Government Contracts Monitor

Update: Court Sides with VA’s Interpretation that Veteran-Owned Small Business Set-Asides Are Not Necessary Before Ordering Off the Federal Supply Schedule

January 3, 2013

In a recent decision, Kingdomware Technologies, Inc. v. United States, No. 12-173C (Fed. Cl. Nov. 27, 2012), the Court of Federal Claims held that under the Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. §§ 8127-8128 (“the VA Act”), the Department of Veterans Affairs (VA) may purchase goods/services off the Federal Supply Schedule (FSS) using unrestricted competition without first determining if a veteran-owned small business set-aside is appropriate.  Thus, this decision put an end to the ongoing dispute between the VA and the Government Accountability Office (GAO) over the interpretation of the VA Act that was previously reported here.

As background, GAO held that the VA Act required the VA to set aside all procurements for competition exclusively among service-disabled veteran-owned small businesses (SDVOSBs) or other veteran-owned small businesses (VOSBs) if the contracting officer has a reasonable expectation that two or more such businesses can provide the goods or services.  See Aldevra, B-406774 et al. (Comp. Gen. Aug. 21, 2012).  GAO based this decision on §8127(d) of the VA Act, which states (in relevant part):

[A] contracting officer of the Department shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price...

Thus, under GAO’s interpretation, the VA could not purchase goods or services off the Federal Supply Schedule (FSS) without first determining whether two or more SDVOSBs or VOSBs were capable of performing the work.  However, because GAO decisions are only recommendations, the VA issued a memorandum to all procurement officials instructing them to ignore GAO’s decision and to continue purchasing goods and services off the FSS without first conducting set-aside analyses.

One SDVOSB, Kingdomware Technologies, Inc., took the question to the Court of Federal Claims hoping the Court would order the VA to first conduct a set-aside analysis before ordering off the FSS.  Unfortunately for the protestor, the Court sided with the VA instead of GAO.  The Court held that, although the VA Act encourages SDVOSB and VOSB set-asides, the VA Act is silent as to the relationship between the set-asides and the FSS.  The Court looked to the Federal Acquisition Regulation (FAR), which generally exempts the FSS from set-aside requirements, and found that the VA’s interpretation was reasonable and entitled to deference.

Soon thereafter on a request for reconsideration of this same issue, GAO raised the white flag stating that, since the VA is ignoring its recommendations and since the Court went the opposite way, GAO will no longer consider protests based on the argument that the VA must consider set-asides for SDVOSBs (or VOSBs) before conducting an unrestricted procurement under the FSS.  See Kingdomware Technologies, Inc., B-407232.2 (Comp. Gen. Dec. 13, 2012).

 

Katie Calogero is the attorney responsible for the content of this article.