Judge Allows Department of Veterans Affairs to Ignore Veteran Preference When Awarding Contracts
Due to an apparent legislative gap, the U.S. Department of Veterans Affairs (VA) doesn’t have to give former service members’ small businesses preference for all of their contracts. This alarming decision could impact $3 billion in federal contracts each year.
On November 27th, U.S. Federal Claims Judge Nancy Firestone ruled against a bid protest filed by a Maryland veteran owned business. Firestone said the VA didn’t violate a 2006 law by awarding an emergency notification service contract without first considering bids from veterans. The award was one of at least 18 that the Government Accountability Office (GAO) said were unlawful.
In a 35-page decision, Firestone found that the VA’s decision not to set aside the contract at issue was not arbitrary, capricious, or contrary to the law. The November 27th ruling was the first time the claims court considered the contracting provisions of the so-called Veterans First law, which directed the agency to give preference to veterans when awarding contracts.
If the VA changed its position, it might steer as much as $3 billion in federal contracts a year toward small companies owned by veterans, according to data compiled by Bloomberg Government last year.
Firestone’s opinion may have been based on a legislative gap which apparently does not mandate that veteran-owned firms take precedence over pre-existing agreements with vendors that typically offer bulk discounts. If Congress left a“legislative gap” that could mean all pre-existing vendors would be “grandfathered” in to have contracting preference over veteran owned businesses.
Meanwhile, the Government Accountability Office (GAO) took a much different opinion. The GAO, a federal agency that arbitrates contracting disputes, at least 18 times directed the VA to determine whether there were at least two qualified veteran-owned small businesses that could perform the work at a reasonable price before turning to other vendors. But, according to a letter the agency sent to Congress this month, the VA refused each time.
The lawsuit was brought by Waldorf, Maryland-based Kingdomware Technologies Inc., which alleged the VA failed to research whether veteran-owned businesses could provide an IT product and services at a San Francisco VA facility.
It remains uncertain if Kingdomware Technologies will appeal the ruling. However, if this ruling is followed by other courts the ramifications could be devastating to all veteran owned businesses counting on veteran preference when contracting with the VA or other government agencies.
The case is Kingdomware Technologies Inc. v. U.S., 12-cv-00173, U.S. Court of Federal Claims.