Veterans Agency Can Ignore Vets Status in Contract Awards

The U.S. Department of Veterans Affairs doesn’t have to give former service members’ small businesses preference for all contracts, a federal judge said, rejecting the position of a government watchdog agency.

U.S. Federal Claims Judge Nancy Firestone in Washington, ruling against a bid protest filed by a Maryland business, said the department 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 said were unlawful.

“The court respectfully disagrees with the GAO’s interpretation of the 2006 act in the case at hand, and finds that the VA’s decision not to set aside the ENS contract at issue was not arbitrary, capricious, or contrary to law,” Firestone said in a 35-page decision.

The Nov. 27 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 agency 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.

Jo Schuda, a VA spokeswoman, declined to comment on the decision.

‘Legislative Gap’

Firestone in her ruling said the law didn’t mandate that veteran-owned firms trump preexisting agreements with vendors that typically offer bulk discounts. She said Congress left a “legislative gap” for the veterans’ agency to fill.

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, 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. Earlier, the GAO had sided with the technology vendor.

Tim Power, an attorney from Sonoma, California, who represents Kingdomware, said his client hasn’t decided yet whether to appeal the ruling.

“If this is followed by other courts, it is kind of devastating to veterans,” Power said. “They had counted on this statute as establishing that a good slice of work from the VA would be for them.”

Federal Discounts

It’s not surprising the VA would favor spending with the so-called supply schedule vendors, said Devon Hewitt, an attorney with Protorae Law PLLC in McLean, Virginia, who helped Power on the case. Those pre-selected vendors typically provide discounts to federal agencies for buying in bulk.

“It’s simpler, quicker, and cheaper,” Hewitt said in a phone interview. “When you’re looking for pencils, when you’re looking for desks, when you’re looking for plates, why go through a procurement process that’s time-consuming and expensive for the agency? My view is, can you really blame them?”

Nonetheless, many veterans feel the VA is one agency that should prioritize spending with veterans, she said.

“This decision means the VA can continue to make a lot of purchases from large businesses instead of going to small veteran-owned companies,” she said. “Those purchases would make a big difference to small veteran businesses.”

The case is Kingdomware Technologies Inc. v. U.S., 12-cv- 00173, U.S. Court of Federal Claims (Washington).

To contact the reporters on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net; Kathleen Miller in Washington at kmiller01@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Stephanie Stoughton at sstoughton@bloomberg.net

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