Gordon Rees Scully Mansukhani’s Government Contracts Practice Group highlights the key developments from the past month and their implications for federal contractors. Our team tracks significant decisions, regulatory changes, and practical updates to help contractors stay compliant in a rapidly changing environment.

Tune in to The Essential GovCon Brief podcast on Spotify or YouTube for a discussion on the issues highlighted below.

Congressional Effort to Codify “Rule of Two” Gains Momentum

Congress is considering legislation that would codify the long-standing “Rule of Two” into statute, potentially strengthening one of the federal government’s most important small business contracting requirements. The proposal would write into statute an obligation to reserve certain procurements for small businesses where the agency reasonably expects that at least two responsible small business concerns will submit offers at fair market prices.

This legislative activity comes against the backdrop of long running debate over the Rule of Two’s scope, including questions about how it interacts with other preference programs (such as 8(a), Historically Underutilized Business Zone (HUBZone), Service-Disabled Veteran-Owned Small Business (SDVOSB), and Women-Owned Small Business (WOSB)) and with broader policy initiatives favoring consolidation and category management.

If enacted, statutory codification would elevate the Rule of Two from a doctrine primarily developed through regulation and case law to a more explicit statutory requirement and potentially affect agency acquisition planning.

Key Takeaways for Government Contractors

• If enacted, contractors can expect more bid protests challenging decisions not to set aside procurements where the market record suggests at least two capable small businesses.

• Agencies may face increased pressure to conduct and document robust market research before defaulting to full and open competition.

• Large business contractors should anticipate a higher likelihood that certain requirements will be reserved for small businesses where the market can support multiple qualified small offerors.

• Small business contractors may gain additional leverage in pre award discussions and bid protests where an agency’s market research or set aside decision appears cursory or unsupported.

• Contractors of all sizes should take pre-solicitation engagements, such as responding to RFIs and sources sought notices, seriously, as these submissions help build the record on whether two or more responsible small businesses are reasonably expected to compete.

Court Upholds SBA Size Finding: Mentor-Protégé Joint Venture Must Still Qualify at Final Proposal Revisions

The Court of Federal Claims recently issued a noteworthy decision clarifying that mentor-protégé joint ventures (JVs) must continue satisfying Small Business Administration (SBA) mentor-protégé requirements through final proposal revisions in order to qualify for small business set-aside contracts. In Primary Health Care, LLC d/b/a Anglin Distinctive Health Care JV, LLC v. United States, — Fed. Cl. —-, 2026 WL 1530132 (Fed. Cl. May 28, 2026), the Court of Federal Claims rejected a post award bid protest challenging an SBA size determination against a mentor-protégé joint venture in a Defense Health Agency small business set aside.

The joint venture between Distinctive (large) and Anglin (small) initially had an SBA-approved mentor-protégé agreement and self-certified as small in its initial proposal. After that initial offer, however, the mentor-protégé agreement was terminated, and Anglin later withdrew from the JV. Following a size protest, the SBA Area Office and then SBA Office of Hearings and Appeals (OHA) found the JV “other than small” because, as of final proposal revisions, there was no longer a valid mentor-protégé relationship to support the JV’s reliance on the size exception. The JV argued that the “snapshot in time” rule for size determinations meant SBA could look only to the initial offer, when the agreement was still in place.

The court upheld the SBA’s determination, concluding that SBA reasonably interpreted its regulations to require the continued existence of a valid mentor-protégé relationship through final proposal revisions. The court rejected the JV’s argument that SBA was limited to examining eligibility only as of the initial proposal submission date.

Because the mentor-protégé agreement was no longer in effect by the time of final proposal revisions, the JV could not rely on the mentor-protégé exception and was ineligible for award.

Key Takeaways for Government Contractors

• Mentor-protégé JVs must ensure a valid, SBA-approved mentor-protégé agreement remains in place through final proposal revisions, not just at initial offer, to rely on the JV size exception.

• The snapshot in time rule for size does not prevent SBA from examining ongoing compliance with JV and mentor-protégé requirements at the final proposal revision stage.

• Termination or expiration of a mentor-protégé agreement mid-procurement can render a JV “other than small,” even if it was small at initial offer and previously treated as an apparently successful offeror.

• Contractors should carefully manage mentor-protégé timelines and amendments in long procurements and align withdrawal/termination decisions with JV participation and pending competitions.

Court of Federal Claims Reinforces High Bar for Recovering Proposal Preparation Costs

In Mayvin, Inc. v. United States, — Fed. Cl. —-, 2026 WL 1530055 (Fed. Cl. May 28, 2026), the Court of Federal Claims denied a request for bid preparation and proposal costs even though the protestor had previously prevailed on the merits of its bid protest.

Mayvin had successfully challenged the Army’s cancellation of a women-owned small business set aside (the SETA III procurement), obtaining reinstatement of the solicitation after the court found the cancellation violated FAR 19.502 9 and lacked a rational basis. Mayvin then moved for recovery of its proposal costs, pointing to multiple rounds of proposal revisions and three protests over a lengthy procurement.

Applying the Federal Circuit’s Reema framework for recovering proposal preparation costs, the court concluded that Mayvin failed to establish the required causal connection between the Army’s unlawful cancellation and the proposal costs it sought to recover. The opinion emphasizes that recovering proposal costs requires a showing that the specific prejudicial error the court actually found caused the proposal work to become a “needless expense,” for example, where an unlawful action forces a second or materially revised proposal that is later rendered futile. General procurement flaws or the burden of repeated protests are not enough, and bid protest litigation costs themselves are not recoverable.

Key Takeaways for Government Contractors

• Even a successful protestor faces a high bar to recover proposal costs; there must be a direct causal link between the adjudicated error and proposal work that became unnecessary.

• Courts will look for specific, wasted proposal efforts (e.g., a second proposal induced by a defect later corrected), not just a long or troubled procurement history.

• Protest and litigation expenses cannot be recast as proposal costs and remain non-recoverable in COFC bid protests.

• Contractors contemplating a motion for bid preparation costs should be prepared to tie particular proposal iterations and dollars to the precise error that led to the court’s relief.

GRSM Government Contracts Practice Group

GRSM’s Government Contracts team supports contractors throughout the entire procurement lifecycle, providing both proactive counseling and representation in disputes.

Our attorneys advise on compliance, small business programs, cost and pricing requirements, cybersecurity, subcontracting, and other regulatory issues, while also litigating bid protests, claims, and agency matters nationwide.

Please contact Patrick Burns, Meredith Thielbahr, or Quyen Dang with any questions or for additional information.

Background of the Case

The resident signed an MDPOA in 2014 naming her daughter as agent. The document authorized the agent to act in all matters relating to the resident’s healthcare, to consent to medical treatment and procedures, and to authorize admission to or transfer from a healthcare facility. It did not mention arbitration.

Nearly a decade later, the resident was admitted to the facility. The resident attended part of the admissions meeting but left before it concluded; the agent completed the paperwork alone, including the arbitration agreement. About a month after admission, the resident suffered two falls within roughly forty-eight hours and passed away days later.

The estate sued for negligence, Colorado Consumer Protection Act violations, and wrongful death. The facility moved to compel arbitration. The trial court denied the motion, finding the agent had neither express MDPOA authority nor actual or apparent authority to sign the arbitration agreement. The Court of Appeals affirmed.

What the Court Held

1. An MDPOA must expressly authorize arbitration.

Building on Lujan v. Life Care Centers of America (Colo. App. 2009) and Fresquez v. Trinidad Inn, Inc. (2022 COA 96), the division held that entering a voluntary arbitration agreement is not a “medical treatment” decision within the meaning of the MDPOA statute (§ 15-14-505(7), C.R.S.). Authority to make healthcare decisions therefore does not subsume authority to waive the resident’s right to go to court. The court expressly disagreed with the contrary holding in Moffett v. Life Care Centers of America (Moffett I), which had assumed an MDPOA agent could sign arbitration agreements unless restricted.

2. The HCAA “delinks” arbitration from admission.

Healthcare arbitration agreements are governed by Colorado’s Health Care Availability Act (HCAA), §§ 13-64-101 to -503, C.R.S. The HCAA requires that such agreements be voluntary, contain mandatory disclosures, and be rescindable for any reason within three months—and it prohibits conditioning admission or care on signing one. § 13-64-403(4), (7). Because arbitration is, by statute, untethered from the resident’s admission, it is not “necessary” admission paperwork, and authority to handle admission does not reach it.

3. The facility failed to establish actual or apparent authority.

The court also rejected the facility’s fallback theories. There was no express authority beyond the MDPOA. Implied authority failed because the arbitration agreement was not documentation necessary for admission. And apparent authority failed because the resident’s decision to step out of the meeting was not a manifestation—by her words or conduct—that she consented to the agent signing an arbitration agreement. Apparent authority flows only from the principal’s conduct, not the agent’s.

4. The court rejected the facility’s procedural arguments.

Because the facility bore the burden of proving the agent’s authority and proffered no supporting evidence despite discovery, the trial court was not required to hold an evidentiary hearing. The court also declined to reach the facility’s estoppel argument, which had been raised for the first time in a reply brief and was therefore unpreserved.

Impact on Colorado Healthcare Facilities

Reno consolidates a now near-uniform line of Colorado authority and aligns with recent decisions in California, Tennessee, and Wyoming. The risk is concrete: arbitration agreements your admissions team has been collecting in reliance on a resident’s MDPOA may not be enforceable.

For facilities that use arbitration agreements, the case highlights several practical steps to improve enforceability:

• Note that garden-variety MDPOA will not compel arbitration. If the MDPOA does not expressly grant authority to enter arbitration agreements, an agent’s signature does not bind the resident.

• Identify the enforceable pathways. Realistically, an agent-signed arbitration agreement is enforceable only where (a) the resident personally signs while capacitated; (b) the agent holds a general / unlimited power of attorney; or (c) the MDPOA or a separate writing expressly and specifically authorizes arbitration agreements.

• Read the actual document at intake. It is not enough to note that “a POA exists.” Staff should obtain the instrument, confirm whether its language reaches arbitration, and route anything ambiguous for review before relying on it.

• Do not lean on the “admission paperwork” rationale. Because the HCAA forbids conditioning care on arbitration, that theory will not supply implied authority in Colorado.

• Build the record where authority is asserted. The facility lost in part on an empty evidentiary record. If you rely on agent authority, document the basis for it contemporaneously.

• Confirm HCAA compliance generally. Voluntariness, the mandatory disclosures, the three-month rescission right, and the no-conditioning rule all remain prerequisites to enforceability—independent of the authority question.

How GRSM Can Help

GRSM would welcome the opportunity to review your facility’s arbitration agreement and admissions process in light of Reno and the HCAA. That review can include:

• Assessing your current arbitration agreement form and disclosures for HCAA compliance;

• Developing intake procedures and a checklist for evaluating an agent’s authority (including specimen MDPOA/POA language to look for);

• Preparing training materials and a short in-service for your admissions staff; and

• Recommending practical steps to strengthen the enforceability of agreements going forward.

If you would like to learn more, please reach out to author Christopher Jones to discuss next steps. This legal alert was authored by Jones, in collaboration with Legal Secretary Karla Freeman.