GAO: SDVOSBs Preferred Over Veteran-Owned Businesses for VA Procurements

Unlike most agencies, the Department of Veterans Affairs offers contracting preferences for businesses owned by veterans who are not service-disabled.  However, as the GAO confirmed in GAO Protest of Buy Rite Transport, B-403729, B-403768 (Oct. 15, 2010), even at the VA, service-disabled veteran-owned small businesses are preferred over veteran-owned small businesses.

The Buy Rite GAO bid protest involved a VA set-aside for veteran-owned small businesses, not service-disabled veteran-owned small businesses.  However, a service-disabled veteran-owned small business filed a GAO bid protest, arguing that the solicitation should have been set-aside for SDVOSBs.

In response, the VA admitted it had made a mistake when it conducted its market research.  The mistake led the VA to erroneously conclude that it was unlikely to receive at least two fair market offers from service-disabled veteran-owned small businesses.  After correcting its research, the VA concluded that it was likely to receive offers from four service-disabled veteran-owned small businesses.  The VA pulled the initial solicitation and reissued it as a SDVOSB set-aside.

A veteran-owned small business, Buy Rite Transport, filed a GAO bid protest, disputing the VA’s conclusion and arguing, in essence, that the new set-aside was unfair.

The GAO denied the bid protest.  It held that under the VA’s procurement regulations, service-disabled veteran-owned small businesses trump businesses owned by non-service disabled veterans.  If the VA has a reasonable expectation of receiving at least two fair offers from SDVOSBs, it is generally required to set the procurement aside for SDVOSBs, even if veteran-owned businesses might have provided a better value.

Given the plain language of the VA’s regulations, the Buy Rite GAO bid protest decision was a foregone conclusion.  It’s certainly easy to understand Buy Rite’s frustration, especially given that the VA initially issued the solicitation as a set-aside for veteran-owned businesses.  But the rules are the rules, and when it comes to VA procurements, service-disabled veteran-owned small businesses receive the top preference, even over veteran-owned businesses.

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