The Supreme Court recently issued a decision in Kingdomware Technologies, Inc. v. United States which will have the result of increasing the number of opportunities Veteran Owned Small Businesses (VOSBs) and Service Disabled Veteran Owned Small Businesses (SDVOSBs) will have at the U.S. Department of Veterans Affairs (VA).

The Veterans Benefits, Health Care and Information Technology Act of 2006 requires the Secretary of Veterans Affairs to set annual goals for contracting with service-disabled and other veteran-owned small businesses.  In an effort to achieve these goals, the Act contains a separate provision which requires the VA to award contracts to VOSBs/SDVOSBs when there is a reasonable expectation that two or more such businesses will bid for the contract at a “fair and reasonable price that offers best value to the United States.”  This provision is known as the Rule of Two.

Historically, the VA has taken the position that the Rule of Two only applied where necessary for the agency to meet its annual small business contracting goals.  If the agency had met its goals, the VA believed it was not required to follow the Rule of Two.  Most importantly, the VA took the position that it was not required to apply the Rule of Two to acquisitions made under Federal Supply Schedule contracts.  Kingdomware challenged this position at the Government Accountability Office (GOA) and won.  The VA, however, refused to follow GAO’s recommendation in the case.  Kingdomware then sued the VA in federal court.

On appeal, the Supreme Court disagreed with VA and rejected the VA’s arguments.  The Supreme Court held that the Rule of Two is mandatory and should apply to all of the agency’s acquisitions using competitive procedures.  As a result of this decision, VA will now have to use the Rule of Two for those acquisitions it otherwise would have procured under a FSS contract.