The VA is considering using so-called “tiered evaluations” to address concerns that SDVOSBs and VOSBs may not always offer “fair and reasonable” pricing, even when two or more veteran-owned companies compete for a contract.

In a session yesterday at the National Veterans Small Business Engagement, a panel of VA acquisition leaders described the potential tiered evaluation process.  It’s hard to argue that the VA isn’t entitled to fair and reasonable pricing, but judging from the reaction in the room, some SDVOSBs and VOSBs may wonder whether tiered evaluations are an effort to circumvent Kingdomware.

The VA panel consisted of Thomas Leney, Executive Director of Small and Veteran Business Programs, Jan Frye, Deputy Assistant Secretary for Acquisition and Logistics, and Robert Fleck, Chief Counsel of the Office of General Counsel.

Mr. Leney, who spoke first, said that the Kingdomware decision has been “good for veterans and good for the VA,” and pointed out that the VA’s annual SDVOSB/VOSB spending rose significantly following Kingdomware.  That’s good news, of course.

But Mr. Frye said that when Kingdomware was decided in June 2016, the the VA was worried that the decision could, in some cases, result in higher prices and lengthier procurement processes.  The VA doesn’t currently have any hard data about whether that’s proven true on a macro level, but has commissioned a study to evaluate it.

In the meantime, Mr. Leney said, there is anecdotal evidence of cases where the VA has paid “excessive prices” to award to veteran-owned companies. The VA hopes that this is a “small problem in a few cases, not a widespread problem,” Mr. Leney said.  But apparently anticipating the need for policy changes to address the issue, the VA is considering adopting a tiered evaluation system in some procurements.

Under a tiered evaluation, a solicitation would be set-aside for SDVOSBs or VOSBs, but other companies (including large businesses) would also be able to submit proposals.  The agency would start by evaluating the proposals of the top tier–in most cases, likely SDVOSBs.  If the VA didn’t receive “fair and reasonable” pricing at that tier, the VA would go down to the next tier (probably VOSBs) and continue down the chain until a “fair and reasonable” offer was available to accept.

The speakers said that using a tiered evaluation approach would prevent procurement delays.  As it stands now, if an acquisition has been set aside for SDVOSBs but no SDVOSB offers a fair and reasonable price, the VA must cancel and resolicit.  Mr.  Leney said that there have been cases where the VA has solicited the same acquisition “two, three or four times” before receiving fair and reasonable pricing.  A tiered evaluation would eliminate this problem by allowing the contracting officer to simply go to the next tier, instead of resoliciting.

The speakers indicated that tiered evaluations wouldn’t be used in all acquisitions.  Mr. Leney said that the approach likely wouldn’t be used in acquisitions involving complex technical proposals because the VA would be unlikely to receive offers from companies whose proposals might never be considered.  On the other hand, the VA seems to think that the approach could work well in less-complex acquisitions, particularly where price is a critical factor.

It’s hard to argue that the VA isn’t entitled to “fair and reasonable” pricing.  Fair pricing is, of course, a bedrock principle of federal procurement.  But, judging from the mood in the room, the VA is going to have some work to do to convince SDVOSBs and VOSBs that this initiative (if it comes to pass) isn’t an attempt to circumvent Kingdomware.

It’s worth asking whether the VA is jumping the gun.  After all, the VA admits that it doesn’t yet have hard data, and is relying on anecdotal evidence.  So why is the VA proposing a broad solution when it doesn’t know for sure yet whether there is a widespread problem?

But assuming there is a need for a tool like tiered evaluations, one key consideration is this: how is “fair and reasonable” determined?  One speaker suggested that if the VA receives pricing that is lower than the prices submitted by SDVOSBs, the Contracting Officer might use that as evidence that the SDVOSB pricing wasn’t fair and reasonable.

Hopefully, that’s not how it would work: there’s a big difference between higher pricing and unreasonable pricing.  As one audience member pointed out, if reasonableness is judged based on the pricing submitted by non-veteran offerors (including large businesses), many SDVOSBs and VOSBs would have a tough time competing.

I give the VA leadership credit for coming to a public forum to discuss issues like these.  And I’m willing to wait and see the details before passing judgment on the proposal, should the VA decide to implement it.

But the VA must understand that the SDVOSB/VOSB community watched for years as the VA fought tooth-and-nail to evade the statutory preferences under 38 U.S.C. 8127.  With that history, some veterans are understandably skeptical that efforts like these are anything other than an attempt to circumvent the Supreme Court’s ruling.

If the VA is going to implement tiered evaluations, or similar tools, the agency will have some convincing to do.  Stay tuned.

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