The United States Court of Appeals, in Kingdomware Technologies, Inc. vs. United States, No. 2013-5042 (2014), ruled that the VA may utilize the Federal Supply Schedule to procure services and supplies without first considering whether an SDVOSB or VOSB can fulfill the requirement. In a nutshell, the Court concluded that the statutory language allowing the VA to set aside procurements to SDVOSBs or VOSBs is discretionary rather than mandatory. The Court held that SDVOSB set aside tools are available to allow the VA to meet its set aside goals for SDVOSBs. And because the VA is meeting its goals, it was reasonable for the VA to utilize the Federal Supply Schedule instead.
The opinion provides a nicely written history of the SDVOSB set aside laws. But it then devolves into a strained reading of why the word “shall” does not apply to the Rule of Two, i.e. VA procurement must be set aside if at least two SDVOSBs can meet the requirement. This ensures adequate competition, while at the same time, encouraging small business participation. The Court concluded that the Rule of Two does not apply so long as the VA is meeting its set aside goals, which it is. This drew serious criticism from a dissenting Judge who argued that this opinion could undo nearly thirty years of federal procurement law upholding the Rule of Two. In this regard, the dissenting Judge said:
The majority’s reticence to requiring agency advancement of small business participation beyond the aspirational goals is due to a misapprehension of the interplay between a Rule of Two analysis and agency-wide goals. The former is undertaken by the contracting officer on a contract-by-contract basis, while the latter are set by the head of the agency and inform the agency’s entire procurement process. Under the majority’s rationale, the participation goals established under the Small Business Act would also be rendered superfluous by the FAR’s existing Rule of Two requirement, which applies in nearly every acquisition. See 15 U.S.C. § 644(g)(1); FAR 19.502-1. Such an outcome would overturn more than thirty years of federal procurement law upholding the Rule of Two as a legitimate method of ensuring that agencies award a “fair proportion” of contract dollars to small businesses.12 In fact, the FAR requires agencies to conduct a Rule of Two analysis under FAR 19.502-2 regardless of whether the agency’s “small business goals have already been satisfied.” LBM, Inc. B-290682, 2002 CPD ¶ 157 (Comp. Gen. Sept. 18, 2002)
Let’s see where this takes us. Perhaps Congress needs to step in and revise the law so it is clear that the VA must set aside procurements where at least two SDVOSBs can satisfy the need.
