On June 16, 2016, the Supreme Court ruled unanimously in favor of Kingdomware Technologies, Inc., in its case against the Department of Veterans Affairs (VA). For veteran-owned small businesses (VOSBs) and service-disabled veteran-owned small businesses (SDVOSBs), Kingdomware is a huge win.
Kingdomware challenged the VA’s failure to set aside an order under the Federal Supply Schedule (FSS) for veteran-owned small businesses. During the lawsuit process, VA said they were not required to reserve FSS orders for SDVOSBs or VOSBs because the mandates of the “Veterans First” law did not apply to FSS orders. The VA was successful in two lower courts and then the case was taken to the Supreme Court, who disagreed with the decisions handed down by the lower courts.
In their ruling, the Supreme Court found that the Veterans First law did not include any exceptions for FSS orders. As a result, the Supreme Court stated that the requirement to give preference to SDVOSBs and VOSBs does extend to FSS orders. The VA argued that an order under the FSS is not a contract. However, the Supreme Court stated that these orders are clearly contracts. Additionally, the Supreme Court held that the required use of veterans’ preferences applies to all VA acquisitions regardless of whether the VA has met its annual veteran contracting goals.
The Supreme Court stated: “On the merits, we hold that this law is mandatory, not discretionary. Its text requires the Department to apply the Rule of Two to all contracting determinations and to award contracts to veteran-owned small businesses. The Act does not allow the Department to evade the Rule of Two on the ground that it has already met its contracting goals or on the ground that the Department has placed an order through the FSS.”
On July 27, 2016, the VA released internal guidance stating their revised policy to comply with the Supreme Court ruling.
The internal guidance states: “Generally, the Court ruled that consistent with Public Law 109-461 (38 U.S.C. 8127 and 8128), the VA shall award contracts based upon competition restricted to SDVOSBs or VOSBs when a contracting officer has a reasonable expectation, based on market research, that two or more firms listed as verified in Vendor Information Pages database are likely to submit offers and an award can be made at a fair and reasonable price that offers best value to the United States. This is known as the “Rule of Two.”
Based on a recent market analysis I did for an FSS schedule holder, in many areas, VA has traditionally not done any kind of set-aside, let alone one for veteran and service-disabled veteran owned businesses. So the hope is that this ruling will give those businesses a fair chance whenever the “rule of two” applies.