AbilityOne Contractor Loses Work to SDVOSB, Has Protest Dismissed

As recently as May, the Department of Veterans Affairs told a nonprofit helping to employ blind workers that it intended to renew its contract. The organization was shocked, therefore, when on July 30, the VA issued a notice of award to a service-disabled veteran-owned small business. To make matters worse, the nonprofit’s GAO protest of the award was promptly dismissed for being untimely.

What the heck happened?

For the last 16 years, Alphapointe, a Kansas City, Missouri nonprofit, has staffed the switchboard at the local VA Medical Center. Last year, that work employed 10 people, 8 of whom are blind. In total, Alphapointe helped employe 225 visually impaired people last year alone.

Historically, Alphapointe has provided these services to the VA through the AbilityOne program. This Congressionally-mandated program brings together more than 550 nonprofits to provide products and services to the federal government, based on a list of supplies and services it offers to agencies (the Procurement List). Once a good or service is on the list, agencies must buy it through the AbilityOne program—that is, unless some other law requires them to use a different source.

That’s what happened here. While the Javits-Wagner-O’Day Act tells the VA to use AbilityOne for those services, the Veterans Benefits, Health Care, and Information Technology Act of 2006 requires the VA to prioritize purchasing goods and services from veteran-owned small businesses. Specifically, if the VA expects at least two offers from SDVOSBs or VOSBs at reasonable prices, it has to set the procurement aside for veteran businesses. This is known as the Rule of Two.

According to GAO’s opinion, “Telephone switchboard services for the Kansas City VA Medical Center have been—and still remain on—the Procurement List since 2003.” Alphapointe probably figured that, because its services were on the list, the VA would have to come back to it. And, in fact, Alphapointe was being told the VA would.

On October 5, 2018, the VA issued a sources sought notice for this work, describing it as a SDVOSB set-aside. But, as Alphapointe told GAO, even as the VA was seeking SDVOSB sources, in private the VA was reassuring Alphapointe that it would continue to buy through the AbilityOne program. This wasn’t just lip service. Alphapointe’s contract performance was extended twice after the sources sought was issued, first to June then to September.

A few weeks after the VA issued the sources sought notice—on October 17, 2018—the Court of Appeals for the Federal Circuit affirmed a ruling by the Court of Federal Claims that had held that the Rule of Two has priority over the AbilityOne program. Coming on the heels of the Supreme Court’s 2016 Kingdomware decision, which gave the Rule of Two priority in Federal Supply Schedule contracts, the courts’ position was unequivocal: for the VA anyway, the Rule of Two is king.

Fast forward to April of this year, when the VA informed Alphapointe that the VA was required to set aside the work for SDVOSBs. Then, on May 20, the agency issued a class deviation to the VAAR giving the Rule of Two priority over AbilityOne. That same day, the contracting officer reversed course and told Alphapointe that the VA planned on renewing its contract. The contracting officer even accepted a price proposal from Alphapointe. On June 3, the VA modified Alphapointe’s contract again to extend performance until September 30.

Just eight days later, the VA published a solicitation for this work on FBO.gov, as a total SDVOSB set-aside. Alphapointe apparently never saw this notice. Proposals were due on June 28. In July, the VA picked Quality Innovations for award.

Upon learning of the award, Alphapointe filed a GAO protest. It argued that the VA did not effectively determine whether the Rule of Two was met. Relying in part on the VA’s statements to it, Alphapointe said “it seems highly unlikely that the VA engaged in any Rule of Two analysis.”

Both the VA and Quality Innovations requested dismissal of the protest. They argued that Alphapointe was challenging a term of the solicitation, which had to be filed before the receipt of proposals. Alphapointe responded that it had no idea the solicitation had been issued and that it only learned of the solicitation through the award notice.

From Alphapointe’s perspective, it makes sense that it would not have seen the notice. Remember, Alphapointe had been told that the work would remain AbilityOne. It had even submitted a price proposal. It must have figured the VA was evaluating the proposal.

The contracting officer had extended Alphapointe’s performance twice since the October sources-sought notice and the last extension had a few months remaining. Also, Alphapointe is not a typical government contractor. The AbilityOne program is unique in federal contracting, dealing with nonprofits and maintaining a list that agencies seek out to make purchases—not the other way around. As an AbilityOne contractor, Alphapointe may have had little familiarity with the FBO website, which itself is not super user friendly.

Whether Alphapointe’s story made sense or not, GAO dismissed the protest. It said that because the solicitation was publicly posted, Alphapointe had constructive notice of the procurement and therefore should have challenged it before the receipt of proposals. It said the doctrine of constructive notice “imputes knowledge to a party without regard to the party’s actual knowledge of the matter at issue.” In other words, it doesn’t matter whether Alphapointe saw it or not.

GAO sympathized though, saying, “While we agree that the agency’s actions and communications . . . were less than clear—and possibly contradictory—Alphapointe was put on notice as early as October 5, 2018, when the agency issued a sources sought notice, that the agency contemplated awarding a contract outside of the AbilityOne program. . . . Moreover, while Alphapointe may have been accustomed to a different procurement process, we do not find that its prior experience provides an exception to our timeliness rules or our constructive notice rules.”

For what its worth, legally this outcome makes sense. It is well established that the Rule of Two has priority over the AbilityOne procurement list. The VA has no choice but to follow the rulings of the Supreme Court, the Federal Circuit, and its own class deviation. So legally speaking, Alphapointe was never likely to win, even if its protest survived dismissal.

But Alphapointe would certainly be justified in feeling aggrieved. The VA led Alphapointe to believe it would retain the work, and asked it to keep performing long enough for the VA to procure the services from another firm. Given the VA’s actions, did Alphapointe not at least deserve a ruling on the merits? GAO can consider a late protest for “good cause” shown. If “less than clear—and possibly contradictory” statements aren’t good cause, than what is?

Regardless, for those switchboard operators, this ruling is sure to cause uncertainty.

Questions about this post? Email us or give us a call at 785-200-8919.

Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook.