On June 16, 2016, the U.S. Supreme Court in Kingdomware Technologies, Inc. v. U.S., issued a rare unanimous decision in a case addressing preferences in contracting to Veteran-Owned Small Businesses (VOSBs), including Service Disabled Veteran-Owned Small Businesses (SDVOSBs), by the Department of Veteran Affairs (VA). In a holding that expands contracting opportunities for VOSBs, including SDVOSBs, the Supreme Court held that the VA must apply the so-called “Rule of Two” to all competitive acquisitions, including those under Federal Supply Schedules (FSS).
The Veterans Benefits, Health Care, and Information Technology Act of 2006, established a “Rule of Two” that mandates that the VA restrict competition for VA contracts to service-disabled or other veteran-owned small businesses 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 that offers best value to the United States. In issuing regulations implementing the Act, the VA, however, took the position that the rule did not apply to Federal Supply Schedule task or delivery orders.
In its decision, the Supreme Court recognized that the Act contained only two exceptions to the Rule of Two. Contracting officers can use procedures other than competitive procedures to award a contract to a veteran-owned small business: (1) if the contract is worth less than the simplified acquisition threshold; or (2) if the contract is worth more than the simplified acquisition threshold but less than $5 million, the business is “a responsible source with respect to performance of such contract opportunity,” and the award can be made at “a fair and reasonable price.” In reversing lower court decisions, the Supreme Court rejected the argument that the Rule of Two was limited to contracts necessary to fulfill VOSB contracting goals under the Act. The Supreme Court held that the Rule of Two was mandatory, not discretionary, that the VA was required to apply the Rule of Two to all contracting determinations in order to award contracts to veteran-owned small businesses, and that Act does not allow the VA to evade the Rule of Two on the ground that it has met its contracting goals or on the ground that the VA has placed an order through the FSS.
The Supreme Court’s decision paves the way for additional contracting opportunities at the VA for VOSBs and SDVOSB’s, particularly under the VA’s FSS program, which manages 9 multiple award schedule programs, and awards 1900 contracts worth over $11 billion. Like GSA schedule contracts, VA schedules are indefinite delivery/indefinite quantity contracts awarded to pre-approved vendors. Thus, VOSBs, including SDVOSBs, that rely on self-certification for SDVOSB or VOSB contracts with other agencies may, if they have not already done so, wish to complete the VA’s formal Vets First verification, which is a prerequisite for any VOSB or SDVOSB awards made by the VA.