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June 16 —The U.S. Supreme Court sided with veterans when it ruled June 16 that federal law requires the Department of Veterans Affairs to consider them first before awarding contracts to other suppliers ( Kingdomware Techs., Inc. v. United States, 2016 BL 192332, U.S., No. 14-916 , 6/16/16 ).
The court's unanimous opinion turned on Congress's use of the word “shall” in a statutory provision requiring the VA to restrict competition to veteran-owned small businesses.
“Unlike the word ‘may,' which implies discretion, the word ‘shall' connotes a requirement,” Justice Clarence Thomas wrote for the court.
Veterans stand to gain potentially billions of dollars' worth of contracts over the years, Steven J. Koprince, an attorney who specializes in federal government contracts law, told Bloomberg BNA June 16.
Koprince filed an amicus brief in support of Kingdomware Technologies, a business owned by a service-disabled veteran.
For them “this is a big emotional win,” he said.
“This is a tremendous victory for veteran-owned small businesses,” Thomas G. Saunders, an attorney with Wilmer Cutler Pickering Hale and Dorr LLP, Washington, told Bloomberg BNA in a June 16 e-mail.
Saunders represented Kingdomware.
But Saunders said the decision could also end up being a win-win for the agency.
It will have its procurement needs met and is doing so by helping businesses in a way that's exactly in line with its core mandate, he said.
Kingdomware sued the federal government after the company filed protest bids with the Government Accountability Office and the VA didn't act on the GAO's recommendations benefitting Kingdomware.
Kingdomware alleged the VA didn't apply the “rule of two” and instead awarded contracts using the Federal Supply Schedule or other contracts.
The “rule of two” is a government policy that restricts competition for government contracts to, in this case, veteran-owned small 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.
The 2006 Veteran Benefits, Health Care, and Information Technology Act, at 38 U.S.C. §8127(d), says the VA “shall” award contracts to veteran-owned small businesses if a contracting officer has a “reasonable expectation” that two or more VOSBs will submit offers for a “fair and reasonable price.”
Kingdomware contended that the mandate was plain on its face and that “contracts” is an expansive, all-inclusive term.
But the U.S. Court of Appeals for the Federal Circuit upheld the Court of Federal Claims's finding that the VA didn't have to implement the 2006 act's preferences for veterans as long as it met its agency-wide goals for contracting with them.
The Supreme Court reversed that decision here.
This is a simple case, Saunders said. “The answer is right there in the statute.”
When statutory language is unambiguous and its scheme is “coherent and consistent,” the inquiry ceases, the Supreme Court said. Such is the case here, it said.Relevant Provisions of the 2006 Act
The interplay between Section 8127(d) and its exceptions—Sections 8127(b) and (c)—shows that the statute “unambiguously requires the Department to use the Rule of Two,” it said.
Section 8127(d) says the VA “shall” award contracts to VOSBs using restricted competition when the rule of two is satisfied, the court said.
The surrounding subsections “confirm that Congress used the word ‘shall' in §8127(d) as a command,” because the subsections use the word “may,” the court said.
“When a statute distinguishes between ‘may' and ‘shall,' it is generally clear that ‘shall' imposes a mandatory duty,” it said.
Thus, before contracting with a non-VOSB, the VA must apply the Rule of Two, the court said.
“What stands out to me in the court's opinion is what it didn't say,” Koprince said.
The VA's counsel really focused on policy during oral arguments, Koprince said.
Enforcing the mandate “would be really, really devastating to just our basic operation,” Zachary D. Tripp of the Department of Justice argued February 22 (84 U.S.L.W. 1219, 2/25/16).
The court “blew right past” this argument, Koprince said.
The court's holding will have a “minimal” impact on the VA, Lee Dougherty, of Montgomery Fazzone PLLC, Washington, told Bloomberg BNA June 16.
Dougherty specializes in government contracting and has expertise on VOSB issues.
He worked pro bono on some of Kingdomware's initial bid protests with the GAO.
“The Rule of Two isn't unique to this law,” Dougherty said.
Every year, millions of government contracts are entered into and for each one it has to be determined if a set-aside for small businesses is required, he said.
The VA can implement the statute in a way that's not unduly burdensome and that prioritizes veterans, which is the agency's mission, Koprince said.
The 2006 act requires the VA to set goals that encourage contracting with VOSBs and service-disabled VOSBs, the Supreme Court said.
It was passed after the government “continually fell behind in achieving” its 3 percent government-wide contracting goal with these businesses, it said.
The entire purpose of the statute was to benefit veterans, Dougherty said.
Since its inception 10 years ago, “the VA has spent a lot of time and effort to resist the mandate,” Saunders said.
“But the mandate itself is internally balanced,” he said.
There are criteria you have to meet before it applies, Saunders said.
If it embraces the mandate, I think the VA will see it's a lot easier to implement than it thought it would be, he said.
The government didn't respond to Bloomberg BNA's request for comments.
To contact the reporter on this story: Melissa Heelan Stanzione in Washington at firstname.lastname@example.org
Full text at http://src.bna.com/fYq.
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