Supreme Court to rule on VA set-aside case

The U.S. Supreme Court this week agreed to hear an appeal by a service-disabled, veteran-owned small business that is arguing that Veterans Affairs is violating federal law by not giving a preference to companies such as his.

The case dates back to 2011 when Kingdomware Technologies protested a request for quotes where VA specified that it want to buy LiveProcess Enterprise software as a subscription. Kingdomware argued that it offered a similar software. Kingdomware said VA didn’t do the proper market research.

Under the 2006 VA Act, VA is required to do market research to see if two or more service-disabled or veteran-owned small businesses can fulfill a requirement. This is the so-called rule of two.

VA issued a corrective action, but Kingdomware protested that as well because it felt that VA was still trying to circumvent the requirement to give a preference to the veteran-owned businesses.

The Government Accountability Office agreed with Kingdomware and said that VA should conduct reasonable market research and if it finds two or more veteran-owned small businesses that can meet the requirement, it should re-solicit the contract as a set-aside.

Well, VA didn’t like that and informed GAO that it was going to ignore the recommendation.

Kingdomware took the case to the Court of Federal Claims, which sided with VA. But Kingdomware wasn’t done and appealed again to the Court of Appeals for the Federal Circuit.

And again, the company lost. The appeals court said in a 2-1 decision that VA didn’t need to create a set-aside if it was using the Federal Supply Schedule.

Apparently, part of VA’s decision centers around language in the law that seem to say that conducting the market research isn’t necessary if the agency is meeting its goals.

Part of the dispute centers around the use of the word “shall” and whether shall means that an action is mandatory. VA argues in this case that shall applies to achieving its goals for contracting with veteran-owned businesses.

So now it is off to the Supreme Court, where the justices will take up the case when the next term begins in the fall.

Obviously, this could be an important case for veteran-owned companies. The American Legion has weighed in supporting Kingdomware.

But this is also important for other small-businesses. A ruling against Kingdomware could weaken the rule of two standard considerably, which could stretch beyond VA. Agencies would have greater latitude in picking when to issue set-aside contracts. It could undermine long-held practices for when to set-aside contracts.

This will be one to watch.