Set-Aside Alert news analysis:

Veterans group hits VA contracting

Report: VA not fully compliant, or works against, Vets First

      In the 16 months since the Supreme Court confirmed that eligible veteran-owned small businesses must get the first shot at all Veterans Affairs Dept. contracts, the VA has fallen short in complying, according to a national veterans group.

      The National Veteran Small Business Coalition recently commissioned a white paper outlining ways in which they claim VA is not fully compliant or sometimes is actively “working against” Congress’ intent in the Veterans First law of 2006. The law ordered that veterans get top priority in VA contracts.

      The group on Nov. 9 sent a letter and the 21-page white paper to Sen. John Boozman, R-AR, a member of the Senate Veteran Affairs Committee.

      While VA officials were not immediately available to respond to the report, VA officials in the past have said the VA has taken action to fully comply with Veterans First and the Supreme Court’s “Kingdomware” decision.

Kingdomware

      Last year’s “Kingdomware” decision by the Supreme Court confirmed that for every contract, the VA must do market research to see if there are at least two qualified and willing service-disabled veteran-owned small businesses (SDVOSBs) that can do the work at a fair and reasonable price. If so, the contract must be awarded to one of them. Non-disabled veterans are the second priority.

VA not fully compliant: report

      The veterans coalition commissioned Jon Williams, partner of Piliero Mazza PLLC law firm, and John Shoraka, managing director of Piliero Mazza Advisory Services, to present their criticisms in a white paper report.

      Specifically, the report states the following concerns:

• SDVOSB percentage drop: The percentage of VA prime contract spending on SDVOSBs has declined in recent years, even though there are nearly 9,000 such firms verified with the VA.
  

• Simplified Acquisition: Only 4% of VA contracts below the simplified acquisition threshold in fiscal 2016 were set aside for SDVOSBs or VOSBs, the report said, citing information obtained through a Freedom of Information request.

        While SBA regulations and the Federal Acquisition Regulation require that the Rule of Two be applied and small business set-asides be created for procurements below the threshold (currently $150,000), the VA only created such set-asides for 11% of its procurements below the threshold. Of those, 7% were for small businesses in general and 4% were for SDVOSBs, the report said.

• Limited Resource Justifications Overuse: When buying from the Federal Supply Schedule, the VA can use a limited resource justification to limit the source for an urgent and compelling need or to avoid unacceptable delays. At the same time, the report asserts that nearly three quarters of the procurements for which the VA has used such justifications have resulted in non-competitive contracts with large businesses.

        In one example, the VA used a justification to buy disinfectant wipes from a large business, but the authors said similar wipes were available from 11 SDVOSBs or 13 VOSBs.

• Medical-Surgical Prime Vendors: VA is initiating a large new Medical Surgical Prime Vendor procurement, called MSPV 2.0, which will greatly increase annual spending on this program yet will preclude prime contract participation by SDVOSBs and VOSBs, the report said.

Alleged anti-Vets First rules

      The report contends that VA has limited the reach of the Veterans First mandate by issuing changes to its procurement regulations, including some improper changes. These changes were in the form of “class deviations” that were not subject to public notice or comment rulemaking.

      For example:

• VA has adopted policies that make it more difficult than Congress intended for VA procurement officials to award sole-source contracts to SDVOSBs or VOSBs.
• VA issued a rule change in February 2017 regarding SBA’s nonmanufacturer rule that violates law and regulations, the Piliero Mazza authors wrote. VA issued a class deviation “that is contrary to SBA’s non-manufacturer rule and has a significant adverse effect on SDVOSB and VOSB suppliers,” the report said;
• VA is accused of misusing statutory authority for prosthetics purchases for the purpose of avoiding competitions among SDVOSBs and VOSBs. Some VA contracting officials are relying on a prosthetics purchasing law, 38 U.S.C. § 8123, to conduct sole source procurements without competing the contracts among SDVOSBs or VOSBs;
• VA is said to be imposing too heavy a burden on SDVOSBs and VOSBs in responding to market research requests;
• And VA allegedly is failing to apply top priority to SDVOSBs over VOSBs for micropurchases, as required.

Action needed

      The report calls for the VA to increase its SDVOSB and VOSB prime contracting and subcontracting goals to 25% a year in each category, to issue new guidance for prioritizing SDVOSBs and VOSBs in simplified acquisitions, and to take other actions to rectify the problems it identifies.

      It also says Congress would need to act to address several of the issues.

Contract spending issue

      The report by the national veteran coalition and Piliero Mazza also said VA contract spending on SDVOSBs and VOSBs has been declining, but it did not present data to that effect.

      According to Set-Aside Alert’s research, VA contract spending for SDVOSBs actually has increased every year from fiscal 2010 to fiscal 2016, with the exception of a drop in fiscal 2015. From $3.2 billion in fiscal 2010, the total rose to $4.1 billion in fiscal 2016.

      At the same time, the percentage of VA contract spending going to SDVOSBs has fallen from 20% in fiscal 2010 to 18% in fiscal 2016.

More information: NVSBC white paper: http://goo.gl/eABTqx

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