52-459f-895c-37c9e95884de/
SBA Proposed Rule on Monetary-Based Size Standards: https://www.federalregister.gov/documents/2025/08/22/2025-16142/small-business-size-standards-monetary-based-industry-size-standards
H.R. 7154, Streamlining Small Business Contracts Act of 2026: https://www.congress.gov/bill/119th-congress/house-bill/7154/text
SBA Proposed Rule on Social Disadvantage in the 8(a) Program: https://www.federalregister.gov/documents/2026/06/11/2026-11765/reforms-to-remove-sbas-8a-programs-rebuttable-presumption-of-social-disadvantage-for-individually
S. 4390, Ending Discrimination in Government Contracting Act: https://www.congress.gov/bill/119th-congress/senate-bill/4390/text
Federal News Network: “SBA kicks off new audit of economically disadvantaged contractors” https://federalnewsnetwork.com/acquisition-policy/2026/06/sba-kicks-off-new-audit-of-economically-disadvantaged-contractors/
Chapters
00:00 - Introduction to GovCon and the Rule of Two
01:28 - The History and Legislative Push for H.R. 2804
03:58 - Understanding the Tolliver Case and Task Orders
05:28 - Bipartisan Support and the NDAA Vehicle
11:15 - Navigating Mandatory Sources and AbilityOne Concerns
14:45 - The Importance of Codifying the Rule of Two
17:35 - GWAC Innovation, Pools, and the Shift in Task Orders
19:26 - The IT Value-Added Reseller (ITVAR) Size Standard Debate
26:05 - The Value of ITVARs vs. Direct Procurement and OneGov
30:46 - The Fight to Raise Sole Source Thresholds
35:50 - The Impact of Compressed Buying Years and Competition
38:54 - Reimagining the OSDBU and the 8(a) Proposed Rule
41:43 - Women-Owned Small Business Entry into the 8(a) Program
44:57 - Legislative Threats to Small Business Set-Aside Programs
47:49 - Deconstructing the EDWOSB Audit and Program Origins
52:47 - Overcoming the Scrutiny and Complexity of the WOSB Program
55:18 - Strategies for Capability Statements and Mission Alignment
58:26 - A Plea for Small Business Unity Against Large Competitors
59:41 - Wrapup
Transcript
Introduction to GovCon and the Rule of Two
Sam: If you care about small business federal contracting, you have to care about the Rule of Two. The Rule of Two, SBA said, is the cornerstone of small business federal contracting. If you remember from the FAR overhaul period last year, it was in doubt about whether the government would continue providing preferences to small businesses under the Rule of Two. Today on GovCon Intelligence, we have the person most responsible for getting the Rule of Two into the FAR overhaul and pushing it through the halls of Congress. Lizzie Sullivan is the president of Madison Services Group. That’s a government relations firm in Washington that has clients across the acquisition ecosystem. Lizzie, thanks so much for joining us on GovCon Intelligence.
Lizzie: Thanks so much for having me, Sam. It’s great to be here. Great to see you again.
Sam: Great to see you as well. So Rule of Two—I spent a lot of time at SBA on the Rule of Two, pushing it through GAO cases and working with the FAR staff potentially to expand it. You have been the person most visible and involved on the Rule of Two now for years. Tell us a bit about what your motivation has been for pushing so hard on the Rule of Two and where is it now from a statutory perspective? Why do you think we need it in statute?
The History and Legislative Push for H.R. 2804
Lizzie: That’s a great question. And I’m just going to start by saying anything I say, we work completely bipartisanly. We work with whoever wants to get what’s best for this community done within reason, right? No crazies. So I would encourage anyone listening to not interpret my words and try and fit them into one box or the other. I’m an equal opportunity lover and hater of all political parties. But I think that this issue is something that has brought everyone together because it really is, like you said, the cornerstone of small business contracting.
So just some history, and thank you for the nice introduction. Back, I believe it was last summer, before there was an executive order and the official kickoff to the FAR overhaul, there were rumblings that the FAR overhaul was happening in the basement of GSA.
Sam: I’ve been in that basement, by the way.
Lizzie: Ah, there you go. And based on kind of who was at the table that we were being told, we thought it was extremely important to get in front of anything that was going to happen by cementing that Congress was watching and that the Rule of Two was important. So it was not just me. It was also Cate Benedetti, who works for the ranking member Nydia Velázquez from New York, who is sadly retiring but has been such an advocate for all of these programs and really knows contracting in and out—as does Cate, right? She’s only one of the most savvy procurement staffers on the Hill. And she said, “Okay, let’s introduce this bill. It’s not perfect. They haven’t even started, but yes, it sends this message.”
So that is how the bill came to be. And lo and behold, after that was dropped, there was an executive order, an official, “Here’s how the FAR overhaul is going to go.” So really that message was received by the decision-makers. The original bill, which is H.R. 2804, has the addition of task and delivery orders to it. The reason it does is because we were mimicking that agreement that you put together with the FAR Council on solving the Tolliver issue. I don’t know if you want to talk a little bit about that case. I think it would be helpful.
Understanding the Tolliver Case and Task Orders
Sam: Sure. The Rule of Two for context is the rule that says if you have two or more small businesses that can perform a requirement, the requirement must be set aside for small businesses. And the Tolliver case, which was the 2020 case from the Court of Federal Claims, asked: Is a requirement only a contract? Which means for a multiple-award IDIQ contract, just the base-level contract? Or could it apply to an order that an agency might issue off the contract?
In that case, Judge Solomson—he’s now Chief Judge of the Court of Federal Claims—ruled that when an agency issues an order off a multiple-award IDIQ contract, it needs to apply the Rule of Two prior to issuing that order. So what that means is an agency cannot go straight to a large business off of a multiple-award IDIQ contract before it looks at a small business competition.
The reason that SBA and other agencies had come to this agreement about the Rule of Two for orders is that we saw that more of federal contracting was going through orders. And we looked at that as a possible workaround on the Rule of Two. There were some statistics in there; we said if we were able to pass the Rule of Two for orders, that would add somewhere around $6 billion to small business contracting.
Bipartisan Support and the NDAA Vehicle
Lizzie: That’s a lot. And it makes sense with the trends, right? But as it’s been pointed out and how Congress has been moving the bill, there had to be some changes made, right? So there is a Senate companion bill and it’s—I have my cheat sheet—S. 2656. That was introduced bipartisanly by the ranking member Ed Markey of the Senate Small Business Committee, the top Democrat Cory Booker as the other Democrat, and then both Alaska Republican Senators Murkowski and Sullivan were original co-sponsors. In our world, the reason that’s important is because while you can add other people onto a bill—for example, the House bill, you can add on other sponsors—it sends a very important message when there are original co-sponsors on this bill.
So that’s kind of how we got started. The Senate came after the House. Flash forward to now, there was a markup in the House Small Business Committee, and this bill passed unanimously. However, worth noting, there was an amendment to the bill, and the amendment took out the task and delivery orders. What it did is it mimicked exactly how the FAR overhaul expanded the Rule of Two in their language, right? So it’s anything above the SAP applies to small business.
They had to do that in order to get the bill moving forward because there was heartburn, I think, about doing something above and beyond what the administration had done. And that rule that, unfortunately, you worked on for a long time got rescinded. So it would have looked like they were superseding what the administration had done.
So what the Democrats decided with the Republicans—and this is how the legislative process works—is how can we negotiate, come to the table, and get to a place where we can move this forward? Because both of them, in this highly political and polarizing environment, still recognize the absolute importance and crucialness of the Rule of Two. And I think that’s a really powerful message, honestly. Again, I know people think Washington is just dysfunctional. Small business contracting legislation is something that we’re able to work on because it brings both sides of the aisle together.
Sam: Congratulations on that really big win for small businesses. Is there any insight you can give us into what the lawmakers were agreeing on when they passed that unanimously? What areas did they feel were important to make such a big statement there?
Lizzie: Yeah, they felt that as the cornerstone of small business contracting, it needed to move forward. And we’re really happy, and we were very happy with the expansion in the FAR overhaul that we worked on. One of the things that’s cropped up—and just to go back to your “I’m Just a Bill” Schoolhouse Rock—it passed the committee. So now there are a couple of options here. It can go to the House floor. Oftentimes those small business bills go through something called suspension votes, where two-thirds are required in the House to agree for it to move forward.
Another vehicle that gets talked about all the time is the National Defense Authorization Act (NDAA).
Sam: Oh, wow.
Lizzie: And that is Congress’s last must-pass bill. So you can imagine every lobbyist in town, including us, tries to get things onto that bill. That was actually something that some people cooked up about 10 years ago and said, “Well, small business applies to the industrial base, so it’s germane, or it would make sense to put it in the bill that authorizes the Department of Defense.”
Sam: Some people like Sullivan.
Lizzie: Sullivan and Murphy. And yes, exactly. And that has then been the way that we’ve been able to move forward legislation. That’s important because if you go back to the original process, then the Senate would need to mark it up and it would need to go to the floor. And the Senate is much harder to move things through because of a lot of the rules around timing, what they’re working on, and the fact that any one senator can put a hold on a bill and say, “No, this isn’t moving forward.”
So right now, we’re working to get it into the House NDAA and also the Senate NDAA so that when both sides pass their bills and are conferencing, it’s very crystal clear that this needs to be in the final—what they call conference report—which is the final bill signed into law.
Sam: So are we talking about the FY 2027 NDAA possibility?
Lizzie: Everything is—yes. Exactly.
Sam: Exactly. Do you see this getting in there and becoming the law for good?
Navigating Mandatory Sources and AbilityOne Concerns
Lizzie: You know, we had 39 organizations that represent tens of thousands of small business contractors. Think about 500 individual companies that signed onto a letter for the original House bill before it was amended, right? And look, we have only so much control. As I mentioned, the House decided to make that amendment to move it forward. We would have loved the expanded bill, but again, we’re happy with this version to move forward. And so I thought that was a very powerful number of companies and boards to put together in like 72 hours as this was about to get marked up.
It’s caught the light that there is some concern from the AbilityOne community around the impact of the Rule of Two with sole-source and mandatory sources. You’re an attorney; I am not. So you could talk about that. I didn’t think that this was a problem, but this has been an effort to stop the bill. And I know that the committees are trying to work with the AbilityOne teams and their lobbying firms to figure out kind of how to move forward here.
Sam: As a historical note, the Rule of Two has been around since 1962.
Lizzie: Wow.
Sam: And it’s always been secondary to the mandatory sources, another one of which is JWOD and the Federal Prison Industries. So just historically, people understand the Rule of Two as coming after an agency would apply mandatory sources. There was a question that came up with the VA-specific Rule of Two—that’s the one that applied in the Kingdomware case—where that was written in statute in a particular way where the courts found that, in fact, that Rule of Two jumped ahead of the mandatory sources.
There are other semi-rules of two or suggestions of two in different programs that specify that they’re subject to AbilityOne and Federal Prison Industries. This VA statute did not have that. So the court said the VA Rule of Two moves ahead of JWOD and Federal Prison Industries. Congress had to go back and change that. So Congress has solved that problem with the VA after these cases came out.
Lizzie: Back in 2020?
Sam: It’s been a while. There were a number of cases, and it became a hot issue. And that was one of those where, again, same as your bill, it was a bipartisan agreement to change the bill so that everybody went back to the historical understanding under the Rule of Two. My view would probably be either let’s go with the historical understanding—which is AbilityOne and Federal Prison Industries still get priority, nobody is trying to dispute that.
Lizzie: Exactly.
Sam: Same as the VA bill, the current SBA statute, as well as in the other SBA programs where they have explicit language, just carve out AbilityOne and Federal Prison Industries to ensure that we just stay the way that we’ve been. What I’m understanding you saying with the bill that you put forth is you’re trying to keep in place the status quo, both before the FAR overhaul and as implemented in the FAR overhaul. Okay, maybe we tried for task orders, but that was a no-go. And I can tell you why I think perhaps it’s not as important now to do task orders as it was when I was at SBA. But if we’re going to do the status quo for contracts under the Rule of Two, then let’s also do the status quo for the interaction between AbilityOne, the Prison Industries, and small business preferences.
Lizzie: 100%. This bill was never intended to do anything to touch mandatory sources. As you said, this bill is intended to put it into statute so that it cannot be changed when there’s a sunset period for all the provisions in the FAR overhaul, right? It can be changed, but if it’s there in statute, it’s set in stone, and that’s really what the goal has been here.
The Importance of Codifying the Rule of Two
Sam: So that’s an important point because you talked a lot about this during the FAR overhaul drafting period in 2025, and it’ll probably come up again as we get to a close and final rule in 2026. But if there is that 10-year sunset period, why is it that the Rule of Two would be up for consideration in 2035 or 2036 if it weren’t for this statute?
Lizzie: You can think about who wouldn’t like this expansion, right? And there are a lot of powerful companies with a lot of lobbying capability able to go and influence and say, “We don’t really like this.” I mean, there were organizations during the proposed rule with the FAR Council—again, before it got rescinded—that stood up and said, “We don’t like this expansion.” So there’s nothing stopping a huge push to get rid of it. That’s why, really, this Congress, this NDAA, is so crucial because the end of this year is the end of a Congress. And so then the bill would have to be reintroduced next year and start the whole process over again.
Sam: And you have momentum now because of the FAR overhaul making that decision and because of this unanimity around the statute.
Lizzie: 100%. So I would encourage anyone listening, any organization you’re a part of, talk to them about calling the Hill. You also, as a business owner, have a ton of autonomy here. You can actually make an impact. When you call a congressional office, whether it’s the district office or the D.C. office, they have to record down what you’re saying. So you’re calling and saying, “Hey, this bill is really important to me, and I want my member to know that it’s important it moves forward.” You don’t even have to be savvy enough to say “in the National Defense Authorization Act,” but just mention the bill. That actually is something that makes it up to the member. They keep track of what people call about. Even from the district, they keep track of what people are talking about. So that is an impact that people can make.
I know I’ve put it out there before and encouraged organizations to talk to all of their members who have been supporting this, but I think it’s going to take the entire community coming together and expressing to both the House and Senate how important this bill is and how important this foundation of small business contracting is.
Sam: That’s a really good insight into how members view input from their constituents. It’s more than just somebody picks up the phone and then says, “Okay,” and slams it back down. They’re actually recording all the calls and tallying it up to see what the priorities are.
Lizzie: You may get a 22-year-old intern, but they are required to do it. Yes.
Sam: I’m sure the member hears that.
GWAC Innovation, Pools, and the Shift in Task Orders
Sam: And don’t let this task order issue prevent you from making that phone call. I’ll tell you why. Yes, of course, I was passionate about this when I was at SBA, but as I’ve been out in the private sector for over a year now, I’ve really seen the power of the GWAC and the multi-agency contract—we’re talking about 8(a) STARS and Oasis Plus and Polaris. I worked with GSA and some of the other agencies on those when I was at SBA. We came to an agreement to have set-aside pools on those. And those pools are becoming prevalent.
Lizzie: Which was amazing, by the way.
Sam: You remember when there was nothing for women-owned small businesses. There was no consciousness. And now we have pools on Polaris. We have pools on Oasis Plus, particularly for women-owned and HUBZone. That’s been a big advancement for small businesses in every stripe.
Lizzie: 100%. We tried to stand up a WOSB GWAC during the first Trump administration, but GSA just said, “Look, this is just too expensive.” Same with HUBZones; they tried to do that back in the day, and it didn’t work. So the pools piece is just incredible, in my opinion.
Sam: Yes, it’s been a terrific innovation. And in a way, that takes some of the pressure off of that task order issue because the pools apply to task orders. Because of the ease of ordering, agencies are using these pools to get to the particular designations that they want. So it’s not as necessary to use the Rule of Two at the order level because agencies can just set aside using the pools. So I think if I recalculated that $6 billion today, that probably would be a slightly lower number because of the pools, actually.
Lizzie: That’s interesting data. You are the data king over here, so that’s perfect.
Sam: Thank you for that. I’m trying to keep it up. So subscribe!
The IT Value-Added Reseller (ITVAR) Size Standard Debate
Sam: We got to know each other by talking about size standards, speaking of numbers and data. Oh my gosh, that is a good one. Yeah, going back to probably the last five-year review five years ago, and now going into another five-year review, let’s talk about why that, for whatever reason, hasn’t come out yet. An experience I remember very vividly at SBA is the debate over the IT value-added reseller size standard and IT value-added resellers as a whole. It’s a big segment of small business contracting that really, when you start out in government, you don’t even necessarily realize exists.
Lizzie: And a lot of veteran-owned companies.
Sam: Yes, a lot of veteran-owned companies are these IT value-added resellers. Can you tell us what is the reason for having this special designation and size standard, what’s your interest in it, and what are you trying to do with that?
Lizzie: Yeah, we have worked with GovEvolve for I think around year eight or nine, which is a trade association just for IT VARs. We’ve worked on things like class waivers for the non-manufacturer rule, and size has always been something that’s been a sticking point for them. I know there was an effort prior to my time around removing a footnote, but basically, the IT VARs operate mainly under a NAICS code that’s 541519, footnote 18, which is quite a mouthful, can I just say?
Sam: You’ve got to really geek out on size standards, don’t you?
Lizzie: I mean, pull me out of the weeds if I get too far in. I feel like I have worked on this now for so long, since we met. And so, the IT VARs are people and products. If you think about it, it’s kind of like the construction industry or the elevator industry faces—they are people and products. I had a client in Michigan who had a revenue-based size standard. Well, think about the labor or the union workforce that he has, plus all of the materials that fluctuate in price. The margins of the contract versus the size of the contract are very different. So, the same thing applies to IT VARs. They have a footnote that dictates an employee-based size standard. It’s 150 people. So at 151 people, you are now supposed to directly compete with the largest multi-billion, multinational global corporations—and I’m not going to name them all, but you know what I’m saying.
Sam: Just one person takes you over. You’re either small or you’re not.
Lizzie: Right. And I think there’s been—and you can correct me if I’m wrong—but in this whole process of bringing this size standard piece to light that we’ve been working on through the past couple of years, I feel like there’s been a notion at SBA that that’s really large, right? Like seeing the numbers and the contracts and being like, “20 million, that’s a huge contract in the IT VAR space.” There’s been a misnomer because, at the end of the day, the margins that the IT VARs make—because again, it’s people, help desk, systems engineers, all the integration, and then the product that they get from the manufacturers—the margins you’re operating on are super thin. So that’s why they need an employee-based size standard. But again, to say 151 people is supposed to compete with the big guys is, to me, kind of ridiculous, if I’m being honest.
Sam: Well, if I remember correctly—and I’m pretty sure this is the case—that is the smallest employee-based size standard. All the other ones are 500, and you have ones that go up to 1,500. So 150 is much lower than it is in other industries.
Lizzie: Definitely. And when we dug into the size standard methodology for our clients, one of the things we found is that there was 2017 census data being used for the methodology. And if you think about the GovCon ecosystem, wow, have things changed since 2017. So that push for a fresh look at all size standards, frankly, is something that SBA is undertaking right now.
Sam: Yes, we’re still awaiting a new size standards final rule and a proposed rule on the employee-based standards.
The Value of ITVARs vs. Direct Procurement and OneGov
Sam: While that is happening, we had this intense period of GSA pushing its OneGov initiative through AI providers and Snowflake fairly recently. During that period, they sent out surveys—first of all about markups—surveys to value-added resellers. They came out with some feedback summaries of those surveys recently, and it seems like the criticism is not as intense as it was when this initially started. But there was a lot of talk about these value-added resellers: Will it just be a pass-through? Is there just marking up of software, whatever it is, for the federal government? What are the value-added resellers doing now, in light of that pressure from last year in the software space, to adapt to the marketplace?
Lizzie: So I’m going to back up on size standards really quick because I wanted to add a piece. The timeline for the rule is probably sometime soonish—summerish, fall. I think SBA realizes that they have to get something out. Businesses need certainty; businesses need to know what they’re going to bid on. But it’s looking like they are going to do a lot of things that will help companies who are trying to transition into mid-size, right? That cliff that everyone talks about. I think you’re going to see a lot of changes in the proposed rule that comes out.
And the reason is, by the way, the new associate administrator, Ryan Lambert, was formerly on the House Small Business Committee. He was a policy director for the majority, and he actually ran a hearing on size standards. It was a full committee hearing where every single member that sat there and asked questions completely understood, and there were IT VARs who were testifying about why there needs to be an entire relook of this process at SBA. That’s where all of these roundtables came from during the pre-rule process. The Office of Advocacy did some, and the Office of Size Standards did some. So I would just implore them to continue that engagement.
Okay, so now on to IT VARs. There’s been such a big emphasis on cost, right? And saying, “We want the best deal.” So the FAS office at GSA has really been leading the charge on OneGov, right? And all these OneGov deals that you’ve seen come out in press releases. And unfortunately, IT VARs have been conflated with just resellers—meaning, “I’m reselling thousands of these pens to the government,” right?
Sam: In some cases, just drop-ship it. All you’re doing is entering something online.
Lizzie: A hundred percent. But IT VARs are rarely just doing licensing, right? That’s almost always coming as a package deal. So I use the example: the Army needs a thousand computers, right? There are so many specialized things. Think about the CAC cards. That’s from one person. Then you’re getting quotes from either Dell, HP, or Apple, trying to figure out what’s the best system to use with what already exists in the agency. What are the requirements that they want? Okay, you need certain licenses; you need certain cloud protection, cybersecurity, a help desk. I could keep going on, but I won’t get too in the weeds.
So all of those pieces are what IT VARs do. And I think where there’s a misunderstanding with OneGov and the huge push to go direct is that the government is then taking out the people who are doing all the integration and trying to make them subcontractors. But if you think back to my cost piece, if you just go direct to one OEM, right—one manufacturer—they’re going to sell you their stuff. If you’re just going to them, they’re going to, of course, say, “Yes, this is the best product that you need,” right? That’s their job. If you don’t have that competition that IT VARs provide, you’re kind of taking out the price controls that they bring, right? And all the competition.
Sam: Yeah, and they act as a consultant to really get you the best value.
Lizzie: 100%. And I think there’s been also a huge push at DOD and DOW. By the way, I’m going to call it both because, yes, technically an act of Congress requires the name change, but at the same time, everyone is calling it DOW. So don’t read into that, whoever’s listening.
Sam: They absolutely could, 100%.
Lizzie: But they have been pushing, kind of saying, “Okay, well, we want to do these enterprise-wide agreements with companies.” And it’s been pretty complicated. And as you said, because of the huge education push through GovEvolve, through our ITVAR Modernization Coalition, and through other companies and organizations that have been working on this, I think we’ve been able to kind of shift the conversation so that IT VARs are not linked in with just plain old resellers. I really wish it could be a different name.
Sam: It’s a mouthful. They are IT VARs.
Lizzie: It’s a mouthful, it’s confusing, but they really do provide value. And if the government says, “Okay, the government only wants to go direct to one OEM,” that OEM would have to stand up an entire division doing exactly what the IT VARs do. If you don’t think a publicly traded company is going to pass all those costs to the government, they absolutely would. They’re not going to eat the cost to set up another division. I’ve had some of them tell me it would be 30% more cost to the government if they had to do that.
Sam: But where do you see this going? Do you see IT VARs looking the way that they do now in five years or so? Do you see them getting swallowed up by the OEMs in a sense of merger action? Do you see them getting a 500-employee size standard, becoming even larger than they are currently?
Lizzie: Well, I’m going to knock on some wood around the size standard. Our friends at The Pulse made a very compelling argument with their data poll around why that should be expanded. So I think that IT VARs, like any industry, have had to completely change their approach, right? With the big shifts in acquisition, there comes opportunity. So they’re both trying to educate on what they do, but I think they’ve had to figure out, “How can we pivot? Are there different ways we need to approach our customers if they’re looking for fewer deals and bigger deals?” Which is also, in my opinion, been a trend.
Sam: Oh, interesting.
Lizzie: Yeah.
The Fight to Raise Sole Source Thresholds
Sam: Let me go back to Capitol Hill. You’ve been working on a bill on sole-source authorities. Tell us what’s happening there. What would happen with this bill?
Lizzie: I’m smirking because the Hill staff joke that it’s going to be on my tombstone: “She raised the sole-source thresholds.”
Sam: Is that what you want?
Lizzie: Oh my gosh, no, I want this enacted into law! A bit of history: this effort started back in 2019 to raise the sole-source thresholds. And that’s for individual 8(a), HUBZone, women-owned, and SDVOSB programs. It doesn’t touch the entity-owned, right? As everyone knows, they have their own rules and their own piece of the 8(a) program, and we’re not trying to touch that—just everyone else.
All the companies that we represent said, “No contracting officer is going to jump through hoops.” Back then, it was $4 million, right? And then $7 million for manufacturing. They wouldn’t jump through hoops for a $4 million sole source, even if they wanted to do it. I had one woman-owned small business in Alaska who was just a WOSB say they told her, “You know, this is a $7 million opportunity. It totally makes sense for where you are and what your specialty is, but legally we can’t do it.” So there have been all these passed-over opportunities where that work then goes to a large business. So we sought out to increase them.
There have been like 500 versions of this bill, just to set the record straight. The original bill was in the House to raise the thresholds from $4 million and $7 million to apply each year, because right now that’s the total over the life of the contract. Then there was an effort during the reauthorization in the Senate Small Business Committee where they said, “You know what, that’s not enough money when we look at the size of contracts. Let’s raise the thresholds to $8 million and $10 million and allow for that each year, right?” So if I was doing math, over five years, what was that? This is why I’m a lobbyist—$40 million and $50 million. And that didn’t go through only because the entire reauthorization effort fell apart over the regulatory title of the bill. At the time, Chairman Marco Rubio didn’t want to move the contracting piece where this sat. And H.R. 190, which was the OG bill for the $4 million and $7 million each year, had passed the House already.
Okay, so then there was an effort because people have always asked me, “Where did this $8 million and $10 million come from?” That’s where it came from. Because then the next Congress, there was an effort just to raise them to $8 million and $10 million. When we’re lobbying for something and you’re using data, we want to make a number make sense. So we don’t just throw out a size standard like, “Oh, we think it’s this,” or “Oh, we think this should be raised.” At the very minimum, we felt like this should be doubled.
Sam: Double the statutory threshold.
Lizzie: Right. Double the statutory threshold and make it tied to something with an inflation adjustment as time goes on. Okay, so that didn’t make it through because it was used as a negotiating piece during an NDAA conference for something else that another one of the “four corners” wanted. That didn’t make it through.
So flash forward to now, we have a bill, H.R. 7154. That raises the sole-source thresholds, again, for those four programs to $10 million across the board. Like, let’s make it simple here. Why are there two separate lines? Let’s just make it one, right? That was Congress’s idea. Is it as large as I want it to be? Absolutely not. But I’ll take it because chipping away at it and making the statement that this is a tool that contracting officers can use when justified is really important. There’s no threshold on the entity-owned 8(a) companies; they get multi-billion dollar sole sources.
Sam: Yeah, that’s an important point to make: when we’re talking about sole sources to small businesses, it’s a tiny fraction of the sole-source contracts that are getting awarded by the government. There are hundreds of billions of dollars of sole-source contracts that are going out every year, and single-digit percentages—like 5% of them—are going to small businesses.
Lizzie: Right. So why not give them this tool when we have business owners continually giving examples of how they’re missing out and the work is instead just going to a large business?
The Impact of Compressed Buying Years and Competition
Lizzie: Especially with the squeezed buying year, right? We all know that there’s probably going to be a CR—a continuing resolution—while the House works on their appropriations bills. Yeah, it’s easier to get it through the House because, unlike the Senate, they don’t have to be bipartisan. So if we go through the usual process where right around the holidays all the members of Congress want to go home and they agree on some type of funding for the fiscal year, that then squeezes where all the money comes from. And contractors have to deal with that every year. So the government, especially I believe with the RIFs and the reorganization, that’s going to become a worry.
Sam: Sure. Fewer contracting officers, fewer competitions—it affects all competition. And then they have this compressed buying year because of the CR. We saw that the Army sent out a memo saying don’t use sole-source authority or 8(a) sole-source authority unnecessarily. Particularly, the Air Force has something similar about not creating new contracts. Is this the right environment to be trying to raise sole-source thresholds when there’s this emphasis on competition?
Lizzie: Interestingly enough, it actually has been. We really bill it as a tool because it is. I know there was an effort by the chair and through the letters that were sent, and then SBA had this whole cascading effect on 8(a). But to me, why are you limiting those companies from opportunity if the industrial base keeps shrinking? The shrinkage of the industrial base keeps getting quoted over and over and over again, so I thought this was the right time to do it.
And it actually is an amendment in the House National Defense Authorization Act that’s up for consideration. It was just submitted on Friday, and it’s bipartisan. It’s with Gil Cisneros, who is the ranking member of the House Small Business Committee’s Subcommittee on Contracting and Infrastructure—mouthful—and Derek Van Orden, who’s a Republican from Wisconsin who really latched onto this issue. He’s not on the Small Business Committee but thought it was really important. So I think that sends a message.
Sam: Yeah, it could really budge the small business numbers. We have not seen the latest SBA scorecard, but perhaps based on the preliminary numbers that I’ve seen, it’s been flat for a while, while the actual industrial base numbers have been going down.
Lizzie: When does that usually come out?
Sam: Summer.
Lizzie: Okay.
Reimagining the OSDBU and the 8(a) Proposed Rule
Sam: I know there was a lot of discussion around the goals, and I wonder if it’s worth noting that Congress has been thinking about reimagining the OSDBU, or Office of Small Business Programs, right? I know I think there was a bill at one point to change the names, right?
Lizzie: Yes.
Sam: But the OSDBUs and the authority that they have—Congress also recognizes that they don’t have enough authority, right? Just focusing on the goals doesn’t really move the needle as much as it should. So I think that’s ripe for opportunity once those scorecards come out and once we see those numbers. That data is invaluable to us just because it helps justify and move forward a lot of the policies that we’re working on.
Sam: Oh, that’s good to know. I mean, people actually read that. Yes, yes. On the name change, the name change would be to take “disadvantaged” out of OSDBU. The “D” in OSDBU stands for disadvantaged. And we’re speaking on the Thursday after a Friday where SBA issued a proposed rule to change the definition of socially disadvantaged for the 8(a) program. The proposed rule has a quick turnaround period—a 30-day comment period.
Lizzie: Don’t you love the Friday drop?
Sam: A Friday drop, and then 30 days that include Juneteenth and July 4th. So two long weekends in it. But July 13th—they’re keeping with July 13th. Already, in just the first week, the agency has received about 20 comments, and there are some that are positive, but probably more that are negative on the proposal. As companies are looking through this proposed rule and putting together their comments, what sort of advice would you give to them in trying to formulate what their thoughts are on the SBA proposed rule on social disadvantage for the 8(a) program?
Lizzie: If you like it, tell them. If you don’t like it, tell them. But “tell them” being SBA, in a very purposeful way. What that means is—and you could speak to this better than I could—in those comments, go into the rule. Find the pieces that you don’t like. Tell SBA how it impacts your business, or highlight the pieces that you do like and how it impacts your business. Because at least on our side, we feel like that is the most compelling thing that you can do as a company when you’re responding to a proposal. I think people often misunderstand and think that SBA is just going to ignore comments. They have to respond to the comments, correct, in the final rule?
Sam: They have to respond to significant comments.
Lizzie: There you go. So “significant,” I’m assuming, would mean something more than just “I hate this” or “I love this, rah-rah,” correct?
Sam: Yes. You tend to think of it as something that provides substantial input, data, or a different point of view on the comment or on the rule. The ones that are not significant are those that are off-topic. People come in with comments on just about anything, but really they need to be on the topic at hand, which is how social disadvantage needs to be designated for them.
Women-Owned Small Business Entry into the 8(a) Program
Sam: On the point with 8(a) eligibility, you lead the Women’s Procurement Circle. And historically, women have been able to use that social disadvantage criteria to gain access into the 8(a) program. What’s your understanding of where SBA wants to go with 8(a) eligibility, and what would be the path for women-owned businesses to enter that program?
Lizzie: Yeah, we’ve assisted WOSBs over the years in getting into the 8(a) program. A lot of the ones that did so successfully were ones who kept good records of that discrimination. So for example, I have a quote because I’ve never forgotten this: one of the companies told me that their boss said, “I’m going to promote this person because he has a family he has to support. You’re single; you don’t need this as badly as he does.”
Other examples have been the denial of capital, the denial of a loan, which was really part of what drove that authorization of the WOSB program back in 2000. So I think for WOSBs—and again, you would know better than I do about this rule—it seems like it will be harder for companies to get into the program. I would advise people maybe not to send their application into this program right now. While there’s so much change and flux, if it were me, I would wait. But that’s just my opinion.
Sam: I’m saying that regarding applications certainly, because it doesn’t seem like—no matter which way SBA goes on this final rule—there’s going to be some change. And during that period of change, SBA seems unlikely to process applications under the old standard, so you might as well just wait to see how this all plays out and then decide whether you want to apply. Not legal advice, just practical advice, as SBA is probably not going to keep doing things the way that it’s been doing them for the past three years.
Lizzie: Right. And there’s change. Look, there’s change in all of the programs. And I think it’s kind of been a wake-up call for everyone in this community—meaning the small business contracting community—just because something has been done a certain way for 20 years is not how it’s going to be done right now. I mean, if we think about OneGov and consolidation, the FAR overhaul, the entire acquisition system has had a spotlight on it. Having all of us nerds in the spotlight certainly wasn’t on my bingo card, right?
And so the other thing I’d say—and this is not specific to the rule, but also kind within people’s power—is tell Congress what you like about the change, or tell Congress what you don’t like about the change. SBA has the authority to change this again. Say another administration comes in—a different administration—they could change it, right? They have these authorities to highlight certain things. So Congress is the only place where you can get something into law regarding what you like or don’t like about these changes to the program.
Legislative Threats to Small Business Set-Aside Programs
Sam: And Congress is talking about the transportation bill, which has the DBE program in it. There seem to be changes there. In your crystal ball, or based on things that you’re hearing in the halls of Congress, do you think there will be any action on the 8(a) program?
Lizzie: Meaning the fact that there were two bills that proposed to eliminate it, right? And I think also eliminate WOSB along with HUBZone. I can’t remember exactly, but basically to eliminate all the programs. This is nothing new. Back in the Section 809 Panel days—now my brain is working—back in that relook of the entire federal acquisition system, there was a proposal to eliminate all of the socioeconomic set-asides in exchange for a 5% price preference. Do you remember that on that commission they did? And this is definitely where they got that from, although I think this current bill just eliminates them outright.
It is not, in my opinion, in any member of Congress’s interest to eliminate these programs because almost all of them have these businesses in their district. They have at least one company, right? And that one company can call, like I talked about earlier, to their congressional representative and talk about why this program is important to them and what it’s done for them. Same with WOSB, same with HUBZone, same with SDVOSB. So I don’t see a world where that’s going to move forward.
Even with people asking, “Would the Republicans in the House move it because it’s easier on their side?” Chairman Roger Williams has not done anything to eliminate the program. He’s not on that bill, right? And I think that just sends a message that the committee and the chair understand the importance of the small business programs. And then on the Senate side, I’m going to remind everyone: it takes 60 votes to get something through. So to get that through would require Democratic support, of which that would never happen. But also, again, Republicans also agree with the small business programs. I think it’s just a small fraction of Congress that thinks they should be eliminated, so I don’t really see it as a threat.
Sam: Yeah, that’s the Eliminating Discrimination in Government Contracting Act. That’s the one that would eliminate women-owned small businesses. I did hear of the concept targeting socially disadvantaged businesses. So that’s a legislative attack. It’s good that you don’t see that gaining much headway in either the House Small Business Committee or in the Senate.
Lizzie: I’ll lay my body over the tracks before I let that go anywhere.
Deconstructing the EDWOSB Audit and Program Origins
Sam: We don’t want that to happen. However, we also have seen news that SBA is initiating an audit of all economically disadvantaged women-owned small businesses (EDWOSBs). So there’s certainly some level of scrutiny on women-owned small businesses generally. Just taking a step back, you mentioned the year 2000. Why do we have a Women-Owned Small Business program? What led to that program?
Lizzie: Yeah, to address the audit, by the way: when I got sent that, the Hill also was like, “Oh my gosh, what is this?” I went through the survey to see what they were asking and then asked a bunch of our EDWOSBs within our Women’s Procurement Circle, “Hey, did you get this? And two, is there any new information they’re asking?” There isn’t any new information. It’s not different than what you’re asked when you are getting certified as an EDWOSB.
And I talked to SBA, and it turns out that they had some very unfortunate timing putting this out because it’s actually not tied to the 8(a) program audit. What they are doing is their normal three-year EDWOSB audit. And every EDWOSB I talked to said that since they got into the program, they haven’t been audited for EDWOSB status; this is their first time. So SBA probably should have clarified that when they did this. I’d be interested in the comments if anyone has actually had this come up faster, right? Like if they got certified last year and then got this letter. But that’s my understanding when I went digging for what the survey was.
Sam: So that at least alleviates the suspicion that SBA is trying to hurt the program through this audit. It’s really just something that they’re required to do, and they’ve gotten around to it in an oddly timed circumstance. But there’s not a motivation in there to somehow hurt the program.
Lizzie: Right. And look, the women-owned companies in the program welcome audits. They are really sick of—at least all of the ones I’ve talked to over the last 10 years—are really sick of the narrative of, “Oh, it’s just a program where, you know, their husbands actually run it,” right? We’ve had a bill to eliminate self-certification in the WOSB program for the last couple of Congresses that hasn’t moved forward, and that had bipartisan support. So companies don’t want that narrative that sometimes the SBA IG will push. They’ve suggested things to eliminate fraud in the program, so I think WOSBs would welcome the fact to get rid of people who aren’t legitimate, right? To really put a lid on that narrative. And when you look at fraud, honestly, in that program, I think the IG has found it’s like 1%. But great—get rid of the 1%, exactly.
Overcoming the Scrutiny and Complexity of the WOSB Program
Lizzie: When the program was authorized in 2000, the reason that it was so important was because there were so many women unable to get capital at that time, right? The examples that I gave. So women business owners really took up the fight to get this program into place. It took Ann from our firm—she led the charge here—11 years to get it into place. I believe another two years to get sole-source authority, and then she also had to fight to remove dollar caps.
Sam: Yes, there used to be a cap on the competition.
Lizzie: Correct. And this program is all founded on a NAICS study—a disparity study—of which NAICS codes show where WOSBs are underrepresented, right? So it doesn’t apply to every single one. It applies to a lot of them, not surprisingly. But I don’t know of a program—and let’s put what’s going on with 8(a) in a box right now for the last year and a half—I don’t know of a program that’s been so scrutinized as the WOSB program since its inception. And I think it’s that narrative of, “These are husbands with their wives running them.” So any effort that Congress wants to do or the SBA wants to do to get rid of that and actually allow the legitimate WOSBs to thrive would be very welcome. They’ve met the goal twice; the last time was 2015. And I think the data that I saw shows that the numbers are actually going to go down for the first time in the history of the program.
Sam: It looks like it’s going to go down from last year. It was 4.97% last year. It was really close to that 5% goal. But it looks like there’s going to be more of a gap based on current issues.
Lizzie: And I’m not going to go down the rabbit hole that you and I talked about regarding double counting and what that number would look like if it was just a pure set-aside.
Sam: Thinking about this, I think about the value over a few years.
Lizzie: Oh man, I really harassed Sam about that when he was at SBA because of Congress. So I won’t go down that rabbit hole, but I will say in this environment, WOSBs I think have an opportunity, especially with the change in the FAR overhaul around “not just once an 8(a), always an 8(a)” contract. So we’ve been telling WOSBs, “Okay, if there is that work, go educate contracting officers on how to use this program.” We had to make a one-pager on how to use the program because there was just still a huge knowledge gap in the acquisition workforce regarding whether the WOSB program even existed and how to use it—which is kind of crazy if you think about it, given it was authorized in 2000. So it’s really been an uphill battle with this program.
Sam: My thought on it was related to the NAICS study that you were mentioning. That is a level of complication that the other programs don’t have, where you have to check the NAICS list. Contracting officers don’t necessarily know to check the NAICS list; that’s not currently embedded in their standard training. So it’s a bit harder to use the program compared to the other programs. But now, as we talked about before with the pools, perhaps that makes it a bit easier because those vehicles have already gone through that NAICS filtering process.
Lizzie: Definitely. Well, and you can get rid of it, right? If you got rid of that study, I feel like that would open it up to so many constitutional challenges, right? I do really wish, though, in this whole thing that we’re talking about, that administrations would stop picking winners and losers. And I’m going to pick also on the Biden administration for raising that goal, right? That was saying, “Hey, this is a really important priority.” Obama did it with something else; Trump one did it with another group; Trump two is doing it with another group. And I just wish that there would be more of a focus on, “How can we make sure this industrial base, in all of these programs that all serve different purposes, is getting access to competition in small versus large?” instead of kind of dog-eat-dogging the programs alive and against each other. It just has been really exhausting, in my opinion, in the advocacy world to be facing that.
Strategies for Capability Statements and Mission Alignment
Sam: Yes. It gives people something to talk about, though, because they say, “Oh, well, it’s not 8(a) anymore, now we’re going to veteran-owned.” Instead of being women-owned, I’ve talked to business owners that say, “I’m being told to take 8(a) or women-owned off of my capability statement and just stick with small business.” What do you say to businesses like that? Do you tell them to keep it on for the next round when women-owned comes back into vogue?
Lizzie: You know, I... every training I’ve ever seen from an OSDBU or from a government contracting organization always says lead with how you align with the mission and not with, “I’m this designation.” Because there’s a lot of back-and-forth around, “We need to find a unicorn of somebody who checks every single designation,” right? I don’t know. I see it as an opportunity, especially for WOSBs, again—Lizzie: ...because of that change around the 8(a) contracts. Um, I wonder if I’d remove it. I think I’d keep it. I mean, I’m a woman-owned small business, so, you know. Maybe that’s my perspective.
Sam: You’ve done very well in that as a nation, as a business. Just overall, when we were looking back in 2025 at a FAR overhaul, there were people who were saying, “Oh, it’s going to get rid of the women-owned program. It’s going to get rid of the 8(a) program. It’s going to get rid of the Rule of Two.” And thanks to your advocacy, we kept that in the FAR overhaul. And maybe it’s actually now. But looking ahead at the political wins and what you’re seeing in potential NDAAs... Do you see the certification programs staying the way that they look now in five, ten years?
Lizzie: No. I mean, I certainly know they’re going to change, right? And SBA is going to look at, under this administration’s—under the next administration, under the next administration—what they can do to align the programs with their priorities, right? That’s just how it works. So I don’t see them necessarily being the same, but I also don’t see them being eliminated, again, to the point of it’s not anyone’s political interest to completely eliminate them.
Lizzie: Now you can take them out of favor, right? And do things to try and influence the acquisition workforce of whether or not they’re going to use them. But I had an attorney point out to me the fact that, you know, a contracting officer is going to do what’s the quickest, right? They might be influenced by the politicals at their agencies, depending how loud they are either way. But usually they’re going to try, especially now, bless people to do whatever they can do to make it the fastest, right?
So then the emphasis is, okay, how can you make small business faster, right? How can you create parity across the programs, across those rules so that you don’t have 400 different rules for each program and the set-aside for this is different than this, right? I think that’s been a huge focus in Congress over the years and I would hope continues as these programs are all shifting.
A Plea for Small Business Unity Against Large Competitors
Lizzie: I’m going to plead with the small business community since you gave me a microphone to really work together to get changes done that impact all of the programs instead of tearing each other apart. You know, there was a change in goaling, right? Just for one program. There’s a push for a sole-source increase just for one program. And what that does is it allows the opposition that would be the bigger companies, right? And their lobby to point to how fractured the small business community is.
The way that we’ve been able to move things forward over the last 23 years as this company has been because the heads of organizations work together to try and push a common goal. And I would really hope that that can continue and we can get back to that because that’s what makes effective advocacy in this community and in this very shifting environment.
Sam: That’s a very powerful message. One team, one goal. We’re pushing to get more small businesses and as many contracts to them as we can.
Lizzie: Rising tide lifts all smalls. There you go.
Sam: All smalls. That’s a great motto. We can use that for GovCon Intelligence.
Wrapup
Sam: Lizzie Sullivan, how do people find you and hear more about Madison Services Group?
Lizzie: Our website is MadisonServicesGroup.com. My email is Esullivan@MadisonServicesGroup.com. We have a LinkedIn page like everyone in GovCon—which, I don’t know how everyone in GovCon spends so much time on LinkedIn, but we have one—you can get in contact with us there. We do a “Reading Washington” that’s kind of our take for the week on big issues. But we’d love to get in touch with companies and organizations.
I want to thank everyone who has advocated for the Rule of Two, but also things right now that can make and strengthen the small business industrial base. It just is such a critical piece that needs to continue. So I also wanted to thank anyone who’s been doing that. And there have been a lot of players in this space.
Sam: Well, we want to thank you for your advocacy, being so visible and outspoken about the importance of small businesses in the federal contracting community. People don’t realize how close it was to not having the preferences and advantages they have now. You are a big part of being able to keep those going and looking at the environment the way that it is now as being a welcoming one to small businesses. So thank you for your role in that and thank you for being on the show.
Lizzie: Yeah, thank you. And I’m going to end with my favorite thing to say: meet, call, write your members of Congress. When they’re back in the district, invite them to your office. You don’t have to come to D.C., although we’d love to see you, to go meet with them and their staff. Getting engaged is something that is so critical for small business contractors writ large and for all of the programs to keep them going.
Sam: Meet, call, write. Yes.
Lizzie: Thanks so much for having me today.
With 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. Sam obtained his law degree from the University of Virginia and formerly served as SBA’s director of procurement policy. His website is www.samlelaw.com. This video is for informational purposes only and does not constitute legal advice.
This episode of GovCon Intelligence was produced by Amelia Delphos.
