Veteran-owned firm wins big in VA contracting case

A Supreme Court ruling fixes the rules for veteran-owned small business set asides in Veterans Affairs contracting.

Shutterstock image (by kmlmtz66): businessman confronting a judge's gavel.

Score one for persistence.

Kingdomware Technologies, a service-disabled, veteran-owned small business, has prevailed before the U.S. Supreme Court, which ruled that the Veterans Administration must apply the so-called rule of two to all of its procurements.

If the agency finds that there are at least two veteran-owned or service-disabled, veteran-owned-small businesses capable of doing the work, the contract must be set aside, the Supreme Court said in a unanimous ruling on Thursday.

The victory may seem like a slam dunk for Kingdomware and other veteran-owned businesses but it was a long journey to get here.

The company first filed a protest with the Government Accountability Office in 2012 after the VA conducted a full-and-open competition via the Federal Supply Schedule for emergency notification services.

Kingdomware argued that the Veterans Benefits, Health Care and IT Act of 2006 required the VA to use small businesses. GAO agreed but the VA told the GAO it was going to ignore its recommendation.

That would be Kingdomware's last victory until today's Supreme Court ruling. The company was rebuked by the Court of Federal Claims and then by the Court of Appeals for the Federal Circuit.

Much of the debate centered on the use of the word "shall." VA argued that "shall" only applied to meeting its contracting goals of working with veteran-owned small businesses. VA felt that as long as it was meeting the goals, it had the discretion to and when to use veteran-owned small businesses.

Kingdomware's counter argument, which was finally supported by the U.S. Supreme Court, is that "shall" makes it a requirement, not an option.

In this case, the "shall" is that the VA must conduct the market research to determine if there are at least two veteran-owned small businesses that can do the work. If there are not two, the contract can be competed as unrestricted.

But if there are two, then it has to be a set-aside contract.

"The word 'shall' usually connotes a requirement, unlike the word 'may,' which implies discretion," Justice Clarence Thomas wrote in his opinion. "Alternative readings of [the law] are unpersuasive."

The court ruled that the use of the word "shall" was deliberate on the part of Congress because in other parts of the law the word "may" was used.

"When a statute distinguishes between 'may' and 'shall,' it is generally clear that 'shall' imposes a mandatory duty," Thomas wrote. "We therefore hold that, before contracting with a non-veteran owned business, the Department must first apply the Rule of Two."

The court also didn't buy the VA's argument that the rule of two would hamper "mundane government purchases." The argument fell short because it fails to consider the frequent use of the schedules for buying complex IT solutions.

Unfortunately, the ruling comes a little late for Kingdomware as the work on the emergency notification system continued and has been completed.

Usually, the Supreme Court would not take up such a case as the issue would be moot but the court made an exception because the VA could refuse to apply the rule of two in a similar future procurement.

Congress passed the 2006 Veterans Act because it wanted VA to take the lead in meeting contracting goals for veteran-owned small businesses, according to Kingdomware's attorney Thomas Saunders of the firm Wilmer Hale.

While the ruling is specific to VA, "I do think the decision will have effects beyond the VA," he said in an email.

Congress wanted to "break down a lot of stereotypes and prejudices," Saunders said.

If veteran-owned businesses can succeed at VA, it should open more opportunities for them in the private sector and other parts of the government.

"That is exactly what Congress wanted," he said.

Kingdomware never lost its belief in the capabilities of service-disabled, veteran-owned businesses to perform. And while it is a small business, it didn't stand alone. Many groups filed briefs with the appeals courts and later the Supreme Court supporting the company's position.

These groups included the American Legion, the National Small Business Coalition, the Task Force for Veterans' Entrepreneurship, Paralyzed Veterans of America, Vietnam Veterans Association, the Military Officers Association of America, the National Veterans Legal Services Program, the Iraq and Afghanistan Veterans of America, the National Association for Black Veterans, the National Veteran-Owned Business Association, Aldevra, VetLikeMe and others. These groups were represented pro bono by attorneys at various law firms such as Duane Morris, Jenner & Block, Winston & Strawn, Sidley Austin, Hogan Lovells and Koprince Law, Saunders said.

Members of Congress also voiced their support for Kingdomware.

"This was truly a team effort, and the victory belongs to everyone who helped," Saunders said. "With that much support, and that much on the line, Kingdomware never would have dreamed of giving up."

Saunders declined to comment on next steps for the company such as whether they can pursue reimbursement of their legal costs.

"Kingdomware is enjoying victory today and will take the next steps when they come," he said.

This article was originally published in Washington Technology.

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