Government Contracts

The Supreme Court on June 16, 2016 handed a victory to Veteran-Owned Small Businesses (VOSB’s), ruling that the Veterans Administration (VA) must give priority to VOSB’s, even for purchases from the Federal Supply Schedules (FSS).  The ruling was unanimous. Kingdomware Technologies, Inc. v. United States, No. 14-916 (June 16, 2016).

The decision resolved a longstanding disagreement between the VA and the Government Accountability Office (GAO).  In numerous bid protests, the GAO said a 2006 law required the VA to set aside all procurements for VOSB’s whenever the so-called “Rule of Two” was satisfied, including FSS purchases.   The VA refused to follow the GAO rulings, contending that FSS orders were exceptions, and that set-asides were discretionary, to be used whenever needed to meet annual mandatory goals for awards to VOSB’s.  

The Supreme Court ruled that VA set-asides are mandatory, and must be used for all VA procurements, including FSS purchases, whenever the Rule of Two is satisfied.  The Rule of Two requires the Contracting Officer to set aside contracts for VOSB’s whenever he/she has a reasonable expectation that at least two VOSB’s will bid for the work at a fair and reasonable price. 

The decision only applies to VA procurements, but even opening a fraction of the $20 billion VA spent in fiscal 2015 could be a boon for VOSB’s.  VOSB’s should scan all VA procurements not set aside, including FSS purchases, and should consider requesting that any opportunity they could fulfill be set aside -- particularly if another VOSB can be persuaded to also make a request, so that the Rule of Two can be satisfied.  The VA’s failure to set aside a procurement when the Rule of Two is satisfied may be vulnerable to protest.  Larger businesses can help SDVO SB’s meet a requirement, but must be careful to structure the teaming arrangement to avoid affiliation pitfalls.

The case has been closely watched by organizations supporting veterans, and other small business groups.  The decision should end an episode in which the VA, the agency supposedly championing veterans, when faced with a statute requiring it to reserve procurements for VOSB’s, instead refused to set aside FSS purchases, disregarded GAO rulings recommending compliance, and fought all the way to the Supreme Court, where it lost a unanimous decision.  

This Supreme Court’s decision can be found here.

This alert was written by Daniel S. Koch and Stephen P. Ramaley, lawyers in the Government Contracts practice group at Miles & Stockbridge in the firm’s Rockville, Maryland and Tysons Corner, Virginia office.

Any opinions expressed and any legal positions asserted in the article are those of the author(s) and do not necessarily reflect the opinions or positions of Miles & Stockbridge P.C. or its other lawyers. This article is for general information purposes and is not intended to be and should not be taken as legal advice on any particular matter. It is not intended to and does not create any attorney-client relationship. Because legal advice must vary with individual circumstances, do not act or refrain from acting on the basis of this article without consulting professional legal counsel. If you would like additional information on the subject matter of this article, please feel free to contact any of the lawyers listed above. If you communicate with us, whether through email or other means, your communication does not establish an attorney-client relationship with either Miles & Stockbridge P.C. or any of the firm's lawyers. At Miles & Stockbridge P.C., an attorney-client relationship can be formed only by personal contact with an individual lawyer, not by email, and requires our agreement to act as your legal counsel together with your execution of a written engagement agreement with Miles & Stockbridge P.C.