The VA Rule of Two, while a powerful motivator for setting procurements aside for service-disabled veteran-owned small businesses, does have its limits.
One of those exceptions was discussed in a recent ruling from the United States Court of Appeals for the Federal Circuit. The court confirmed that the VA may convert a service-disabled veteran-owned small business set-aside solicitation to a small business set-aside if the SDVOSB bids it receives are too high in price.
Generally, the small business Rule of Two requires an agency to set aside contracts for small business, assuming that there are at least two small businesses with competitive prices who will bid on the contract. But does the small business Rule of Two apply to orders under a multiple award contract? In a recent decision, GAO affirmed the answer is no–application of the small business Rule of Two for orders under a multiple-award contract is discretionary.
The United States Court of Federal Claims (COFC) has ruled that an agency has to conduct a small business Rule of Two analysis before it can use an existing multiple-award indefinite delivery indefinite quantity (MAIDIQ) contract vehicle to procure services. This is a landmark decision, given that GSA Schedule contracts are exempt from the Rule of Two.
The Indian Health Service has released a proposed rule that will strengthen requirements for IHS to set aside contracts for businesses owned by tribal companies. The new rule should result in increased opportunities for native-owned businesses by bringing Buy Indian Act purchasing preferences in line with other purchasing policies such as the small business Rule of Two, and it’s about time, as this purchasing preference has been law for 110 years with little clarity on how agencies would enforce it.
A few months ago, GAO confirmed that where VA uses GPO as its 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.
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.
GAO recently gave its blessing to a VA decision not to follow the Rule of Two, despite knowing several SDVOSBs would bid. The VA’s decision was based on the contracting officer’s opinion that prices would not be fair and reasonable based on an evaluation of prices and market research.
The decision is important for providing some clarification on what research a contracting officer must undertake to establish that prices will not be fair and reasonable for purposes of the Rule of Two.