The Veterans Affairs Department acted unusually quickly to comply with the U.S. Supreme Court’s “rule of two” decision in the Kingdomware case.
So much so that it both surprised observers and had them wondering if VA was acting too hastily.
VA issued new acquisition regulations July 25, just more than a month after the decision, which found VA’s interpretation of a law requiring the agency to set-aside all procurements if at least two veteran-owned small businesses are qualified was flawed. The nation’s highest court reversed the lower court’s decision on June 16 by an 8-0 vote, finding VA must use the “rule of two” for supply schedule contracts even if it has met its statutory contracting goals.
“We expect to set aside a greater volume of VA contracts to service disabled veteran-owned small business and veteran-owned small business suppliers,” said a VA spokesman in response to questions from Federal News Radio. “VA senior officials will be developing market research principles during a two-day integrated process team meeting Aug. 10-11. These principles will be transformed into a comprehensive policy, which will be used by all VA requirements personnel in the conduct of market research. In addition, a training course is currently being developed by the VA Acquisition Academy, and training will be conducted for required VA personnel during August 2016. The Office of Small Disadvantaged Business Utilization (OSDBU) is improving its existing market research platform to provide more robust research and analysis capability.”
“The veteran small business community is cautiously optimistic this will lead to an expansion of contract opportunities, but given VA’s past history of implementing VETS First, there is justifiable skepticism,” said Scott Denniston, executive director of the National Veterans Small Business Coalition (NVSBC). “VA Procurement Policy Memorandum (2016-05) is vague as to the extent of market research required: Use of the veterans information portal (VIP) versus system for award management (SAM) versus issuing sources sought, etc. We are concerned VA will use the wording of ‘fair and reasonable price that offers best value to the United States’ to exclude veteran owned small businesses before providing opportunities to submit offers.”
The 11-page policy and decision tree that VA released with the policy tries to give contracting officers a process to ensure they are doing everything they can to follow the rule of two, which calls for VA to set-aside the contract if they can find at least two qualified veteran-owned firms to bid.
The policy relies heavily on oversight by the OSDBU director as well as documentation by the contracting officer.
“OSDBU has a statutory mandate to make recommendations to the contracting officer whether an action should be set-aside. … This review process is more effective when conducted collaboratively and early, both as the program office develops its acquisition package and as the contracting officer conducts the acquisition. As part of its VA Form 2268 reviews, OSDBU examines market research developed as part of other acquisitions from other offices,” the policy stated.
The VA also is mandating contracting officers use the VIP database “as the initial source to identify verified SDVOSBs or VOSBs that may meet VA eligibility requirements.”
Steve Koprince, managing partner of Koprince Law LLC, said the policy is pretty straightforward and the emphasis on market research wasn’t surprising.
“Overall, for most veteran-owned small businesses, the policy is going to be welcome. I say most because the policy for the most part prioritizes veteran owned acquisition and makes clear, as the Supreme Court ruled, the rule of two does apply to schedule contracts,” he said. “I’m hearing from my veteran- owned clients that they are getting calls from VA, and VA is reaching out to them to determine capabilities and be included in market research packages. It seems like that kind of outreach hasn’t happened before.”
But this level of outreach doesn’t come without its challenges. The VA spokesman said the agency also believes the lead time for acquisitions may increase because of the requirement to do more comprehensive market research.
So that may be bad news for veterans in terms of how long it takes to get new services in place.
Additionally, the policy doesn’t address all the issues. Koprince said there still is some need for clarification about how the mandatory source rule fits in with the rule of two. He said VA has been clear that procurements for Ability One and Federal Prison Industries programs still out rank the rule of two.
“The Court of Federal Claims a year or so ago agreed with VA that Ability One and the Federal Prison Industries and other mandatory sources trump the rule of two. I think there is a conflict between the statutes, and of course, the Court of Federal Claims got Kingdomware wrong, so I view that as an open decision,” Koprince said. “There is also a question about existing contracts. I get this from companies about whether VA can do limited competition on Schedule 70, for instance, if there are two or more qualified veteran-owned small businesses. The memo says if the companies have an existing vehicle and two or more that have them are qualified and VA wants to use them, then they can and don’t have to go to the open market. GAO ruled on this a few years ago too.”
Denniston added VA also needs to further address how it will address the Prime Vendor program in the medical commodities area, and whether they will split orders to say under the $3,500 small purchase threshold. For those procurements, VA is not required to use the rule of two.
“We hope VA embraces the spirit and intent of VETS First,” he said.