Kingdomware Technologies, Inc. v. United States
136 S. Ct. 1969
| SCOTUS | 2016Background
- Kingdomware Technologies, a service-disabled veteran-owned small business, protested the VA’s award of an Emergency Notification Service contract to a non‑veteran firm procured via the Federal Supply Schedule (FSS).
- The FSS procurement was a one‑year order (with one exercised option) completed in 2013; Kingdomware first filed a GAO protest, which found the VA’s action unlawful but issued a nonbinding recommendation the VA rejected.
- Kingdomware sued in the Court of Federal Claims seeking declaratory and injunctive relief under 38 U.S.C. §8127(d), which contains the “Rule of Two” preferring veteran‑owned small businesses when two or more such firms are reasonably expected to bid at a fair and reasonable price.
- The Court of Federal Claims and a divided Federal Circuit held the VA need apply the Rule of Two only to the extent necessary to meet its annual §8127(a) goals (i.e., discretionary once goals are met).
- The Supreme Court granted certiorari, found the case fit the capable‑of‑repetition‑yet‑evading‑review exception to mootness, and reached the merits.
- The Supreme Court unanimously reversed: §8127(d) is mandatory—VA “shall” apply the Rule of Two in awarding contracts (including FSS orders), except where subsections (b) and (c) permit noncompetitive awards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §8127(d)’s Rule of Two is mandatory for all VA contracting | Kingdomware: “shall award” is mandatory; VA must apply Rule of Two whenever its conditions are met | VA: Rule of Two is limited to meeting annual goals and is discretionary once goals are satisfied | Held: Mandatory. “Shall” imposes an obligation; VA must apply Rule of Two except when (b)/(c) permit otherwise |
| Whether FSS orders are “contracts” covered by §8127(d) | Kingdomware: FSS orders create mutual contractual obligations and fall within §8127(d) | VA: FSS orders are distinct and not subject to §8127(d); applying Rule of Two to FSS would impede simple purchases | Held: FSS orders are contracts under ordinary and regulatory definitions and §8127(d) applies to them |
| Whether the prefatory clause (“for purposes of meeting the goals under §8127(a)”) limits §8127(d) | Kingdomware: Prefatory language states purpose but does not change the operative mandatory command | VA & Federal Circuit: Prefatory clause means Rule of Two only applies as necessary to meet goals | Held: Prefatory clause does not alter the operative mandatory text; it cannot override the clear “shall” command |
| Whether deference (Chevron) requires accepting VA’s contrary interpretation | Kingdomware: Chevron not applicable where statute is unambiguous | VA: Agency interpretation of scope of §8127(d) in its regs merits deference | Held: No Chevron deference; statute is unambiguous and controls |
Key Cases Cited
- United States v. Detroit Timber & Lumber Co., 200 U.S. 321 (preamble/syllabus doesn’t form part of opinion) (prefatory material cannot alter operative statutory text)
- Spencer v. Kemna, 523 U.S. 1 (1998) (capable‑of‑repetition‑yet‑evading‑review mootness exception)
- Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998) (interpretation that “shall” is ordinarily mandatory)
- United States v. Rodgers, 461 U.S. 677 (1983) (contrast that “may” implies discretion)
- Yazoo & Mississippi Valley R. Co. v. Thomas, 132 U.S. 174 (1889) (preambles/prefatory clauses do not change operative clause)
- Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (agency deference framework; not applied where statute unambiguous)
- Southern Pacific Terminal Co. v. Interstate Commerce Comm'n, 219 U.S. 498 (1911) (short administrative/contractual actions may be too brief for full judicial review)