Pds Consultants, Inc. v. United States, 2017 U.S. Claims LEXIS 574

Background

The dispute concerns which procurement priority the VA must apply first when an item appears on the AbilityOne Procurement List (JWOD) and the VA also must follow the Veterans Benefits Act (VBA) Rule of Two for veteran‑owned small business set‑asides.
AbilityOne (via the AbilityOne Commission) added eyewear and prescription eyewear services for several VA regions (VISNs) to the AbilityOne List before and after the VA implemented VBA procedures in 2010; VA contracts followed those listings with a nonprofit (IFB).
The VBA (2006) requires the VA to perform a mandatory ‘‘Rule of Two’’ analysis and, if two or more qualified veteran‑owned small businesses will bid at a fair price, to restrict competition to them. The JWOD (AbilityOne) requires agencies to procure listed items from designated nonprofits.
After the Supreme Court’s Kingdomware decision (2016) clarified the VBA Rule of Two is mandatory for all VA procurements, the VA adopted a regulation (2017) requiring a Rule of Two for items added to the AbilityOne List on or after Jan 7, 2010, but continuing to treat pre‑2010 AbilityOne listings as mandatory sources without reapplying the Rule of Two.
PDS (a service‑disabled veteran‑owned small business) challenged the VA’s practice for VISNs 2 and 7 (added to the AbilityOne List prior to 2010), seeking to block future contracts to IFB for those VISNs unless the VA first performs a Rule of Two analysis.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether VA must perform the VBA Rule of Two before awarding new contracts for items on the AbilityOne List that were added before VA’s 2010 implementing regulations	PDS: Kingdomware requires Rule of Two for all VA procurements, so VA must perform Rule of Two for VISN 2 & 7 before new awards	Government/IFB: JWOD mandatory source status for pre‑2010 List items means VA reasonably may treat those items as exempt from subsequent Rule of Two review; VA’s regulation is a permissible reconciliation	The court held VA must perform a Rule of Two for all new procurements after the VBA; pre‑2010 AbilityOne listings do not permanently exempt VA from applying the Rule of Two before new contracts
Whether the court has jurisdiction to decide PDS’s protest seeking to prevent future awards without a Rule of Two	PDS: This is a bid protest "in connection with a procurement or proposed procurement" under the Tucker Act	Government: Challenges to List additions should be adjudicated via APA in district court, not here	Court: Denied jurisdictional challenge; Tucker Act bid protest jurisdiction covers proposed procurements and this challenge is within court’s scope
Whether laches bars PDS’s claim given long delay since some listings	PDS: Delay excused by Kingdomware clarifying law in 2016; challenge targets future awards, not existing contracts	IFB: Damages and reliance from long‑standing contracts and investments justify laches	Court: Rejected laches; delay not unreasonable post‑Kingdomware and prejudice insufficient to bar relief
Whether VA’s 2017 regulation (apply Rule of Two only for post‑2010 listings) is a reasonable statutory interpretation entitled to deference	PDS: Regulation conflicts with VBA and Kingdomware; not permissible	Government: Regulation reasonably reconciles competing statutes and merits Chevron deference	Court: Regulation was not upheld as to pre‑2010 listings; VBA is unambiguous per Kingdomware and VBA prevails as the VA’s first priority; VA must apply Rule of Two for new awards regardless of listing date

Key Cases Cited

Kingdomware Techs., Inc. v. United States, 136 S. Ct. 1969 (2016) (VBA Rule of Two is mandatory for all VA procurements)
Angelica Textile Servs., Inc. v. United States, 95 Fed. Cl. 208 (2010) (VA guidance on reconciling VBA and JWOD entitled to Skidmore deference; where conflict, VBA controls)
Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984) (framework for judicial review of agency statutory interpretation)