Any company pursuing business with the Department of Veterans Affairs (VA) has more than likely heard of the infamous Kingdomware case which enforces the “Rule of Two”. After four years of mixed results at the GAO, U.S. Court of Federal Claims, and Federal District Court, Veteran business owners scored a major victory when the U.S. Supreme Court held that the provisions of the Veterans Benefits Act (VBA) require the VA to set aside contract opportunities for Service Disabled/Veteran-Owned Small Businesses (“SVOSB/VOSB”) when certain requirements are met. (No. 14-916, 2016: https://www.supremecourt.gov/opinions/15pdf/14-916_6j37.pdf).
The basis of the Kingdomware decision centers around the requirement of the “Rule of Two”. A VA Contracting Officer must restrict competition to SDVOSBs or VOSBs when he/she has the reasonable expectation that two or more responsible SDVOSBs or VOSBs will submit offers and that award can be made at a fair and reasonable price while still offering the best value to the United States (SDVOSBs as first priority)(38 U.S.C. § 8127(d): https://www.law.cornell.edu/uscode/text/38/8127).
To take it a step further, the results of the Kingdomware case have taken precedence over the “Required Sources of Supplies and Services” referenced in FAR Part 8.002. You heard that right. If the Rule of Two is met the VA Contracting Officer is now required to set-aside for SDVOSB or VOSB (this includes open market) before they consider soliciting to any other socio-economic category contract holders on GSA/NAC. In the event a VA contracting officer fails to conduct necessary steps to determine if the “Rule of Two” is met, fails to set aside a contract for SDVOSBs/ VOSBs when required, or otherwise violates the VBA, this provides grounds for a pre-bid protest.
To minimize delays in the re-solicitation process, the VA is authorized to conduct procurements using tiered (cascading) evaluation. While multiple socioeconomic categories may submit offers, the VA Contracting Officer will examine them by tier (SDVOSB, VOSB, small business, large business). The objective is to make the award to an SDVOSB while providing flexibility to the VA in the event this is not possible. Access the guidance and procedures provided to VA Contracting Officer here: https://www.va.gov/oal/docs/business/pps/ppm201804.pdf.
Keep in mind that the micro-purchase threshold (items that can be paid with credit card and don’t need to be formally posted/competed) has been raised to $10,000. I mention this because this may cause some frustration among some SDVOSB/VOSBs that target smaller procurements. Procurements under this threshold typically do not come through the contracting office and are processed by Government Purchase Card holders which make it difficult to protest. That doesn’t mean a company can’t protest, but sometimes this can be cost-prohibitive, especially considering the dollar value involved and the fact that these violations affect small businesses (with limited means). Also, the short timeframe to protest (before bids are due) deters contractors from protesting. The VA may be rolling the dice in knowing that it is subject to the Rule of Two but that the likelihood is that no one will question its procurement decision(s).
The best thing a Veteran owned company can do if they feel the VA is not complying with Kingdomware requirements is to challenge the market research they conducted prior to their solicitation. This can be difficult. In FedBizOpps, the VA will often post pre-solicitation notices, so one can see efforts to identify VOSBs or SDVOSBs capable of doing the work. However, much of the market research is behind the scenes (such as researching companies and reviewing the VetBiz database). Generally, one cannot see if the VA has failed in its duty to conduct market research until a protest; in a GAO or U.S. Court of Federal Claims protest, the VA will have to produce its Agency Report justifying its actions in not setting aside the work, and if the Agency Report is lacking market research, that strengthens the protest grounds. (Also note that these documents are usually produced under protective order so a contractor usually doesn’t have access to them, only its attorney admitted to the protective order).