Q&A on Kingdomware

Jon Williams, partner with Piliero Mazza PLLC law firm in Washington, DC, responded to questions about the impact of the Kingdomware decision.

Set-Aside Alert: What are some of the likely impacts of the Supreme Court’s decision on Kingdomware?

Williams: The impact of the decision is that the Veterans Affairs Dept. has to start performing the Rule of Two analysis for all orders under the Federal Supply Schedule (FSS), with only two narrow exceptions provided for in the statute.

And, more broadly, the ruling confirms that the "Vets First" preference applies to all VA contracts.

While the Rule of Two will not be satisfied for all FSS orders or VA contracts, application of the Rule of Two surely will lead to more set-aside contracting opportunities for veteran-owned (VOSBs) and service-disabled veteran-owned small businesses (SDVOSBs) firms. And the expected increase in contract opportunities could certainly make the SDVOSB and VOSB market more attractive for firms looking to establish themselves in this space.

In addition, Kingdomware may be entitled to its costs and perhaps a portion of its attorneys' fees as the now-prevailing party. I do not foresee other firms successfully using the Supreme Court's ruling to sue the VA for money damages stemming from past contracts, but the Supreme Court's ruling would be the blueprint to challenge the VA on future procurements if the agency does not follow the Court's interpretation of the law.

Set-Aside Alert: What did the court say about the extent of market research to be performed to satisfy the Rule of Two?

Williams: The Court declined to answer the extent of the market research the VA is obligated to perform. Without taking a position, the Court indicated that the market research could be limited to FSS contract holders, or could be done more broadly. I assume the VA would limit its market research for FSS orders to FSS contract holders. If VA did broader market research for FSS orders, this could significantly diminish the use of FSS vehicles if the VA found two or more SDVOSB or VOSB sources for the work that do not have FSS contracts.

The market research, even if limited to FSS contract holders, would still take time and create some administrative burden. However, the VA has several sources to perform market research and FSS contracts are categorized by socio-economic designations, so this would seemingly ease the burden.

Set-Aside Alert: The court reversed the lower courts’ rulings and remanded the case. What does that mean?

Williams: I believe the remand is just a procedural step so the lower courts can reverse their earlier, now-overturned rulings. I addressed costs/fees above.

Set-Aside Alert: Is the ruling likely to have any impact on other federal small business set-aside programs?

Williams: The ruling does not directly impact other federal small business set-aside programs because the case pertained to the text of a VA law that applies only to participation of SDVOSBs and VOSBs on VA contracts.

However, there may be an indirect benefit in the Supreme Court's rejection of a potential dangerous precedent in the Federal Circuit's decision.

The Federal Circuit held that the Vets First only required the VA to use SDVOSB and VOSB set-aside procedures when necessary to meet the VA's contracting goals; according to the Federal Circuit, when the VA had met its goals the VA did not have to reserve contracts for SDVOSBs or VOSBs.

The Federal Circuit's ruling was concerning because the goals establish the floor, not the ceiling, for spending on small businesses. This could have had a negative impact on small business goals and set-aside programs more broadly if the precedent was applied outside the VA's program. So it was good for small businesses in general that the court rejected the Federal Circuit's interpretation.

Set-Aside Alert: For other agencies, the Rule of Two and set-asides on the FSS are discretionary. Why not for the VA?

Williams: You are correct. Ever since the Small Business Jobs Act of 2010 and the implementing rules in FAR 8.4, contracting officers have had discretion in whether to set-aside FSS orders for small businesses.

However, the VA FSS will now be treated differently because of the Supreme Court's interpretation of the Vets First statute. I do not think the ruling is necessarily surprising based on the plain language of the Vets First law. Congress passed the Vets First law because it wanted the VA to make more progress toward its SDVOSB and VOSB contracting goals. I am not aware that this sentiment has changed. Though, it should be noted that the VA has been "crushing its goals" in recent years, as the agency pointed out during oral argument before the Supreme Court. Perhaps Congress would decide that this means they can now give the VA a little more discretion in applying the Veterans First preference to FSS orders - that remains to be seen.

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