Hey VA! You Can’t Avoid the Rule of Two By Using GPO To Do Your Shopping.

It’s no secret that the VA has tried to find ways around the statutorily-mandated rule of two–i.e. VA must set aside procurements for VOSBS if it has a reasonable expectation that it will receive fair and reasonable offers from two or more veteran-owned small businesses. Although the U.S. Supreme Court has already told VA, in Kingdomware, that it cannot circumvent the rule of two, VA apparently is still seeking ways to avoid it.

Recently, VA tried to go around the rule of two by using GPO as its buying agent. This tactic was protested and GAO confirmed that the rule of two still applies.

In Veterans4You, Inc., B-417340 et al. (June 3, 2019), VA wanted to buy suicide prevention gun locks for distribution through its Veterans Crisis Line. The gun locks consisted of a cable and keyed padlock that can be used on essentially any handgun, rifle, or shotgun. In addition to the device itself, the solicitation required that: 1) the padlock to be coated in vinyl and printed with the Veterans Crisis logo and contact information; 2) a wrap-around sticker be attached to the cable, also printed with the Veterans Crisis logo and contact information; and that 3) the package include a wallet card printed with the Veterans Crisis logo and contact information and information about identifying suicide risks.

VA designated the procurements as a “printing requirement” instead of a acquisition of suicide prevention gun locks; so it sent a requisition to GPO requesting that it procure the gun locks on VA’s behalf. GPO issued the solicitation under 44 U.S.C. § 501-502, which provides GPO with unique authority to provide and procure printing services for the Government.

Veterans4You protested the terms of the solicitation, arguing that VA was not giving priority to veteran-owned small businesses–contrary to the Rule of Two statutory mandate in 38 U.S.C. § 8127(d). VA and GPO countered that the Rule of Two did not apply because the procurement was being fulfilled under GPO’s independent acquisition authority–and GPO did not have to apply the Rule of Two.

GAO agreed with Veterans4You.

After discussing the rule of two generally, GAO explained that 38 U.S.C. § 8128(a) requires VA to observe the Rule of Two even where other statutes apply. It outlined a recent case from the Federal Circuit (which we’ve blogged on before) where the Court held that “the terms of 38 U.S.C. § 8128(a) required that the VA procure all goods and services from SDVOSBs or VOSBs where the VA’s research shows that the rule of two is satisfied, even where the procurement in question would otherwise be governed by the mandatory requirements of [another statute].”

GAO then summarized its holding this way:

As the discussion above demonstrates, the requirement for VA to determine whether there are at least two eligible concerns capable of meeting its requirements at a fair and reasonable price consistently has been interpreted by both our Office and the courts as both mandatory, and of universal application. We reach that same conclusion here with respect to the applicability of the [Rule of Two statute] to all VA printing acquisitions, especially in view of the express provisions of 38 U.S.C. § 8128(a), which states in no uncertain terms that:  “In procuring goods and services pursuant to . . . any other provision of law, the Secretary shall give priority to a small business concern owned and controlled by veterans.”  Simply stated, any time the VA is acquiring goods or services–without limitation–it is required to determine whether there are at least two SDVOSBs or VOSBs capable of meeting the agency’s requirements at a fair and reasonable price.

As noted by GAO, this latest decision reaffirms several GAO and court decisions recognizing the rule of two’s extremely broad reach. VA simply can’t escape the rule–even if it desperately wants to. And because GAO and courts are hyper-sensitive to VA’s rule of two, any deviation from the rule in a VA procurement likely provides fertile grounds for a pre-bid protest.