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3 min read

VA's Intent to Offer Contracts for VOSBs Leads to Contention

Veteran Owned Business Contracts | SDVOSB Set-Asides | Bid Protest

VA's Intent to Offer Contracts for VOSBs Leads to Contention

Bayaud Enterprises, Inc. and SourceAmerica filed legal action against the U.S. Department of Veterans Affairs (VA) in 2017.  Bayaud is a (JWOD) eligible service provider that had contracts to provide medical transportation services, mailroom operations, and switchboard services at VA facilities in Colorado.  SourceAmerica, a central nonprofit agency, represents 450 JWOD-eligible suppliers by helping them obtain, comply, with, and resolve contract disputes with federal agencies.  Bayaud and SourceAmerica filed a Complaint against the VA after it informed Bayaud and SourceAmerica's client agencies that it would not renew its contracts after they expired.  These contracts were instead renewed with veteran-owned businesses under the Veteran's Benefits, Health Care, and Information Technology Act (VBA)

            In 1938, the Javits-Wagner-O'Day Act (JWOD) was passed to give nonprofit entities preference that employed the blind or severely disabled.  The Act led to the creation of AbilityOne, a commission that maintains and publishes a listing of products and services by such nonprofit entities.  JWOD directed that "when the Federal Government purchases products on AbilityOne's procurement list, priority would be given to products made and sold by such nonprofit entities."

The "Rule of Two" was passed by Congress in 2006, requiring the VBA to require the BA to purchase goods and services from qualified veteran-owned businesses, if available.  The VBA was passed to increase contracting opportunities for small businesses "owned and controlled by veterans."  In 2016, the U.S. Supreme Court issued a "Class Deviation" that explained VA's preference for veteran-owned businesses do not apply.  The VA amended the 2016 Class Deviation in 2017


            The Plaintiffs claimed the 2019 Class Deviation violated the Administrative Procedures Act (APA) because the VA did not provide notice-and-comment procedures before implementing it; the VA's conclusion that the VBA takes precedence over JWOD is arbitrary and capricious and contrary to law; the VA's failure to require veteran-owned businesses it contracts with from the AbilityOne list is contrary to law; the VA's adoption of the 2019 Class Deviation deprives the Plaintiffs of procedural due process and equal protection; and the 2019 Class Deviation violates the Rehabilitation Act.

            The VA argued the U.S. District Court lacked subject matter jurisdiction.  It stated the Plaintiffs did not identify the ˜particular claims," leading the to the court to presume it disputed the Courtâ"jurisdiction to hear the Plaintiffs' claims alleging the VA's decisions violate Section 706 of the APA.  The APA holds an express waiver of the United States' sovereign immunity that allows for judicial review of claims by persons that suffer a legal wrong due to agency action if only non-monetary relief is sought.  This provision limits sovereign immunity to procedures that do not "confer authority to grant relief if any other statute that grants consent to suit expressly or impliedly forbids the relief which is sought."  The VA claimed the Tucker Act vests exclusive jurisdiction in the Court of Federal Claims for alleged violations "of a statute or regulation in connection with a procurement or expressed procurement."  However, the Plaintiffs argued they did not challenge the VA's application of the 2019 Class Deviation.  It instead challenged the adoption and legality of the 2017 Class Deviation itself.  


            The VA argued Bayaud challenged specific procurement decisions by the VA because it declined to exercise options to extend Bayaud's contracts because of the 2019 Class Deviation. In the case, Alphapointe v. Dep't of Veterans Affairs, No. 19-CV-02465 (APM), 2019 WL 7370369 (D.D.C. Aug. 30, 2019), the Plaintiffs challenged the 2019 Class Deviation and sought an injunction to prevent the VA from terminating any contracts the Plaintiffs had.  Alphapointe found the injunction exceeded what the court can do, but still found that it had held jurisdiction to consider Alphapointe's claims.  The U.S. District Court found it had subject-matter jurisdiction to consider Bayaud's APA challenges to the manner which the VA adopted the 2019 Class Deviation.

Notice and Comment Claim

            Bayaud argued the Defendants violated rulemaking procedures that included provisions of the Federal Acquisition Regulation (FAR) and Veterans Administration Acquisition Regulation (VAAR).  The VA argued that notice-and-comment requirements under 5 U.S.C. § 553(a)(2) do not apply to "a matter relating to contracts."  The VA found the Plaintiffs' argument that the failure to provide notice and comment violated statutes and regulations because the new claim for relief was being raise for the first time and had not been included in the Plaintiffs' complaint.  The Court, again agreed with the VA, stating the Amended Complaint failed to give adequate notice that the Plaintiffs' first claim for relief involved 41 U.S.C. § 1707 and other regulations.

Arbitrary and Capricious

            The Plaintiffs also alleged the 2019 Class Deviation is arbitrary and capricious.  Claim Two alleges the 2019 Class Deviation is contrary to law because it fails to give due effect to JWOD and other VA procurement regulations.  Claim Three alleges the VA's procurement policies are contrary to law because it failed to require VA contractors to give preference to AbilityOne-listed suppliers when the contractors enter into subcontracts for the purchase of goods and services, and because the VA improperly "indicated its intent to apply the Rule of Two."  This argument required the Court to conclude the Federal Circuit's PDS decision was wrongly decided.  The Court did not find the 20198 Class Deviation arbitrary or capricious.


            In February of this year, the U.S. District Court in Colorado found in favor of the VA on all claims in this action.  For more information on contesting decisions by the VA or other federal agencies, contact Whitcomb Selinsky, PC at (866) 476-4558.