Takeaways

Another attempt by the VA to limit the applicability of the Rule of Two has failed.
Veteran-owned small businesses may reasonably expect more business opportunities to be afforded to them as the VA applies the Rule of Two to ever more procurements.
Nevertheless, because the VA, and other agencies acquiring goods and services for the VA, continue to resist a universal application of the Rule of Two, veteran-owned small businesses likely will need to continue to protect their rights through the bid protest process.

On June 6, 2019, the Government Accountability Office (GAO) issued a decision in the matter of Veterans4You, Inc., deciding that the Department of Veterans Affairs (VA) must apply the “Rule of Two” even when it procures goods and services through other government agencies.

In the VA context, the Rule of Two is the commonly known name for a statutory provision of a 2006 amendment to the Veterans Benefits, Health Care, and Information Technology Act requiring that “the [VA] shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans” where the VA “has a reasonable expectation that two or more [such concerns] will submit offers,” and “the award can be made at a fair and reasonable price that offers best value to the United States.” As we discussed in an alert in 2018, VA has struggled to reconcile this mandate with myriad other mandates establishing preferential sources for government procurements.

In 2018, the Court of Appeals for the Federal Circuit rejected the VA’s argument that the VA Rule of Two did not apply to procurements from other mandatory sources, such as AbilityOne, a program mandating that the government purchase certain goods and services from entities that employ individuals with disabilities. Following that court decision, VA adopted another stance limiting the applicability of the Rule of Two, this time arguing that the VA Rule of Two does not apply when the VA purchases goods and services through other government agencies.

This complicated history led to the protest of Veterans4You, wherein GAO reviewed the Government Publishing Office (GPO) procurement of suicide prevention gun locks for the VA using GPO’s unique authority to provide and procure printing services on behalf of the government. Veterans4You protested GPO’s invitation for bids, arguing that the VA was attempting to acquire these items without giving due consideration to whether veteran-owned small businesses could supply these locks, as required by the VA Rule of Two. GAO emphatically rejected the GPO’s argument that the Rule of Two did not apply because this was a GPO procurement. GAO noted that the VA Rule of Two “has been interpreted by both [GAO] and the courts as both mandatory, and of universal application.” In sustaining Veterans4You’s protest, GAO further stated that “[s]imply stated, any time the VA is acquiring goods or services—without limitation—it is required to determine whether there are at least two SDVOSBs or VOSBs capable of meeting the agency’s requirements at a fair and reasonable price.”

The GAO’s decision once again emphasizes the mandatory and universal applicability of the VA Rule of Two. This decision also suggests, however, that veteran-owned small business should be on high alert to ensure that the VA complies with the Rule of Two. While veteran-owned small businesses should expect to be afforded more business opportunities as the VA applies the Rule of Two to more procurements, they should also beware that the VA, and agencies procuring goods and services for the VA, may not always comply with the VA Rule of Two on their own. Where this is the case, veteran-owned small businesses have the option of challenging the failure to comply with the VA Rule or Two through the bid protest process at the GAO or the U.S. Court of Federal Claims.