The U.S. Supreme Court (SCOTUS) was scheduled to hear oral arguments on Kingdomware Technologies v. United States on September 9th, 2016, in a case involving whether the Department of Veterans Affairs (VA) must prioritize service-disabled veteran-owned small businesses (SDVOSBs) when it buys supplies and services. The case has been withdrawn from the calendar and both sides are required to prepare briefs filed regarding whether the case is now "moot" as the source of the underlying controversy has ended because the disputed contracts in the case “have been fully performed….” If the case is moot it will be dismissed.
The case began with a Maryland SDVOSB company's GAO protest against the VA’s failure to comply with Public Law 109-461, which arguably requires the VA to make awarding contracts to SDVOSB firms its highest priority. Pursuant to the law, VA is authorized to set aside contracts and/or award sole-source contracts, to SDVOSB and VOSB firms. SDVOSBs had hoped that a decision in their favor would force the VA to close the loopholes that it has used to avoid the statutory contracting preference.
The Veterans Benefits, Health Care and Technology Act of 2006 (Act) directed the VA to prioritize SDVOSBs and VOSBs in agency contracting. The Act directed the VA to establish annual goals for contracting with SDVOSBs and VOSBs. These prioritization and goal-setting requirements were hailed by Veteran businesses as an unambiguous Veterans preference.
Unfortunately, the VA interpreted the law differently. The VA's interpretation resulted in a Government Accountability Office (GAO) bid protest that contested the VA's efforts to circumvent the law using, for example, the Federal Supply Schedule (FSS) without considering Veteran businesses.
The GAO agreed with the Veterans and sustained the protests. In Aldevra, B-405271, B-405524 (Oct. 11, 2011), the GAO held that “[w]e see nothing in the VA Act or the [VA Acquisition Regulations] that provides the agency with discretion to conduct a procurement under FSS procedures without first determining whether the acquisition should be set aside for SDVOSBs.” The GAO stated that there was no legal ambiguity, the VA ‘shall’ award contracts on the basis of competition restricted to SDVOSBs if two or more SDVOSBs will submit offers at a fair and reasonable price.”
VA Ignored the "Shall" of the Act
The VA, however, refused to follow the GAO's recommendations, and shortly after the Aldevra decision, Kingdomware Technologies filed a protest against the VA involving the solicitation of a VA San Francisco Medical Center contract for support services because the VA failed to seek a Veteran owned businesses to meet its requirements. In Kingdomware Technologies, B-405727 (Dec. 19, 2011), the GAO sustained Kingdomware’s protest and recommended that the VA re-solicit its requirement using a Veteran set-aside.
When the VA failed to follow the GAO's recommendation, Kingdomware sued the VA in the Court of Federal Claims (COFC) which sided with the VA. In Kingdomware Technologies, Inc. v. United States, No. 12-173C (Fed. Cl. 2012), the Court decided the VA reasonably interpreted the VA Act because the law was ambiguous as to whether it mandated a Veterans preference. The Court wrote that it "respectfully disagrees with the GAO’s interpretation of the 2006 Act in the case at hand, and finds that the VA’s decision not to set aside the ENS contract at issue was not arbitrary, capricious, or contrary to law.”
Kingdomware appealed the COFC decision to the Federal Circuit where the three-judge panel upheld the Court of Federal Claims decision 2-1. The majority decided the law only requires goal setting and does not contain mandates. As a result, as long as VA procedures are reasonable, the VA has discretion regarding how to meet its Veterans preference business goals.
Veteran business owners agree with the lone dissenter. Judge Reyna wrote that “[t]he plain language of the 2006 Veterans Act unambiguously requires VA contracting officers to conduct a Rule of Two analysis in every acquisition and does not exempt task or delivery orders under the [FSS] from this imperative.” He further argued that “[t]he statutory provision at issue could not be clearer. It provides that contracting officers ‘shall award contracts’ on the basis of restricted competition whenever the contracting officer has a reasonable expectation that the Rule of Two will be satisfied.”
Kingdomware appealed the Federal Circuit decision to the SCOTUS and Veteran business owners hoped a positive Supreme Court decision would finally prioritize Veterans and provide clear direction to the VA on how to interpret that VA Act. Now, however, that resolution may not come and Veteran business owners will be left with the Federal Circuit Court decision upholding the VA's policies, practices and procedures.
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