February 22, 2016
OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE
The Veterans Benefits, Health Care, and Information
Technology Act of 2006 requires the Secretary of Veterans
Affairs to set annual goals for contracting with
service-disabled and other veteran-owned small businesses.
38 U.S.C. §8127(a). To help reach those goals, a
separate set-aside provision known as the "Rule of
Two" provides that a contracting officer "shall
award contracts" by restricting competition to
veteran-owned small businesses if the officer reasonably
expects that at least two such businesses will submit
offers and that "the award can be made at a fair and
reasonable price that offers best value to the United
States." §8127(d). Two exceptions provide that
the contracting officer "may" use noncompetitive
and sole-source contracts for contracts below specific
dollar amounts. §§8127(b), (c).
In 2012, the Department procured an Emergency Notification
Service for four medical centers for a one-year period, with
an option to extend the agreement for two more, from a
non-veteran-owned business. The Department did so through the
Federal Supply Schedule (FSS), a streamlined method that
allows Government agencies to acquire particular goods and
services under prenegotiated terms. After the initial year,
the Department exercised its option for an additional year,
and the agreement ended in 2013.
Petitioner Kingdomware Technologies, Inc., a service-disabled
veteran-owned small business, filed a bid protest with the
Government Accountability Office (GAO), alleging that the
Department procured multiple contracts through the FSS
without employing the Rule of Two. The GAO determined that
the Department's actions were unlawful, but when the
Department declined to follow the GAO's non-binding
recommendation, Kingdomware filed suit, seeking declaratory
and injunctive relief. The Court of Federal Claims granted
summary judgment to the Government, and the Federal Circuit
affirmed, holding that the Department was only required to
apply the Rule of Two when necessary to satisfy its annual
1.This Court has jurisdiction to reach the merits of this
case. For a federal court to have Article III jurisdiction
"an actual controversy must exist . . . through all
stages of the litigation." Already, LLC v. Nike,
Inc., 568 U.S. __, __. Here, no court is capable of
granting petitioner relief initially sought in the complaint
because the short-term FSS contracts have been completed by
other contractors. However, the controversy is "
'capable of repetition, yet evading review.' "
Spencer v. Kemna, 523 U.S. 1, 17. The procurements
were fully performed in less than two years after they were
awarded, and it is reasonable to expect that the Government
will refuse to apply the Rule of Two in a future bid by
Kingdomware. Pp. 6–8.
2.Section 8127(d)'s contracting procedures are mandatory
and apply to all of the Department's contracting
determinations. Pp. 8–12.
(a) Section 8127(d)'s text unambiguously requires the
Department to use the Rule of Two before contracting under
the competitive procedures. The word "shall"
usually connotes a requirement, unlike the word "may,
" which implies discretion. Compare Lexecon Inc. v.
Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26,
35, with United States v. Rodgers, 461 U.S. 677,
706. The use of the word "may" in
§§8127(b) and (c) confirms this reading; for when a
statute distinguishes between "may" and
"shall, " the latter generally imposes a mandatory
duty. Pp. 8–9.
(b) Alternative readings of §8127(d) are unpersuasive.
First, §8127(d)'s prefatory clause, which declares
that the Rule of Two is designed "for the purposes
of" meeting §8127(a)'s annual contracting
goals, has no bearing on whether §8127(d)'s
requirement is mandatory or discretionary. The prefatory
clause's announcement of an objective does not change the
operative clause's plain meaning. See Yazoo &
Mississippi Valley R. Co. v. Thomas, 132 U.S. 174, 188.
Second, an FSS order is a "contract" within the
ordinary meaning of that term; thus, FSS orders do not fall
outside §8127(d), which applies when the Department
"award[s] contracts." Third, to say that the Rule
of Two will hamper mundane Government purchases misapprehends
current FSS practices, which have expanded well beyond simple
procurement to, as in this case, contracts concerning complex
information technology services over a multiyear period.
Finally, because the mandate §8127(d) imposes is
unambiguous, this Court declines the invitation to defer to
the Department's declaration that §8127 procedures
are inapplicable to FSS orders. See Chevron U.S. A. Inc.
v. Natural Resources Defense Council, Inc., 467 U.S.
837, 842–843. Pp. 9–12.
754 F.3d 923, reversed and remanded.
Kingdomware Technologies, Inc., a veteran-owned small
business, unsuccessfully vied for a federal contract from the
Department of Veterans Affairs to provide
emergency-notification services. Kingdomware sued, arguing
that the Department violated a federal law providing that it
"shall award" contracts to veteran-owned small
businesses when there is a "reasonable expectation"
that two or more such businesses will bid for the contract at
"a fair and reasonable price that offers best value to
the United States." 38 U.S.C. §8127(d). This
provision is known as the Rule of Two.
case, we consider whether the Department must use the Rule of
Two every time it awards contracts or whether it must use the
Rule of Two only to the extent necessary to meet annual
minimum goals for contracting with veteran-owned small
businesses. We conclude that the Department must use the Rule
of Two when awarding contracts, even when the Department will
otherwise meet its annual minimum contracting goals.
case concerns the interplay between several federal statutes