In a decision affecting an estimated $3 billion in annual Department of Veterans Affairs (VA) contracts, the Court of Federal Claims recently ruled in favor of the VA with respect to whether the 2006 Veterans Benefits, Health Care and Information Technology Act (the “Act”) requires the VA to determine at the outset whether it can set aside each of its procurements for restricted competition among service-disabled veteran-owned small businesses (SDVOSBs) and veteran-owned small businesses (VOSBs) before making purchases under the Federal Supply Schedule (FSS). In contrast to a litany of Government Accountability Office decisions, the court in Kingdomware Technologies, Inc. v. the United States held that the Act does not require the VA to determine if it can conduct its acquisitions using restricted competition among SDVOSBs or VOSBs before deciding to procure goods and services under the FSS.

Kingdomware Technologies, Inc. concerned an SDVOSB’s bid protest claim seeking injunctive relief compelling the VA to comply with the Act in light of the VA’s failure to set aside a procurement for an emergency notification service for limited competition among SDVOSBs before ordering against the FSS. The GAO had previously sustained the plaintiff’s protest based on GAO’s determination that the Act mandates that the VA first determine whether SDVOSB or VOSB set-asides should be used before ordering goods or services under the FSS. The plaintiff argued that GAO correctly interpreted the Act and asked the court to adopt GAO’s finding. In response, the VA argued that the Act does not restrict the VA’s discretion to order against the FSS, a procurement method under which an agency is generally exempted from small-business set-aside requirements provided under the Federal Acquisition Regulations (FAR).

In deciding this case of first impression, the court first considered whether Congress has directly addressed this issue. In light of the Act’s goal-setting provisions, the court determined that the Act is “at best ambiguous as to whether it mandates a preference for SDVOSBs and VOSBs for all VA procurements.” The court further noted that the Act is silent as to the relationship of the set-aside provision and the FSS. Accordingly, the court held that the Act “is not plain on its face…and is ambiguous with regard to the discretion left to VA….”

Because the court determined that the Act is silent or ambiguous as to the issue in dispute, the court next addressed whether the VA’s interpretation of the Act was reasonable. The court held that VA’s interpretation of the Act was reasonable based on the fact that VA’s interpretation remained consistent over time, did not directly conflict with the Act or the VA regulations implementing the Act, and was consistent with the traditional relationship between set-asides and the FSS found in the FAR.

Shortly following this decision, GAO issued a decision stating that it “will no longer consider protests based solely on arguments that the VA must consider setting aside procurements for SDVOSBs (or VOSBs) before conducting an unrestricted procurement under the FSS.”

Kingdomware Technologies—Reconsideration, B-407232.2 (Dec. 13, 2012).

Kingdomware Technologies, Inc. v. the United States,---Fed.Cl.---, 2012 WL 5984589 (Fed. Cl. Nov. 27, 2012).