Supreme Court unanimously ruled that the VA’s “Rule of Two” is mandatory, and applies to all Department of Veterans Affairs procurements–including GSA/FSS Schedule orders.
In a huge win for service disabled and veteran-owned small businesses, the Supreme Court ruled unanimously in favor of Kingdomware Technologies, Inc., in its case against the Department of Veterans Affairs (“VA”). Kingdomware had brought suit challenging the VA’s failure to set aside an order under the Federal Supply Schedule (“FSS”) for veteran-owned small businesses.
In the ensuing litigation, the VA took the position that it was not required to reserve FSS orders for SDVOSBs or VOSBs because the mandates of the “Veterans First” law did not apply to FSS. In a fairly straight-forward ruling, the Supreme Court found that:
• The requirement to give preference to SDVOSBs and VOSBs extends to FSS orders.
• The Supreme Court also rejected the VA’s argument that an order under the FSS is not a contract; the Court found such orders are clearly contracts.
• The Supreme Court held that the required use of veterans’ preferences applies to all VA acquisitions, and regardless of whether the VA has met its annual veteran contracting goals. This ruling eliminates the mandated cap of 3% for SDVOSB’s and allows VA purchasing managers to use Rule of Two on every contract, including the FSS.
• The Act does not allow the VA to evade the Rule of Two on the ground that it has already met its contracting goals or on the ground that the VA has placed an order through the FSS.
• A contracting officer of the VA 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 that offers best value to the United States.
• The two exceptions referenced in the statute allow the VA to make sole source awards to veteran-owned companies under certain circumstances.
Justice Clarence Thomas delivered the opinion of the Court. “In this case, we consider whether the Department must use the Rule of Two every time it awards contracts or whether it must use the Rule of Two only to the extent necessary to meet annual minimum goals for contracting with veteran-owned small businesses. We conclude that the Department must use the Rule of Two when awarding contracts, even when the Department will otherwise meet its annual minimum contracting goals.”
Full transcript available at http://www.supremecourt.gov/opinions/15pdf/14-916_6j37.pdf
The Aftermath of the Kingdomware Decision:
For SDVOSBs and VOSBs, the Supreme Court’s Kingdomware decision is a landmark ruling. Ever since the VA Act was adopted, the VA has taken the position that it may order off the GSA Schedule without prioritizing veteran-owned businesses. Now that The Supreme Court has ruled unanimously in favor of SDVOSB’s, it will have an immediate impact. The Supreme Court decision will provide a major boon to SDVOSBs and VOSBs, ultimately resulting in billions of extra dollars flowing to veteran-owned companies.