In Kingdomware Technologies, Inc. v. United States, the United States Supreme Court unanimously overturned the United States Court of Appeals for the Federal Circuit, as well as years of deference to Department of Veterans Affairs (VA) practices, holding that the VA must conduct market research to determine if at least two service-disabled veteran-owned small businesses (SDVOSBs) or veteran-owned small businesses (VOSBs) are capable of performing a proposed procurement contract before it issues a solicitation. The Court made this decision pursuant to the Veterans Benefits, Health Care, and Information Technology Act of 2006 (Veterans Act), which requires the VA to restrict its competitive bidding process if at least two businesses are found, even if the proposed procurement is to be made through the General Services Administration’s (GSA) Federal Supply Schedule program (FSS). This calculus is commonly referred to as the “Rule of Two.”
If ever there was a chance for the judiciary to put “veterans first,” this was it. While the result is a huge win for business-owning veterans, who stand to reap significant monetary benefits, the Kingdomware holding will likely have much further-reaching negative effects on government contracting in general. The holding may also impede the efficiency of an already overburdened VA in particular. Perhaps most significantly, the Kingdomware decision may negatively affect other disadvantaged small business contractors. It is therefore imperative that Congress take steps to correct the problems that are likely to manifest in the coming years as a result of the Court’s decision and restore some semblance of equity to the VA’s contracting practices.
This Note begins with an overview of the primary players in the decade-long fight over government contract set-asides, a discussion of the Rule of Two, the relevant law that spawned it, and the history behind it. Next, the analysis moves to an in-depth exploration of the judicial progression of Kingdomware and the Court’s reasoning. Then, this Note outlines the potential wide-reaching effects of the Kingdomware holding with regard to veterans, the VA, other government agency contracts, and nonveteran small businesses. Although these effects are concerning, efforts of Congress can solve the outlined issues. This Note proposes such legislative remedies that would restore smooth and equitable VA contracting while still putting American veterans first. Finally, this Note concludes that the Court’s legal analysis, while sound, creates several potential issues for the VA and other government agencies. If Congress does not act to rectify the situation, agencies may face inefficiencies and discrepancies in current contract set-aside practices that require legislative attention, and other disadvantaged small business contractors will likely see a substantial decrease in government- sourced opportunities.