Court of Federal Claims Holds That VA Rule of Two Trumps AbilityOne Program

June 1, 2017

Practice Area: Government Contracts Law

A recent decision from the U.S. Court of Federal Claims (“Court”) confirms the U.S. Department of Veterans Affairs’ (“VA”) mandate to perform a Rule of Two analysis on all procurements, including before utilizing the AbilityOne Program. In PDS Consultants, Inc. v. United States, Case No. 16-1063C (Fed. Cl. May 30, 2017), PDS Consultants challenged whether the VA must conduct analyze whether at least two veteran-owned small businesses (“VOSB”) are capable of performing the work at issue (also known as the “VA Rule of Two”) before procuring goods and services through the AbilityOne Program, which requires federal agencies to procure products and services from qualified non-profit agencies that employ people who are blind or otherwise severely disabled.

The Court held that the VA must conduct the VA Rule of Two analysis for all procurements and cannot procure goods and services through the AbilityOne Program unless it determines that there are not two or more VOSBs capable of providing the goods or services. The Court noted that the VA Rule of Two derives from the Veterans Benefits Act of 2006 (“VBA”), which requires the VA to perform a Rule of Two analysis that “favors [VOSBs] and service-disabled [VOSBs] in all contracting before using competitive procedures and [to] limit competition to [VOSBs] when the Rule of Two is satisfied.” The Court relied on the U.S. Supreme Court’s ruling in Kingdomware Technologies, Inc. v. United States, 136 S. Ct. 1969 (2016), which explained that the VBA establishes a preference for VOSBs “as the VA’s first priority.”

The Court concluded that the VBA requires the VA to perform the Rule of Two analysis for all new procurements, whether the product or service is covered by the AbiltyOne Program or not. Thus, the AbilityOne Program is a mandatory source for the VA only after the VA Rule of Two analysis is performed and the VA finds that there are not two VOSBs that are capable of providing the product or service. Accordingly, the Court found that the VA Rule of Two trumps the AbilityOne Program in terms of priority for the VA, and affirmed that the VA must perform the Rule of Two analysis on all procurements after the passage of the VBA (in 2006).

About the Author: Julia Di Vito practices in the areas of government contracts, litigation, and labor and employment. She may be reached at jdivito@pilieromazza.com.
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