Washington Business Journal by Lee Dougherty, Attorney, General Counsel PC
After more than a year of disagreement between veteran business owners, the Department of Veterans Affairs and the Government Accountability Office, the Court of Federal Claims finally resolved the question of whether the VA is required by law to give priority to veterans-owned businesses when awarding contracts.
And its decision comes as a blow to many.
On November 27, 2012 the court denied the bid protest of Kingdomware Technologies Inc., which claimed the VA violated a 2006 law that requires the agency to award government contracts to veteran-owned businesses, if such businesses are capable of performing the work. This decision by the court puts veteran business owners back years, at a time of record unemployment for those that served in the military.
Here’s some background: Beginning in October of 2011, two service-disabled, veteran owned small businesses, or SDVOSBs, launched the battle with the VA, claiming that the agency violated the 2006 Veterans Benefits, Health Care and Information Technology Act — better known as Vets First. Aldevra, a small Michigan-based business owned by a disabled veteran, filed the first GAO protest. This was followed by a protest filed by Kingdomware, a small information technology company in Waldorf, Md., also owned by a disabled veteran. After those initial bid protests, and with the overwhelming support of other veteran business owners, Aldevra and Kingdomware filed an additional 15 protests. GAO ruled in their favor in all cases, but the VA refused to follow the watchdog agency’s recommendation.
Kingdomware took the case to the Court of Federal Claims to decide once and for all whether the 2006 law applies to all agency procurements, including those made using the Federal Supply Schedule — a vehicle that agencies use to buy goods and services at pre-negotiated prices. Veterans argued in the lawsuit that Vets First requires the VA to conduct market research to determine if VA procurements should be set aside for SDVOSBs or veteran-owned small businesses before the VA acquires supplies and services using the FSS. The VA disagreed, however, claiming that the law was simply a tool to help it achieve its small business contracting goals.
In this case of statutory interpretation, the court ruled that the law as written supported the position of the VA. The purpose of the law was to support the small business procurement goals set by the secretary of the VA, the court claimed, and did not include any additional mandate to favor purchasing from veterans before purchasing from non-veterans using the FSS. Although most veterans do not agree with the decision, it is fairly well-reasoned; it’s difficult to see how an appeal could be successful.
The decision establishes what veteran advocates have been saying for years: That the VA not only fails to support veteran business owners, but will actually fight to ensure no obligation to contract with the community.
Sadly, the VA’s history in terms of support for veterans businesses is surprisingly weak. It was that history, in fact, which helped drive enactment of the 2006 law in the first place. IVets First was supposed to force change, and did indeed lead to a steady increase in the percentage of contracts awarded to SDVOSBs in the few years following enactment. However, recently there has been a retreat from such successes.
In 2010, the VA had just over $16 billion in procurement dollars, of which it awarded 20 percent to SDVOSBs. In 2011, even though the VA’s procurement budget increased by an additional $1.5 billion, the VA only awarded 18 percent to SDVOSBs. Final numbers are not available for 2012, but early indications are that the percentage has again decreased.
And despite prior year achievements, VA Secretary Eric Shinseki in February 2012 set the agency’s goals for SDVOSBs to 10 percent of its procurement dollars — that’s 8 percent less than his agency achieved the previous year.
The Secretary has established 16 major initiatives for the VA in his strategic plan for 2011-2015; none of them directly support veteran business owners. The Center for Veteran Enterprise, established to assist Veteran business owners, has been the subject of numerous hearings on Capitol Hill, with the chairman of the Veterans Affairs Subcommittee on Oversight and Investigations saying in August that CVE’s failures “have needlessly hurt legitimate, veteran owned small businesses.”
For veteran-owned small businesses like Aldevra and Kingdomware, there is a sense of betrayal by the VA. What is clear for veterans, after a year of being bruised and battered, is that the 2006 law should never again be referred to as Vets First.