Appeal of the Court of Federal Claims’ decision finding that the Department of Veterans Affairs is required to apply the Rule of Two before making purchases from the AbilityOne list is denied, where the express language governing VA’s service-disabled veteran-owned small business contracting preferences override the more general governmentwide requirements in the Javits-Wagner-O’Day Act, and where the later-enacted Veterans Benefits, Health Care, and Information Technology Act takes precedence over the older legislation.
The United States and Winston-Salem Industries for the Blind together appealed a decision of the Court of Federal Claims holding that the Veterans Benefits, Health Care, and Information Technology Act requires the Department of Veterans Affairs to consider awarding contracts for prescription eyewear based on competition restricted to veteran-owned small business—i.e., to undertake a “Rule of Two” analysis—before procuring such eyewear from any other source, including a nonprofit agency for the blind or significantly disabled, designated as such under the Javits-Wagner-O’Day Act.
In that earlier decision, COFC held that the statutory language of the VBA, as affirmed by the Supreme Court in its decision in Kingdomware, requires VA to conduct a Rule of Two analysis for all procurements that post-date 2006, when the VBA was passed, and not just for those items added to the AbilityOne list after January 7, 2010, when the regulations implementing the VBA became effective. COFC found that the Supreme Court affirmed the VBA’s establishment of a preference for veteran-owned small businesses as VA’s first priority.
The court also noted that language in the 2003 version of VBA containing an explicit exception for contracts under the JWOD was eliminated in the current legislation. According to COFC, the fact that Congress eliminated this exception was a strong indication that lawmakers meant for the VBA to apply before VA turned to the AbilityOne List.
In a supplemental filing, the Industries for the Blind argued that COFC lacked jurisdiction to rule on PDS Consultants’ claims because they challenged the validity of VA’s regulations and the AbilityOne program as a whole, and that such a challenge rests exclusively with the federal district courts. The Industries for the Blind also argued that purchases from the AbilityOne list are not “procurements” for the purposes of the Tucker Act’s jurisdiction. Instead, the firm argued that the only list procurements arising under Tucker Act jurisdiction are AbilityOne’s decisions to add or remove products and services from the list.
The appeals court disagreed, holding that PDS Consultants’ claims fall squarely within Tucker Act jurisdiction, which provides that an interested party is an actual or prospective bidder whose direct economic interest would be affected by the award of a contract or the failure to award a contract. The court held that PDS Consultants met this requirement, as it is an actual or prospective SDVOSB bidder on the eyewear procurements at issue. Further, the court noted that PDS Consultants did not challenge the validity of VA regulations or the AbilityOne program, bur alleged a violation of the VBA.
The court further held the VBA clearly governed VA procurements, as it dictates the method VA must employ for its purchases, and that the Industries for the Blind’s contracts are procurements. Notably, the government did not contend this issue.
Having concluded COFC had jurisdiction to hear the case, the appeals court affirmed the lower court’s holding that VA was required to apply the Rule of Two prior to awarding contracts through the AbilityOne program. The court noted the VBA states that VA “shall” award contracts on the basis of competition provided the Rule of Two is met. In Kingdomware, the Supreme Court affirmed this language, explaining that the use of the word “shall” unambiguously requires VA to use the Rule of Two before contracting under the competitive procedures.
The court noted that the JWOD Act also states that a federal agency “shall” procure a product or service from a qualified nonprofit agency for the blind or a qualified nonprofit agency for other severely disabled in accordance with regulations promulgated by and prices set by AbilityOne, if the product or service is available within the period it is required. As both statutes contain mandatory language, the court examined whether and to what extent they conflict, noting that if any interpretation of the statutory provisions at issue allows both statutes to remain operative, it must adopt that interpretation absent a clear legislative directive to the contrary.
The government argued that the conflict could be avoided by interpreting the VBA as applying only to non-mandatory competitive awards. According to the government, the mandatory procurements under the JWOD Act are not governed by the VBA. However, the court declined to read the VBA so narrowly, explaining that it applies to all VA contracts. While a portion of the VBA applies only when the Rule of Two is satisfied, its broader language requires VA to prioritize veterans even when the Rule of Two is not satisfied.
In its examination, the court noted that the VBA applies only to VA procurements and only when the Rule of Two is satisfied. The court held that the express, specific directives override the more general contracting requirements of the JWOD Act. Further, a comparison of the provisions and stated goals of the VBA with those of its predecessor, the Veterans Benefit Act of 2003, reinforced this conclusion. Unlike the VBA, the 2003 Act authorized but did not require all contracting officers within the federal government to apply the Rule of Two when contracting with service-disabled veteran-owned small businesses.
Importantly, the 2003 Act gave COs the discretion to apply the Rule of Two through its use of the permissive “may.” The 2006 VBA, however, includes the mandatory language. Further, the court found that the VBA was enacted expressly to increase contracting opportunities for VOSBs and SDVOSBs. The VBA also lacks any exception for procurements that would otherwise be governed by the JWOD. The court presumed Congress was aware that it wrote an exception into the 2003 Act when it omitted that exception in the later bill.
Further, the court explained that when two statutes conflict, the later enacted statute controls. As the VBA was enacted over 30 years after the JWOD was last amended, the court inferred that Congress intended the VBA to control in its narrower arena, and the JWOD to dictate broader procurements outside VA.
Because the court’s interpretation gave meaning to both statutes, it found that it could avoid any repeal of the JWOD by implication. That is, agencies outside of the VA must still comply with the JWOD, as does VA when the Rule of Two is not implicated. The court held that this conclusion also supported by the Supreme Court’s decision in Kingdomware.
PDS Consultants, Inc. is represented by David S. Gallacher and Emily Susan Theriault of Sheppard Mullin Richter & Hampton LLP.
The government is represented by Corinne Anne Niosi, Commercial Litigation Branch, Civil Division, Department of Justice, with whom were Chad A. Readler, Principal Deputy Assistant Attorney General, Robert E. Kirschman, Jr., Director, and Douglas K. Mickle, Assistant Director.
Winston-Salem Industries for the Blind is represented by Joanne L. Zimolzak of LeClairRyan, and by James K. Kearney, Gary H. Nunes and Joshua L. Rodman of Womble Bond Dickinson, and by Jessica C. Abrahams of Drinker Biddle & Reath LLP.
Amicus curiae were filed by Tracye Winfrey Howard and Stephen Joseph Obermeier of Wiley Rein LLP on behalf of the National Industries for the Blind; by Thomas Saunders and Edward Henderson Williams II of Wilmer Cutler Pickering Hale and Dorr LLP on behalf of Kingdomware Technologies Inc., National Veteran Small Business Coalition, and American Legion; by Crag Holman and Nathanial Edward Castellano of Arnold & Porter LLP on behalf of SourceAmerica; by David R. Johnson of Vinson & Elkins LLP on behalf of Goodwill Industries International Inc.; by Dana B. Pashkoff of Drinker Biddle & Reath LLP on behalf of National Association for the Employment of People Who Are Blind; and by Raechel Keay Kummer of Morgan, Lewis & Bockius LLP on behalf of Melwood Horticultural Training Center Inc., Melwood Veterans Services LLC, and Linden Resources Inc.
