{
  "id": "R44401",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "R44401",
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  "source": "EveryCRSReport.com",
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    {
      "source": "EveryCRSReport.com",
      "id": 450162,
      "date": "2016-02-25",
      "retrieved": "2016-04-06T17:01:15.934454",
      "title": "Kingdomware Technologies, Inc. v. United States: A Case of Statutory Interpretation and Its Implications for Federal Contracting",
      "summary": "On Monday, February 22, 2016, the Supreme Court heard oral arguments in Kingdomware Technologies, Inc. v. United States, a case that raises the question of whether the Department of Veterans Affairs (VA) is legally required to make certain purchases through a \u201cset aside\u201d for veteran-owned small businesses (VOSBs). A set-aside is a competition in which only eligible small businesses may generally participate.\nCongress amended the Small Business Act in 1999 to establish goals for the percentage of federal contract dollars awarded to one type of VOSBs: service-disabled veteran-owned small businesses (SDVOSBs). Then, in 2003, it further amended the Small Business Act to grant executive branch agencies\u2014including VA\u2014discretionary authority to set aside contracts for SDVOSBs. However, these enactments were widely seen as ineffective in increasing government contracting with VOSBs, and, in 2006, Congress enacted legislation that required VA specifically to take steps to promote awards to VOSBs. It is VA\u2019s obligations under this 2006 measure, as amended, that are at issue in Kingdomware, not the provisions of the Small Business Act. \nIn particular, the Kingdomware case raises the question of how to construe language in the 2006 act which states that, \u201c[f]or purposes of meeting\u201d certain goals for contracting with VOSBs that VA is required to establish under the act (separate and apart from the goals under the 1999 act), VA \u201cshall\u201d set aside contracts for VOSBs whenever the contracting officer reasonably expects offers from at least two VOSBs and the award can be made at a fair market price. The latter conditions are commonly known as the \u201cRule of Two\u201d because of the focus on there being at least two small businesses. \nVA has taken the position that the statutory language does not preclude it from placing orders through the Federal Supply Schedules (FSS)\u2014which is a simplified method for purchasing commercial items\u2014although its rationale for this position has changed over time. However, many VOSBs have disagreed, arguing that the use of the word shall in the 2006 act means that VA is legally required to set aside contracts for VOSBs whenever the Rule of Two is satisfied. \nThe three administrative and judicial tribunals to have reviewed Kingdomware\u2019s challenge to VA\u2019s continued use of the FSS despite the alleged requirements of the 2006 act reached differing conclusions or relied upon differing logic. Initially, the Government Accountability Office found that the statute unambiguously requires VA to set aside contracts whenever the Rule of Two is satisfied and that VA\u2019s contrary interpretation of the 2006 act is, thus, not entitled to deference. However, the U.S. Court of Federal Claims disagreed, finding that the 2006 act is ambiguous, and VA\u2019s interpretation of the act as not applying to orders placed through the FSS is entitled to deference. A majority of the U.S. Court of Appeals for the Federal Circuit affirmed the decision of the lower court but on different grounds. The majority found that the 2006 act unambiguously requires VA to use set-asides for VOSBs only for purposes of meeting its goals for contracting with VOSBs. Once these goals are met, in the Federal Circuit\u2019s view, VA has discretion as to whether to use set-asides for VOSBs. \nThe Supreme Court granted certiorari to resolve the question of VA\u2019s obligations under the 2006 act. In doing so, the Court could help clarify the application of certain principles of statutory interpretation relied upon by the lower tribunals and the parties, including principles regarding prefatory language, veterans benefits, and judicial deference to agency interpretations of ambiguous statutes. The Supreme Court\u2019s decision could also have practical implications for the manner in which VA conducts certain procurements as well as for VOSBs seeking to do business with VA pursuant to a small business set-aside.",
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      "typeId": "REPORTS",
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  "topics": [
    "American Law"
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}