VA Changes Stance on Key Issue on Veterans’ Set-Aside Contracts

In response to a more-than-gentle nudge from the Government Accountability Office (GAO), a lawsuit by veteran-owned companies, and considerable dissatisfaction on Capitol Hill, the Veterans Administration has backtracked from a prior legal position that could have reduced the impact of a 2006 law that Congress passed in order to help veterans obtain government contracts on a set-aside basis.

Under the Veterans Benefits, Health Care and Information Technology Act, the VA is required to set aside contracts for service-disabled, veteran-owned small businesses (SDVOSB’s), as long as there is a reasonable expectation that the agency would receive at least two bids from SDVOSBs and would be able to acquire the goods or services at a reasonable price.

As reported by Jill Aitoro of the Washington Business Journal, the VA had taken the position that this law doesn’t apply to purchases made through the General Services Administration’s schedules, which provide for pre-defined, discounted prices for agency purchases of goods and services.

In general, federal regulations provide that purchases from the GSA schedules are exempt from various small business set-asides.

On Oct. 11, however, the GAO ruled in response to a protest by a veteran-owned business that the 2006 law’s provisions are “unequivocal” and that the VA’s legal position was incorrect in this case. The language of the statute, the GAO found, leads to the conclusion that the usual exemptions for GSA schedule purchases don’t apply here.

The protest was filed by Aldevra, LLC, a company based in Portage, Mich., that qualifies as an SDVOSB and sells commercial kitchen and food service equipment and supplies. It wanted to sell kitchen equipment to two VA health care centers.

In its ruling, the GAO recommended that the VA cancel and reissue the two solicitations at issue as set-aside contracts under the 2006 act. At first, the VA refused to do so. It is not legally required to follow the GAO’s recommendations. A court battle loomed.

On Nov. 30, at a hearing on Capitol Hill, members of two subcommittees of the U.S. House of Representatives were visibly upset about the VA’s refusal. And on Dec. 6, a veterans’ business group in California filed suit against the VA.

So, rather than stick to its position and defend against the court challenge to its position, the VA announced on Dec. 8 that it will indeed cancel the two solicitations that the watchdog agency recommended should be set aside for veteran-owned small businesses.

The VA has been severely criticized in recent months, including for its handling of the verification process for veteran-owned and SDVO small businesses, a process that is woefully backlogged. The VA’s about-face on this issue should be welcomed as the first sign that it intends to address concerns that it has been a hindrance to, rather than a friend of, veteran-owned and SDVO businesses.

Scroll to top