Supreme Court backs Kingdomware:
Vet preference applies to all VA contracts
The Supreme Court ruled against the Veterans Affairs Dept. and in favor of a service-disabled veteran-owned small business in the landmark Kingdomware Technologies case. The decision is being viewed as a major victory for veteran-owned small business federal contractors.
The court unanimously supported a decision written by Judge Clarence Thomas.
The court concluded that when Congress writes the word “shall” into a law, it intends to establish a mandatory obligation.
The Supreme Court applied that interpretation to the 2006 law, the Veterans Benefits, Health Care, and Information Technology Act, which created strong preferences for veterans in VA contracting.
The 2006 law states that if certain conditions are met, the VA “shall award” contracts to small businesses owned by veterans. While the VA argued that Congress intended to exempt Federal Supply Schedule (FSS) contracts, the Supreme Court rejected that argument.
“Congress used the word “’shall’...as a command,“ Thomas wrote in the decision.
“Big win” for veteran owners
Jon Williams, partner with Piliero Mazza PLLC, called the decision a “big win” for veteran small businesses.
“In a fairly straight-forward ruling, the Supreme Court found that the Veterans First law did not contain any exceptions for FSS orders,” Williams wrote in a blog entry.
Section 8127(d)
The case was based on conflicting interpretations of the 2006 law’s Section 8127(d), which created the so-called Rule of Two in VA contracting.
The section states that the VA “shall award” contracts to veteran-owned small businesses if two conditions are met: if two or more veteran-owned small businesses are likely to submit offers, and also if the award could be made “at a fair and reasonable price that offers best value to the United States.”
Kingdomware argued that Congress intended that if those conditions are met, then the VA must award the contracts to veteran-owned small businesses.
The VA, in the lower courts, had argued that Congress intended those strong preferences to be in effect only to assist in reaching its goals for procurements with veterans and service-disabled veterans. The VA had met and exceeded those goals for several years in a row.
However, in its arguments before the Supreme Court, the VA took a different approach.
Its attorneys asserted that Congress never intended for Federal Supply Schedule contracts to be covered by the 2006 law.
Furthermore, VA officials said that if it were forced to consider veteran-owned small businesses for the 130,000 annual contracts it writes annually under the FSS it would be burdensome and would hamper efficient delivery of medical products and services for millions of veterans.
As a very large purchaser of medical supplies, the VA said it relies on a number of large contracts with large suppliers for efficiency.
SCOTUS decision
However, the court rejected the VA’s argument, saying that Congress did not include an explicit exception for Federal Supply Schedule contracts in the law.
In addition, the Supreme Court also rejected the VA’s argument that an order under the FSS is not a contract, and said that such orders are contracts.
Furthermore, the Supreme Court said the veterans' preferences apply to all VA acquisitions, regardless of whether the VA has met its annual veteran contracting goals or not.
Reaction to decision
Veteran small business owners and their advocates responded very positively to the decision. "The American Legion applauds this unanimous ruling," National Commander Dale Barnett said in a statement.
“I expect that the Kingdomware decision will prove a major boon to SDVOSBs and VOSBs, ultimately resulting in billions of extra dollars flowing to veteran-owned companies,” Steve Koprince, an attorney who supported Kingdomware’s case, wrote in a blog entry.
Impact of decision
Several questions remain from the decision, and the full impact is not yet clear. For one, the court did not clarify exactly what the VA needs to do to conduct market research on veteran-owned firms to comply wtih the Rule of Two, according to Amy Howe, a writer for SCOTUS Blog.
“Is it enough for the department to look for veteran-owned small businesses in the FSS, or does Section 8127(d) require it to conduct a broader search for such businesses?” Howe asked.
In addition, it is not clear how the VA will carry out the new interpretation and whether it would prove as burdensome as the department predicted. If it does disrupt and impede the VA’s mission to provide care to veterans, then the VA may look to Congress to rewrite portions of the law, suggested Richard Arnholt, contracting attorney with Bass, Berry & Sims PLC, writing in an online commentary.
Another impact is that GAO will resume consideration of protests regarding the VA’s application of the Rule of Two, Arnholt said. The GAO had suspended such hearings due to the two lower court rulings favoring the VA.
More information:
Supreme Court decision http://goo.gl/Da7bR7
PilieroMazza blog http://goo.gl/6RZwN0
Koprince blog: http://smallgovcon.com/
Bass, Berry & Sims blog: http://goo.gl/MevLU6
Amy Howe article http://goo.gl/Jez1vb
