In Kingdomware Technologies, B-406507, May 30, 2012, 2012 CPD ¶ —, GAO sustained a protest alleging that the Department of Veterans Affairs (“VA”) improperly used the Federal Supply Schedule (“FSS”), rather than setting aside the procurement for service-disabled veteran-owned small business (“SDVOSB”) concerns. If this scenario seems familiar, that’s because it is.

In several decisions over the past year, a company named Aldevra successfully protested the VA’s decision to use FSS procedures without first determining whether a set-aside was appropriate. See e.g., Aldevra, B-406205, Mar. 14, 2012, 2012 CPD ¶ 112. Under the Veterans Benefits, Health Care, and Information Technology Act of 2006 (“VA Act”) and implementing regulations, the VA must set aside procurements for SDVOSB concerns where there is “a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.” 38 U.S.C. § 8127(d). In the first Aldevra decision, GAO held that the plain language of the VA Act did not afford the Agency any discretion to use FSS procedures without first conducting market research to determine whether at least two SDVOSB concerns could meet the requirements at a reasonable price. The VA refused to follow that decision; and, as a result, GAO sustained two subsequent protests by Aldevra challenging the Agency’s continued use of FSS procedures before conducting the required market research.   

In Kingdomware, the VA conceded that its own market researched revealed that at least 20 SDVOSB concerns, including the protester, held FSS contracts for the services sought. Nonetheless, the VA declined to set aside the procurement, instead awarding the contract to a non-SDVOSB concern. In defending its continued defiance of GAO, the VA reiterated its prior position that it need not consider SDVOSB set-asides before electing to purchase goods and services using FSS procedures. Citing its March 2012 decision in Aldevra, GAO rejected the VA’s arguments and recommended that the Agency cancel the contract and re-solicit the requirement as a SDVOSB set-aside.

Although GAO recommendations are just that, such agency defiance is rare given the fact that, among other things, GAO is an arm of Congress and agencies are, generally speaking, mindful of the source of their appropriations.  In light of the VA’s repeated refusal to follow GAO’s recommendations, it is not clear why the protesters have not resorted to the Court of Federal Claims, where decisions are binding.  It will also be interesting to see if Congress decides to step-in.  Stay tuned.