COFC Strikes a Blow to VA-Verified VOSBs and SDVOSBs

A few months ago, GAO confirmed that where VA uses GPO as it buying agent, it still must to comply with the Rule of Two in 38 U.S.C. 8127(d) (see our blog post on the case ). After VA took corrective action, however, another bid protest was again filed, but this time in the Court of Federal Claims. Surprisingly, there, the Court concluded differently, finding that GPO was not required to set aside the procurement for SDVOSBs or VOSBs, despite acting on VA’s behalf. In so doing, it has weakened the Rule of Two.

Before we dive into the Court’s decision, let’s discuss the some background. For this acquisition, VA sent a requisition to GPO to procure suicide prevention gun locks. (VA justified using GPO because it wanted information, related to its Veterans Crisis Line, printed on the locks and on labels affixed to the locks; it also wanted wallet cards to accompany the locks.) Veterans4You protested (initially to GAO) the solicitation’s terms because VA had not given priority to veteran-owned small businesses–contrary to the Rule of Two statutory mandate in 38 U.S.C. 8127(d). GAO, stressing 38 U.S.C. 8128(a), sustained the protest and recommended corrective action.

Only days after the GAO decision, VA submitted a new requisition to GPO for the imprinted gun locks, labels, and wallet cards. There, VA requested that GPO “to the maximum extent feasible” set aside the procurement for CVE verified SDVOSBs and VOSBs. GPO responded that it did not have authority to set aside the procurement, but it would “accommodate the spirit of VA’s request.” To that end, GPO included in its bid list verified SDVOSBs and VOSBs which were registered with GPO to ensure that they had a chance to submit a proposal. It also included other GPO vendors which had veteran affiliations. Yet, the new solicitation was issued on an unrestricted basis.

Veterans4You again challenged the terms of GPO’s solicitation, this time at the Court of Federal Claims. It argued, among other things, that 1) the Veterans Benefits Act, which includes the statutory Rule of Two, requires the VA to conduct the solicitation if GPO is unable to adhere to the Rule of Two, and 2) GPO’s decision not to set aside the solicitation for SDVOSBs and VOSBs was arbitrary and capricious and conflicted with the Veteran Benefits Act (VBA). But the Court of Federal Claims, in Veterans4You, Inc. v. United States, No. 19-931 C (Fed. Cl. Sept. 27, 2019), disagreed.

As to the first argument, the Court held that the “VBA makes clear that Congress has established a mandatory preference for VOSBs and SDVOSBs when the VA conducts a procurement” but “the text of the VBA also makes clear that this preference applies only when the VA Secretary and the VA Contracting Officer are conducting a procurement on behalf of the agency.” Citing 38 U.S.C. 8127(i)(1), the Court further noted that the VBA merely obligates VA to request that GPO employ a Rule of Two analysis “to the maximum extent feasible.” And the Court found that VA’s request to GPO complied with this requirement.

As to the second argument, the Court held that the “record evidence also shows that the GPO reasonably determined that it could not set aside the Solicitation as requested by VA.” To support its conclusion, the Court cited the contracting officer who has represented that 1) “GPO’s printing regulations require that the GPO promote and provide for competition to the maximum extent practicable in soliciting bids and offers and awarding government contracts,” and 2) “GPO is obligated under its regulation to employ competitive bidding.” In addition, the Court highlighted that the protester “points to no requirement in the printing regulations or the VBA that mandates that the GPO conduct the Solicitation as a VOSB/SDVOSB set aside.”

In the end, the Court held that neither “the VA or the GPO violated the VBA or any other law in connection with the Solicitation” and that “the VA reasonably determined that the GPO should conduct the Solicitation on its behalf and that the GPO reasonably determined that it could not set aside the Solicitation for VOSBs and SDVOSBs.”

In all honesty, I believe there are problems with the Court’s analysis. The biggest flaw, to me, is the Court’s conclusion that GPO “reasonably determined that it could not set aside the Solicitation as requested by the VA.” In so concluding, the Court relied on the CO’s assertion about GPO’s procurement regulations and then noted that the protester pointed “to no requirement in the printing regulations or the VBA that mandates that GPO conduct the Solicitation as a VOSB/SDVOSB set aside.”

What about 38 U.S.C. 8127(i) of the VBA? Although VA “requested” that GPO set aside the procurement for SDVOSBs and VOSBs, the statute effectively transformed that “request” into a requirement. And GPO was, therefore, required, “to the maximum extent feasible” to conduct a Rule of Two analysis and set aside the solicitation for SDVOSBs and VOSBs if the Rule of Two was met. From my reading of the opinion, GPO did not show any statutory, regulatory, or practical reason why it couldn’t conduct a Rule of Two analysis. Indeed, GPO’s contracting officer merely asserted that GPO “is obligated under its regulations to employ competitive bidding for the Solicitation.” But does this requirement–shared by essentially all federal agencies–preclude setting aside a solicitation, under VA’s Rule of Two, if conducting a procurement on VA’s behalf? And is GPO’s assertion enough to show it was not “feasible” to do a set-aside?

Boiled down, it appears that GPO believed that it was not permitted to set aside the procurement for SDVOSBs/VOSBs. Instead of probing this belief as it should have–especially in light of 38 U.S.C. 8127(i)–the Court conducted no analysis of statutes or regulations governing GPO’s procurement authority to determine whether, by law, GPO could not set aside the procurement for SDVOSBs/VOSBS.

Also, the decision generally conflicts with the Rule of Two’s overall policy goal of funneling VA’s procurements into the hands of VOSBs and SDVOSBs. Armed with this decision, VA could evade the Rule of Two (for at least some supply procurements) by requesting that GPO imprint a few words on procured goods–even in cases where the printing component constitutes only a small fraction of the procurement.

For example, VA could start using GPO to acquire surgical instruments because VA decides it wants to print certain information (perhaps the name of the VA medical facility at which they’ll be used) directly on them. Don’t get me wrong, I don’t think that VA will start acquiring everything it needs through GPO. But it gives VA another way to maneuver around the Rule to Two–a loophole which, in my view, contradicts the statute’s requirements and the Supreme Court’s Kindgomware decision.