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Feb. 22 — The first oral arguments since Justice Antonin Scalia's death were held at the U.S. Supreme Court Feb. 22 and they focused on statutory interpretation, an unplanned yet fitting tribute to the late justice, who championed “textualism”.
In the courtroom there was a palpable sense of anticipation about not only the day's arguments, but also how the rest of this term will proceed.
Chief Justice John G. Roberts Jr. paid tribute to Scalia before argument got underway, and even inserted some humor into his homage.
“He authored 282 majority opinions for the Court. He was also known, on occasion, to dissent,” Roberts said, earning laughter from the gallery.
And then it was back to business.
The justices tackled a subject matter rife with nuances and technicalities, but tended to focus on more practical issues.
The case centers around a provision of the 2006 Veteran Benefits, Health Care, and Information Technology Act, 38 U.S.C. §8127, and whether it requires the Department of Veterans Affairs to give priority to veteran-owned small businesses in certain instances when awarding contracts.
The case could make billions of dollars available for contracts with veteran-owned small businesses, but the government says such a result would be devastating for the VA.
Section 8127(d) provides that the VA, for the purposes of meeting its annual contracting goals, “shall” award contracts to VOSBs if a contracting officer has a “reasonable expectation” that two or more VOSBs will submit offers for a “fair and reasonable price,” subject to two exceptions not relevant here.
This “rule of two” is a government policy that restricts competition for government contracts to specified businesses when there's a reasonable expectation that two or more of these businesses will submit a bid and the contract can be awarded at a fair price that offers the best value to the U.S.
Kingdomware, Inc.—a business owned by a service-disabled veteran—sued the federal government, alleging the VA didn't apply the rule of two and awarded contracts using the Federal Supply Schedule or other contracts.
Under the FSS, a supplier contracts to provide an indefinite delivery of goods or services at stated prices for a given period of time.
The U.S. Court of Appeals for the Federal Circuit sided with the government and held that this “rule of two” set-aside is mandatory only until the VA's annual contracting goals with regard to veterans are met.
In its Supreme Court response brief, however, the government took a new position, arguing that “contract” under the statute doesn't include pre-existing “orders” under the FSS or other awards contracts.
Kingdomware alleged that a contract under the statute does include such orders.
“At the end of the day here, we're looking at a mandate that was plain on its face in terms of Congress saying ‘shall' award contracts, contracts being an expansive, all-inclusive term here,” Thomas G. Saunders of Wilmer Cutler Pickering Hale and Dorr LLP, Washington, argued for Kingdomware.
“By its plain terms, the 2006 Veterans Act requires the VA to consider veterans first under the rule of two before awarding contracts to other suppliers,” Saunders said.
The word “shall” is mandatory and subject only to the statute's listed exceptions, and there's no exception for FSS awards, Saunders said.
“I'm not certain how this works,” Justice Stephen G. Breyer said.
“It's very surprising to me that Congress would have wanted the Veterans Administration to buy everything from veterans,” Breyer said. “I must be missing something,” and “you explain to me what I'm missing,” he said.
There's a natural cap, Saunders said.
If so, explain what it is, Breyer asked Saunders, who appeared to struggle for an answer.
Earlier, Saunders had argued that the rule of two was restrained by the wording of the statute.
“The rule of two only applies when you have both fair and reasonable price and best value to the United States,” Saunders said.
“Well, but that strikes me as” a “very thin protection,” Roberts said.
These “terms imply a lot of discretion: What's fair? What's reasonable? What's best value? The idea that's going to operate as a significant restraint on the requirement that the VA locate veteran businesses seems a real stretch to me,” he said.
Saunders responded, “Best value is designed to go beyond price.” It's “really sort of the totality of the circumstances.”
But Roberts pointed out, that's “the sort of thing that there will be an awful lot of litigation about, don't you think?”
“How do you tell what's best?” Roberts asked.
The federal government argued it's best to apply a distinction to the law.
“The mandate here applies when the VA awards wholly new contracts, not when it places orders under old ones,” Zachary D. Tripp of the Department of Justice, Washington, said.
“We're not saying that when you place on order under a preexisting contract that that's not a kind of contract; of course it is,” Tripp said.
“What we're saying is that when Congress establishes a procedure that applies when an agency, quote, ‘awards contracts,' that's naturally read to refer to awarding wholly new contracts, not placing orders under old ones,” he said.
Justices Elena Kagan and Sonia Sotomayor engaged in a back-and-forth with Tripp about contracts and wording.
“I look at your history, and you, yourself, the government itself, calls these orders ‘order contracts,' ” Sotomayor said.
“An order is a kind of contract,” Tripp said.
“It's not a kind. It is a contract,” Sotomayor said.
“The statute seems pretty clear,” Kagan said.
“Once you say that this is a contract, what you've said in your brief and right now. And once you say that, it just—that statute says, ‘A contracting officer of the department shall award contracts on the basis of competition restricted to veterans' small businesses.' So that seems to kind of answer the case, whatever the policy identifications are,” she said.
“I think the basic problem with that is if you take the sort of—just like sort of ‘1L' understanding of contract and—blow through it—” Tripp said.
“Well, it's your own understanding of the contract,” Kagan said.
Tripp said that to apply “this wooden mandate across the board in every case” would impair the VA's ability to deliver quality care to veterans.
For many years, the VA has been “crushing” its procurement goals, Tripp said, but was interrupted by Roberts.
“When—I'm sorry. When you say you're crushing the goals, that means you're meeting them?” he asked to laughter.
We're “far exceeding” them, Tripp said.
“We think it's had a big impact on the veterans' community. But our concern is that if you take this sort of mechanical rule of two and apply it,” we might not be able to place any orders, Tripp said.
Government contracting is becoming increasingly complex and doesn't involve just paperclips and staples anymore, he said.
Even “for more complex procurement, the FSS is still substantially easier” and cheaper, Tripp said.
“Going through the FSS is going to provide the best value for us overall,” he said.
If the VA had to comply with the petitioner's interpretation of the statute, “that would be really, really devastating to our just basic operation,” Tripp said.
But Saunders countered that there could be a legislative fix if the government's dire predictions came true. “If anything in this mandate enforced as written is going to hurt veterans in any way, then you can expect Congress will act swiftly to correct that problem,” Saunders said.
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The transcript is available at http://src.bna.com/cME.
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