SCOTUS to Rule on Rights of Veteran-Owned Businesses

By Brett Mittler

Considering the scandals, allegations of mismanagement and widely condemned disability claims backlog at the Department of Veterans Affairs (VA) in recent years , what would you think if they allocated money to support a business that was not a Veteran-Owned? Timothy Barton, the Chief Executive of Kingdomware Technologies, was angered by just that and decided to take legal action against the VA for awarding a contract to a non-veteran entity. Is Barton right that the VA should have only given these funds to support veterans in their  hopes of achieving the American Dream after serving our nation? Did the VA violate the law? The Supreme Court will rule on these issues in Kingdomware Technologies, Inc. v. United States.

The question presented is: Did the United States Court of Appeals for the Federal Circuit err in holding that the Veterans Act of 2006, 38 U.S.C. § 8127, allows the Department of Veterans Affairs discretion in deciding whether to award a contract to a veteran-owned business?

This policy has long been a part of the history of the United States to promote small businesses. The legislature has been pushing for more government support for small business owned and operated by veterans. As expressed in the Small Business Act, 15 U.S.C ch. 14A, which states,  “A fair proportion of the total purchases and contracts for property and services for the government [should go to Veteran Owned Small Businesses]” 15 U.S.C. . § 644(a)(3). The Small Business Act recognizes both Veteran Owned Small Business (VOSBs) and Service-Disabled Veteran Owned Small Businesses (SDVOSBs). Id. § 632(q).

     

However, the policies and procedure for government contracting is outlined in the Federal Acquisition Regulation (FAR), 48 C.F.R. ch 1. When purchasing supplies, all government agencies fall under the guidelines of the umbrella of FAR, which directs them to the Federal Supply Schedule (FSS). The VA was specifically given authority, under 48 C.F.R. § 38.101(d), to award other contract schedules, meaning they do not have to award them to VOSBs. In fact, they are awarded to VOSBs a smaller percentage of the time than they are to regular FSS contracts.

CASE BACKGROUND

Kingdomware Technologies is a company operated by a service-disabled Army veteran, Timothy Barton, in a suburb of Washington, D.C. Kingdomware provides a range of technology information services to both the private and public sector. It has been certified by the Department of Veterans Affairs as a SDVOSB in 2010 and again in 2012. Barton was wounded during Operation Desert Storm in 1991, when the US Military forced Iraq to back out of its invasion of Kuwait.

     

The technology firm has waged this legal battle on the grounds that the VA “shall” award contracts to veteran-owned small businesses and that they have failed to carry out its duty, as outlined in Id. § 8127(d). After winning a series of protests in the Government Accountability Office (GSA), Kingdomware decided to sue when the rulings did not have the impact they were hoping for under the 2006 law.

Moreover, Kingdomware argues that the VA contracting officer violated the “Rule of Two,” as outlined in 15 U.S.C. § 657f, which states that the contracting officer cannot award a contract outside of a VOSB if no fewer than two small business submitted proposals. It would be considered in violation of this well-known rule throughout government in connection with awarding contracts restricted to small businesses.

     

In early 2012, The VA decided that they were going to implement an Emergency Notification Service, and the VA contracting officer chose to use the GSA FSS to procure the needed services. This particular vendor was not a VOSB. The VA argues under this law, they are not obligated to choose only VOSB and that the decision to choose the vendor that they did falls under the discretion of the Secretary of the VA.

DECISION

The Court of Federal Claims granted summary judgement without deference. They concluded that Kingdomware’s interpretation of § 8127(d) did not account for the Secretary’s mandatory authority to set the goals for the contracts; therefore, it is an unreasonable assumption that the VA is required to always give a VOSB the right of way and choose them as the contracted entity.

Additionally, the Court ruled that there is no reason to compel the Secretary to set aside any contract for the “Rule of Two” inquiry before using the FSS, as Kingdomware had requested. The court stated that the VA has consistently met its mandatory goals for procurement of SDVOSBs each year since the Veterans act of 2006 went into effect. Furthermore, the Secretary and his officer (“the contracting officer”) had the right to award the contract as they saw fit, as long as they were meeting the goals and mandates set forth. The Department of Veterans Affairs decision was not arbitrary and they did not act contrary to the law.

SCOTUS APPEAL

The Kingdomware case was set to be heard at the Supreme Court of the United States on Monday, November 9th, 2015, but it was pulled from the calendar. The Court issued an order to both parties asking whether the disputed contracts in the case “have been fully performed, and if so, whether the case is moot.” The briefs are to be filed with the Clerk of the Court no later than Friday, November 20th, 2015. After reviewing these briefs, the court will then decide if the controversy of the case is still live. At this time it is unclear, if the case remains alive, when it would return to the calendar. It is most unusual that the Court decides to remove a case from the calendar once it is set, unless the circumstances in question have found a way to be resolved prior to that date.