Kingdomware Shocker: VA Abandons Goal-Setting Argument

In a stunning development in the Kingdomware SDVOSB/VOSB Supreme Court case, the Government has abandoned the argument that the statutory preference for veteran-owned companies applies only if the VA has not met its SDVOSB or VOSB contracting goals.

Although this argument was hotly debated, it was successful both at the Court of Federal Claims and again at the Federal Circuit.  But now, just weeks away from oral arguments, the Government’s Supreme Court brief jettisons the Government’s own previously successful argument in favor of an entirely different rationale for refusing to honor the statutory SDVOSB and VOSB preferences.

The last-minute, wholesale substitution of arguments doesn’t say much for the Government’s confidence in its case. And on the merits, the Government’s new argument is no better than the one it has abruptly abandoned.

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GAO: Rule Of Two Analysis Not Required For Exercise Of “In Scope” Options

The Small Business Act envisions that small businesses will be awarded a “fair proportion” of government contracts. To meet this goal, the FAR instructs agencies to set aside for small businesses acquisitions over $150,000 if there is a reasonable expectation that offers will be received from at least two responsible small businesses, at fair market prices.

While the Rule of Two is powerful, it does not extend to all procurement actions. A recent GAO case illustrates an important exception to the Rule of Two. In Walker Development & Trading Group—Reconsideration, B-411246.2 (Sept. 14, 2015), the GAO held that an agency need not conduct a Rule of Two analysis before exercising an option in accordance with the terms of an existing contract.

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Small Business Set-Aside Decisions May Include Restrictive “Capability” Requirements

The small business set-aside “rule of two” is not satisfied unless the procuring agency has a reasonable expectation of receiving proposals from at least two small businesses capable of performing the work.

Although this sounds like a commonsense interpretation of the rule of two, it may give agencies leeway to define “capability” in manner that eliminates small businesses from participation.  In a recent bid protest decision, the GAO held that an agency appropriately issued a solicitation as unrestricted based on the agency’s determination that there were not two or more small businesses with at least five years of relevant experience. Of concern, the GAO did not require the agency to prove that five years of relevant experience was necessary to render a firm “capable” of performing the contract.

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VA Doesn’t Issue SDVOSB Set-Aside, Protest Sustained

The VA’s decision not to issue a SDVOSB set-aside was improper because the VA adopted an unreasonably narrow approach to determining whether two or more SDVOSBs were likely to submit proposals.

In a recent bid protest decision, the GAO held that the VA’s narrow market research did not support its set-aside determination.  And in so holding, the GAO reaffirmed its position that the VA must put “veterans first” in federal procurements.

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GAO: “Rule of Two” Market Research Must Examine Capabilities

When conducting market research to determine whether a small business set-aside is appropriate under the “rule of two,” a procuring agency must do more than determine whether multiple small businesses are likely to submit proposals–it must also make reasonable efforts to ascertain whether those small businesses are capable of performing the work.

In a recent bid protest decision, the GAO held that an agency had improperly issued a solicitation as a small business set-aside because the agency’s market research did not reasonably consider whether the identified small businesses were capable of performing the contract requirements.

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Small Business “Rule Of Two” Doesn’t Apply To GSA Schedule

Agencies are not required to investigate the availability of small business offerors when ordering goods and services off the Federal Supply Schedule, even if multiple small business concerns would be able to compete for the contract.

As the GAO recently held in Walker Development & Trading Group, B-411357 (July 8, 2015), the small business preferences found in the Small Business Act do not apply when an agency uses the FSS.

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Will The Supreme Court Put “Veterans First” In The Kingdomware SDVOSB Case?

Is the Department of Veterans Affairs required to prioritize service-disabled veteran-owned small businesses (“SDVOSBs”) when it buys supplies and services?  That, essentially, will be the question before the Supreme Court when it takes up the case of Kingdomware Technologies, Inc. vs. United States.  On June 22, the Supreme Court agreed to hear the case.

The Supreme Court’s decision in Kingdomware will end a long-running battle between the VA and various SDVOSBs, which have accused the VA of creating loopholes to avoid a statutory contracting preference for veterans.  Hopefully, the Court will get it right.  As a matter of policy and law, the underlying decision of the U.S. Court of Appeals for the Federal Circuit is fundamentally flawed.

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