“Yeah, it’s a contract,” conceded Department of Justice (“DOJ”) attorney Zachary Tripp during recent oral arguments in Kingdomware Technologies Inc. v. United States. According to Tom Saunders, attorney for Kingdomware, that concession should begin and end the case currently before the Supreme Court on the issue of whether the Department of Veterans Affairs (“VA”) is required to set-aside awards for Veteran-Owned Small Businesses and Service-Disabled Veteran-Owned Small Businesses when ordering from the Federal Supply Schedules (“FSS”). Unfortunately for Kingdomware—and the many other veteran-owned government contractors hoping for the Supreme Court to put an end to the “Rule of Two” debate—it may not.

If you have been following the Kingdomware battle, you may recall that the case took an unusual turn when DOJ filed its Supreme Court brief and essentially abandoned what was the winning position in the Federal Circuit—i.e., that the VA is not required to adhere to the “Rule of Two” requirement so long as the agency is meeting its contracting goals. Instead, DOJ argued—for the first time—that a Rule of Two analysis is mandatory for all new contracts, irrespective of whether the VA has met its goals, but went on to assert that such an analysis is not required for task orders under pre-existing FSS contracts because the task order is not a “new contract.”.  

Why DOJ abandoned the goal-setting argument was of particular interest to the Supreme Court Justices and, in fact, Mr. Tripp barely got once sentence out of his mouth before Justice Ginsburg started grilling the agency on its decision to walk away from a winning position, noting the decision was “really odd.” Mr. Tripp’s response that the Federal Circuit’s rationale is right but “incomplete” only led to more questioning on this topic and, as Justice Ginsburg hinted more than once, it now appears that DOJ’s unexpected change of heart may cause the Supreme Court to send Kingdomware back to the lower courts to rule on the agency’s new argument.

While Mr. Tripp appeared open to the possibility of a remand, Mr. Saunders did not, and understandably so. DOJ’s theory as to why the VA can escape a Rule of Two analysis when placing FSS orders is laden with policy concerns, whereas Kingdomware’s position is that the case should be decided solely on the question of whether an FSS order is a contract. And Kingdomware’s argument seemed to resonate well with the Supreme Court Justices, particularly Justice Kagan who stressed to Mr. Tripp that the statute at issue is pretty clear:

Once you say that this is a contract, what you’ve said in your brief and right now. And once you say that, it just—the statute says, “A contracting officer of the department shall award contracts on the basis of competition restricted to veterans’ small businesses.” So that seems to kind of answer case, whatever the policy identifications are.

Still, the problem for Kingdomware is that the issue of whether an FSS order qualifies as a contract for restricted competition purposes was not decided by the lower courts, leaving the case susceptible to remand.

About the author: Peter Ford is an associate with PilieroMazza in the Government Contracts Group. He may be reached at [email protected].