{"id":101,"date":"2015-04-22T00:35:32","date_gmt":"2015-04-22T04:35:32","guid":{"rendered":"http:\/\/blogs.duanemorris.com\/appellatelaw\/?p=101"},"modified":"2015-04-22T00:35:32","modified_gmt":"2015-04-22T04:35:32","slug":"vas-restriction-on-competitive-bidding-by-veteran-owned-small-businesses-challenged-before-the-supreme-court","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/appellatelaw\/2015\/04\/22\/vas-restriction-on-competitive-bidding-by-veteran-owned-small-businesses-challenged-before-the-supreme-court\/","title":{"rendered":"VA\u2019s Restriction on Competitive Bidding by Veteran-Owned Small Businesses Challenged Before the Supreme Court"},"content":{"rendered":"

On May 1, 2015, the government is expected to submit\u00a0its response to the petition for certiorari filed by Kingdomware Technologies, Inc., which seeks to reverse a 2-1 ruling by the U.S. Court of Appeals for the Federal Circuit in Kingdomware Technologies, Inc. v. United States<\/em>, 754 F.3d 923 (Fed. Cir. 2014).\u00a0 Kingdomware contends in its petition that the Federal Circuit\u2019s decision improperly limits the opportunities for veteran-owned small businesses to competitively bid for contracts with the Department of Veterans Affairs (\u201cVA\u201d).<\/p>\n

The Kingdomware petition is one to watch in light of the significant adverse impact imposed by the Federal Circuit\u2019s ruling on veteran-owned small businesses.\u00a0 If Kingdomware\u2019s petition is granted, the Supreme Court will have the opportunity to restore the prospects for competitive bidding by veteran-owned small businesses to the full extent that Congress intended.\u00a0 (Full disclosure:\u00a0 Duane Morris LLP filed an amicus brief<\/a> on behalf of a coalition of veteran-owned small businesses in support of Kingdomware.\u00a0 The American Legion also filed an amicus brief in support of Kingdomware).<\/p>\n

The <\/strong>Veterans Benefits, Health Care, and Information Technology Act of 2006<\/strong><\/p>\n

Congress enacted the Veterans Benefits, Health Care, and Information Technology Act of 2006 (the \u201c2006 Act\u201d) because prior attempts to bolster contracting by veteran-owned small businesses (\u201cVOSBs\u201d) and service-disabled veteran-owned small businesses (\u201cSDVOSBs\u201d) had fallen unacceptably short.\u00a0 Recognizing the VA\u2019s unique obligation to serve veterans, Congress enacted the 2006 Act to impose specific obligations on the VA (not imposed on any other agency) to award contracts on the basis of competitive bidding by VOSBs and SDVOSBs where certain qualifications are met.\u00a0 The 2006 Act\u2019s provisions that create a mandatory mechanism for competitive bidding by VOSBs and SDVOSBs are no accident; the 2006 Act is designed to use the VA as a targeted incubator for veteran contracting.<\/p>\n

Under the express terms of the 2006 Act, and prior to using another procurement method, the VA must assess whether it can contract through competition between two qualified SDVOSB or VOSB bidders that can submit offers that lead to a contract award at a fair and reasonable price and offer the best value.\u00a0 38 U.S.C. \u00a7 8127(d); 48 C.F.R. \u00a7\u00a7\u00a0 819.7005, 7006 (SDVOSB and VOSB bidding, relative to other businesses).\u00a0 When the VA did not follow that procedure for a contract for emergency notification services for which Kingdomware was qualified to bid, Kingdomware filed a bid protest that ultimately led to the Federal Circuit\u2019s decision.<\/p>\n

The Federal Circuit Reads Out the Mandatory Competitive Bidding Provision From the Act<\/strong><\/p>\n

The Federal Circuit read out of the 2006 Act the mandatory provision for competitive bidding by VOSBs and SDVOSBs.\u00a0 38 U.S.C. \u00a7 8127(d) states:<\/p>\n

Except as provided in subsections (b) and (c), for purposes of meeting the goals under subsection (a), and in accordance with this section, a contracting officer of the Department shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.<\/p>\n

38 U.S.C. \u00a7 8127 (d). (Subsections (b) and (c) provide for awarding contracts to VOSBs and SDVOSBs through other mechanisms). The Federal Circuit held that the word \u201cshall\u201d should be placed in \u201charmonious context\u201d in light of prefatory language in 8127(d) and elsewhere in the 2006 Act.\u00a0 Kingdomware<\/em>, 754 F.3d at 934.\u00a0 Under the Federal Circuit\u2019s approach, the VA need not use competitive bidding by VOSBs and SDVOSBs unless the VA in its discretion deems it necessary to meet its purchasing goals.\u00a0 The Federal Circuit thus interpreted goal-setting language as an implicit ceiling on the VA\u2019s obligations.<\/p>\n

Perhaps concerned that giving the statute\u2019s terms their full effect would hamstring the VA, the Federal Circuit arrived at a distorted result that deprives VOSBs and SDVOSBs of the targeted support Congress intended those businesses to receive through competition before the VA.\u00a0 In a strong dissent, Judge Reyna demonstrated that the panel majority had deprived the mandatory competitive bidding provision of its force and effect, had \u201cimpede[d] congressional objectives,\u201d and had rendered other statutory language \u201cinoperative and unnecessary.\u201d Id<\/em>. at 940.<\/p>\n

The Federal Circuit\u2019s novel reading of the VA\u2019s statutory obligations profoundly impacts VOSBs and SDVOSBs.\u00a0 The VA awards billions of dollars in contracts each year, and by law these contracts should be the subject of competitive bidding by VOSBs and SDVOSBs when statutory qualifications are met.\u00a0 The Federal Circuit\u2019s decision eliminates a key stepping-stone for thousands of veteran-owned small businesses.<\/p>\n

The petition and the Kingdomware<\/em> decision have drawn wide attention, and the government\u2019s May 1, 2015 response will be closely watched, as will the Court\u2019s June 4, 2015 conference.<\/p>\n

Conclusion<\/strong><\/p>\n

The Kingdomware<\/em> petition presents important questions about the VA\u2019s statutory obligation to provide competitive bidding opportunities for veteran-owned small businesses.\u00a0 For more information about the case, the brief on behalf of a coalition of veteran-owned small businesses is here<\/a>.<\/p>\n

– Luke P. McLoughlin is an associate in the Trial Group in the Philadelphia office of Duane Morris LLP and a member of the firm’s Appellate Practice Group. \u00a0Kristina Caggiano Kelly is an associate in the Intellectual Property Group in the Washington, D.C. office of Duane Morris LLP and a member of the firm’s Appellate Practice Group.<\/em><\/p>\n


Kristina Caggiano Kelly<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"

On May 1, 2015, the government is expected to submit\u00a0its response to the petition for certiorari filed by Kingdomware Technologies, Inc., which seeks to reverse a 2-1 ruling by the U.S. Court of Appeals for the Federal Circuit in Kingdomware Technologies, Inc. v. United States, 754 F.3d 923 (Fed. Cir. 2014).\u00a0 Kingdomware contends in its … <\/p>\n

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