Georgia Tech Procurement Assistance Center

VA fails again to apply the ‘rule of two’

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In June 6, 2019, the Government Accountability Office (GAO) issued a decision in the matter of Veterans4You, Inc., deciding that the Department of Veterans Affairs (VA) must apply the “Rule of Two” even when it procures goods and services through other government agencies.

In the VA context, the Rule of Two is the commonly known name for a statutory provision of a 2006 amendment to the Veterans Benefits, Health Care, and Information Technology Act requiring that “the [VA] shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans” where the VA “has a reasonable expectation that two or more [such concerns] will submit offers,” and “the award can be made at a fair and reasonable price that offers best value to the United States.”  As discussed in an alert in 2018, VA has struggled to reconcile this mandate with myriad other mandates establishing preferential sources for government procurements.

Continue reading at:  Pillsbury

VA agrees that rule of two has priority over AbilityOne Procurement List

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In its most recent attempt to strike the appropriate balance between the Veterans First and AbilityOne programs, the U.S. Department of Veterans Affairs (“VA”) issued on May 20, 2019 a class deviation to the VA Acquisition Regulations (“VAAR,” 48 C.F.R. Chapter 8), instructing contracting officers to conduct a “Rule of Two” analysis before procuring from the AbilityOne Procurement List.

The Rule of Two is set forth in the Veterans Benefits Act of 2006 (“VBA”), 38 U.S.C. § 8127(d), which established the Veterans First program.  The Rule of Two requires that VA contracting officers determine whether two or more veteran-owned small businesses (“VOSBs”), including service-disabled veteran-owned small businesses, are capable of meeting the VA’s requirements at reasonable prices.  If two or more qualified VOSBs can satisfy the VA’s needs, the VA must procure those goods through those VOSBs that are awarded contracts.  The VBA also allows contracting officers to grant sole-source contracts to VOSBs under limited circumstances (38 U.S.C. §§ 8127(b)-(c)).

The new VA class deviation revises VAAR 808.002, Priorities for Use of Government Supply Sources, and subpart 808.6, Acquisition from Federal Prison Industries, Inc.—the two provisions that implement for the VA the FAR Part 8 mandatory source priority generally enjoyed by AbilityOne Procurement List and Federal Prison Industries vendors across government procurements.  The deviation instructs that the Veterans First priority displaces the AbilityOne priorities for “all VA contracts,” but that “if an award is not made to an eligible . . . VOSB under VAAR subpart 819.70, the priority use of AbilityOne applies and supplies and services on the Procurement List are mandatory sources.”  In this respect, the new VA class deviation reconciles the VA’s priorities for veterans and the separate, government-wide priority for AbilityOne nonprofit companies.

Continue reading at:  Government Contracts and Investigations Blog

In VA procurements, veteran-owned businesses trump all other contractors

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On October 17, 2018, the Federal Circuit ruled that the Department of Veteran Affairs (“VA”) must give priority to veteran-owned small businesses (“VOSB”) when awarding contracts.  (PDS Consultants Inc. v. U.S., et al., Nos. 17-2379 and 17-2512, 2018 WL 5019735 – Fed. Cir. Oct. 17, 2018).

At first blush, no one would argue with the foregoing statement.

But, this mandate became less clear when the VA was faced with awarding a contract to a VOSB or following an otherwise mandatory requirement for all federal agencies to buy a specific list of items made by nonprofits employing the blind and significantly disabled.

Here is the source of confusion. More than 40 years ago, Congress enacted the Javits-Wagner-O’Day Act (“JWOD”), which required federal agencies to buy certain items and services from nonprofits that employ the blind or people with other significant disabilities. Today, this mandatory procurement policy is implemented through the AbilityOne program.

In 2006, Congress passed the Veterans Benefits, Health Care, and Information Technology Act (“VBA”). As the U.S. Supreme Court stated in Kingdomware, the VBA made it mandatory in almost every procurement for the VA to follow the “Rule of Two.” The “Rule of Two” requires the VA to award a contract to a VOSB whenever at least two VOSBs can perform the work at a reasonable price.

Keep reading this article at: https://governmentcontractsnavigator.com/2018/10/18/in-department-of-veterans-affairs-procurements-veteran-owned-businesses-trump-all-other-contractors

‘Cascading’ set-asides now authorized at the VA

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In what many will see as VA’s continued assault on its Veterans First Contracting Program post-Kingdomware, the Dept. of Veterans Affairs (VA) recently implemented “Cascading” set-asides.

The VA refers to these set-asides as “Tiered Evaluations,” noting they are also known as “Cascading” set-asides.

The VA issued Acquisition Policy Flash (No. 18-15), transmitting Procurement Policy Memorandum (PPM) No. 2018-04, dated and effective February 8, 2018.

The VA issued the PPM in response to requests from VA contracting officers requesting guidance and procedures for the use of tiered evaluations within a single synopsized solicitation when applying the “VA Rule of Two.”

Keep reading this article at: http://vetlikeme.org/its-official-cascading-set-asides-are-now-authorized-at-the-department-of-veterans-affairs/

Indictment in $40 million alleged fraud case signals increased scrutiny of SDVOSB contractors

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On December 1, 2017, the U.S. Department of Justice (DOJ) announced the federal grand indictment of an army veteran for allegedly engaging in major government program fraud by using his status as a service-disabled veteran to obtain contracts set-aside for service-disabled veteran-owned small businesses (SDVOSBs), despite the fact that he did not control the management and daily operations of the company to which the contracts were awarded.

In the case, U.S. v. Dial Jr., the veteran has been charged with four counts of major program fraud as well as wire fraud in connection with his company United Medical Design Builders, LLC (“UMDB”) receiving over $40 million in government contract funds from the U.S. Army Corps of Engineers between 2008 and 2015.

Specifically, the Government alleged that Dial, who is a disabled Army veteran, acted only as a “figurehead” of UMDB in order for UMDB to obtain a SDVOSB set-aside contract to build health care facilities.

Keep reading this article at: https://www.lexology.com/library/detail.aspx?g=9b298da1-560e-43ad-86b2-2768bc5ba765

Kingdomware doesn’t require recertification for GSA Schedule SDVOSB set-aside orders

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The Supreme Court’s landmark ruling in Kingdomware Technologies, Inc. v. United States does not require SDVOSBs to recertify their eligibility in connection with individual GSA Schedule task orders.

In a recent decision, the SBA Office of Hearings and Appeals held that Kingdomware doesn’t affect the SBA’s SDVOSB eligibility regulation for multiple-award contracts, which specifies that if a company qualifies as an SDVOSB at the time of the initial offer for a multiple-award contract, it ordinarily qualifies as an SDVOSB for all orders issued under the contract.

OHA’s decision in Redhorse Corporation, SBA No. VET-263 (2017) involved a GSA RFQ seeking transition ordering assistance in support of the Network Services Program.  The RFQ contemplated the award of a task order under the GSA Professional Services Schedule.  The order was set aside for SDVOSBs under NAICS code 541611 (Administrative Management and General Consulting Services).  The GSA contracting officer did not request that offerors recertify their SDVOSB eligibility in connection with the order.

After evaluating quotations, the GSA announced that Redhorse Corporation was the apparent awardee.  An unsuccessful competitor subsequently filed a protest challenging Redhorse’s SDVOSB status.  The SBA Director of Government Contracting sustained the protest and found Redhorse to be ineligible for the task order.

Keep reading this article at: http://smallgovcon.com/sbaohadecisions/kingdomware-doesnt-require-recertification-for-gsa-schedule-sdvosb-set-aside-orders

SBA and GSA, OFPP not seeing eye-to-eye on ‘rule of two’ application

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SBA logoA major dispute is brewing in the small business community. Just four months after the Supreme Court’s June 16, 2016 unanimous decision on the Kingdomware case, the Small Business Administration (SBA) is taking a stand on the “rule of two” that is stressing out industry and agencies alike.

As a quick reminder, the nation’s highest court ruled in the Kingdomware case that the Veterans Affairs Department (VA) must continue to apply the “rule of two” for veteran-owned small businesses even if the agency surpassed its annual prime contracting goal. The “rule of two” states if an agency can find two or more qualified small businesses during market research of a contract under the Simplified Acquisition Threshold (SAT) — between $3,500 and $150,000 — it must set aside the solicitation.

Now the SBA is expanding that Supreme Court ruling to apply to all task and delivery orders under SAT if the request for proposals comes under the General Services Administration’s Schedules.

Keep reading this article at: http://federalnewsradio.com/reporters-notebook-jason-miller/2016/12/sba-gsa-ofpp-not-seeing-eye-eye-rule-two-application/

Here is a copy of the SBA’s memo telling its PCRs that the should apply small business preferences to all task orders and all delivery orders because they are considered contracts pursuant to the Kingdomware decision: http://www.wifcon.com/dgc_memo.pdf

SBA to interpret Supreme Court contractor ruling for small business

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SBA logo smallThe June 16 Supreme Court decision requiring the Veterans Affairs Department to expand set-asides for veteran-owned small businesses could affect broader procurement regulations across government, says the Small Business Administration’s John Shoraka, associate administrator of SBA’s Office of Government Contracting and Business Development.  He recently told Government Executive at a contractors networking event that “the path forward is that we have to interpret how the decision impacts the Small Business Act.”

The court’s decision in Kingdomware Technologies Inc. v. the United States determined that the so-called “rule of two” requirement that the VA consider at least two bidding contractor firms (and apply a set-aside to the one that qualifies) must apply to supply orders as well as contracts.

“There was a perception that a [pre-existing GSA Schedule] order was not a contract, so the rule didn’t apply,” Shoraka told the audience. “But the Supreme Court says it is a contract, so now we know,” and the department must pick the veteran-owned small business assuming it offers a reasonable price.

Keep reading this article at: http://www.govexec.com/contracting/2016/06/sba-interpret-supreme-court-contractor-ruling-small-business/129477

VA issues interim procurement guidance in wake of Supreme Court decision

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VA-LogoIn reaction to the June 16, 2016 U.S. Supreme Court reversal of a lower court decision on the Veteran-Owned Small Business (VOSB) contracting program at the Department of Veterans Affairs (Kingdomware Technologies, Inc. v. United States), the VA has issued guidance to its acquisition team to ensure that procurements for VOSBs and Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) are set-aside whenever a contracting officer has a reasonable expectation, based on market research, that two or more eligible firms are likely to submit competitive offers at a fair and reasonable price.

In the past, the VA had not implemented this rule, known as the “Rule of Two,” for orders placed against GSA and VA Schedule contracts.   The Supreme Court ruled that no exemption from the Rule of Two exists for such orders.  The Court also found that VOSB and SDVOSB set-asides should continue to be made even if and when the VA meets its goals for awards to VOSBs and SDVOSBs.

In announcing the new guidance, the VA’s Office of Acquisition and Logistics said that “additional policy and guidance will be provided via a Procurement Policy Memorandum and Class Deviation to be issued at a later date.”

Highlights of the interim guidance issued by the VA on June 22 include:

  • The VA’s Contracting Officers are to include a requirement in all solicitations that for evaluation purposes, only VA verified SDVOSBs or VOSBs in the VA’s VIP database at the time of contract award will be considered for award.  Non-VIP verified firms will be considered non-responsive and ineligible for award.
  • VA Contracting Officers are instructed to conduct and review the market research to ensure compliance with the Rule of Two, whether or not an initial decision was made to set-aside the acquisition to SDVOSBs or VOSBs.
  • For VA contracting requirements currently in the solicitation/evaluation phase, a review of the original market research is to be accomplished to confirm whether or not the Rule of Two was appropriately considered and whether offers are likely to be received from two or more qualified, capable and verified SDVOSBs or VOSBs at a fair and reasonable price. If the review results in a finding that there are two or more SDVOSBs or VOSBs, an amendment is to be be issued canceling the solicitation.
  • Where a notice to proceed has not yet been issued, VA Contracting Officers are directed to coordinate with the Head of the Contracting Activity, the Office of General Counsel and the Office of Small and Disadvantaged Business Utilization and “be prepared to proceed with issuing the notice to proceed if issued within 30 days of this guidance.”

Details on these changes can be found at: http://www.va.gov/oal/business/pps/flash16-16.asp

Supreme Court unanimously rules in favor of VOSBs in case involving the VA’s use of GSA Schedule contracts

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Supreme CourtToday – June 16, 2016 – the U.S. Supreme Court ruled in favor of the interests of Veteran-Owned Small Businesses (VOSBs) and Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) who challenged the practice of the Veterans Administration (VA) to not apply the veteran business preference to orders placed against GSA Schedule contracts.

According to government contract legal expert Steven Koprince, “The Supreme Court’s decision in Kingdomware Technologies, Inc. v. United States, No. 14-916 (2016) means that the VA will be required to truly put ‘Veterans First’ in all of its procurement actions – which is what Kingdomware, and many veterans’ advocates, have fought for all along.”

The issues involved in the Kingdomware case date back to 2006 when Congress first required the VA to restrict contract competitions to veteran-owned small businesses as long as there were at least two qualified VOSBs available to perform the work.  This is known as the “Rule of Two.”  In practice, the VA determined that this rule did not apply to orders the agency placed through GSA Schedules.  The Government Accountability Office (GAO) decided that the VA’s practices violated the law, but the VA refused to make any changes in its GSA Schedule purchasing.  Finally, in 2011, a SDVOSB company by the name of Kingdomware Technologies took the VA to court, but the U.S. Court of Federal Claims ruled against the GAO and in the VA’s favor.  Kingdomware appealed, but lost at the U.S. Court of Appeals in 2014.  One year ago, the U.S. Supreme Court agreed to hear Kingdomware’s case.

It’s been a long path to travel, but VOSBs and SDVOSBs can celebrate the unanimous decision handed down by the Supreme Court on June 16th.  The Court’s directive to the VA is clear – the written decision states that the Rule of Two “is mandatory, not discretionary.”  The Court goes on to state that the law in this case “unambiguously requires the Department [the VA] to use the ‘Rule of Two’ before applying other procedures.”

Koprince sums up the impact of the Supreme Court’s decision this way: “I expect that the Kingdomware decision will prove a major boon to SDVOSBs and VOSBs, ultimately resulting in billions of extra dollars flowing to veteran-owned companies.  The long battle is over – and SDVOSBs and VOSBs have won.”

Read the text of the Supreme Court decision here: http://www.supremecourt.gov/opinions/15pdf/14-916_6j37.pdf

Read Steven Koprince’s detailed analysis of the decision here: http://smallgovcon.com/service-disabled-veteran-owned-small-businesses/victory-sdvosbs-win-in-kingdomware-supreme-court-decision/

Read earlier articles about this case here:

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