KINGDOMWARE TECHNOLOGIES, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
No. 2013-5042.
United States Court of Appeals, Federal Circuit.
June 3, 2014.
Rehearing En Banc Denied Sept. 10, 2014.*
754 F.3d 923
* Circuit Judge Clevenger participated only in the decision on the petition for panel rehearing. Circuit Judge Hughes did not participate.
III. CONCLUSION
For the foregoing reasons, we affirm the district court‘s denial of Appellants’ motion to dismiss with instructions that the district court proceed in a manner consistent with this opinion.
AFFIRMED.
KINGDOMWARE TECHNOLOGIES, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
No. 2013-5042.
United States Court of Appeals, Federal Circuit.
June 3, 2014.
Rehearing En Banc Denied Sept. 10, 2014.*
Robert C. Bigler, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief were Stuart F. Delery, Assistant Attorney General, Bryant G. Snee, Acting Director, and Patricia M. McCarthy, Assistant Director.
Gene C. Schaerr, Winston & Strawn LLP, of Washington, DC, for amicus curiae American Legion. With him on the brief was Eimeric Reig-Plessis.
Before PROST, Chief Judge,** CLEVENGER, and REYNA, Circuit Judges.
CLEVENGER, Circuit Judge.
This is an appeal from the final judgment of the United States Court of Federal Claims (“Court of Federal Claims“) on a matter of statutory construction. The Court of Federal Claims ruled in favor of the United States, Kingdomware Techs., Inc. v. United States, 107 Fed.Cl. 226 (Fed.Cl.2012), and Kingdomware Technologies, Inc. (“Kingdomware“) appeals. For the reasons set forth below, we affirm the
I
Kingdomware is owned and controlled by a service-disabled veteran. The Department of Veterans Affairs (“VA“) certified Kingdomware as a service-disabled veteran-owned small business in September 2010 and recertified Kingdomware in September 2012.
It has long been the policy of the United States to promote small businesses, including small businesses owned and controlled by veterans. Congress has expressed this policy through the Small Business Act,
The policy directive to promote small businesses lies within the statutes and regulations that guide Government contract formation. The general policies and procedures for Government contracting are contained in the Federal Acquisition Regulation (“FAR“),
The overarching policy of the FAR generally demands that “[c]ontracting officers shall provide for full and open competition.”
Unless otherwise specified by statute or regulation, an agency has wide discretion to decide the method of contracting to use, including the FSS. Tyler Constr. Grp. v. United States, 570 F.3d 1329, 1334 (Fed.Cir.2009). The FAR specifies as a matter of contracting priority that an agency is encouraged to obtain goods and services from FSS contractors before purchasing from commercial sources, which include privately owned VOSBs and SDVOSBs.
The FAR explicitly states that an agency placing an order against the FSS is exempt from requirements of the small business set-aside programs under FAR part 19. See
II
In 1999, Congress amended the Small Business Act to establish an aspirational Government-wide goal of awarding 3% of Government contracts to SDVOSBs.
Congress again amended the Small Business Act in 2003 to focus on SDVOSBs. The 2003 Act grants discretionary authority (“a contracting officer may award“) to contracting officers, Government-wide, to award sole-source contracts of restricted dollar amounts to SDVOSBs when the contracting officer estimates receipt of a fair and reasonable price, and otherwise to award contracts on the basis of competition restricted to SDVOSBs “if the contracting officer has a reasonable expectation that not less than 2 small business concerns owned and controlled by service-disabled veterans will submit offers and that the award can be made at a fair market price.”
History again showed a failure to achieve the goal of the Small Business Act to award 3% of Government contacts to SDVOSBs: only 0.605% of Government contracts went to SDVOSBs in 2005. H.R. REP. NO. 109-592, at 16 (2006) (“H.R. REP.“). Consequently, in 2006 Congress returned to the subject of preferences for businesses owned and controlled by veterans, enacting a statute specifically and only directed to the VA. While the Small Business Act and previous amendments contained provisions relating only to SDVOSBs, the 2006 Veterans Act expanded the reach of the small business provisions to include both VOSBs and SDVOSBs.
In particular, Congress mandated that the Secretary of the VA “shall” establish a goal for each fiscal year for participation in
The Veterans Act of 2006, codified at
For VA acquisitions for amounts less than what is called the simplified acquisition threshold (currently $150,000),
(d) USE OF RESTRICTED COMPETITION.—Except as provided in subsections (b) and (c), for purposes of meeting the goals under subsection (a), and in accordance with this section, a contracting officer of the [VA] shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has 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.
As an assist for achieving the goals under subsection (a), Congress ordered the VA in subsection (i) to give contracting priority to SDVOSBs and VOSBs over other small business entities.
The VA promulgated regulations for
History has proven true the prediction made in the legislative history of
| Year | VOSB Goal | VOSB Attainment | SDVOSB Goal | SDVOSB Attainment |
|---|---|---|---|---|
| 2008 | 10% | 14.89% | 7% | 11.78% |
| 2009 | 10% | 19.98% | 7% | 16.96% |
| 2010 | 12% | 23.08% | 10% | 20.05% |
| 2011 | 12% | 20.50% | 10% | 18.22% |
| 2012 | 12% | 21.77% | 10% | 19.24% |
Memorandum from James B. Peake, Sec‘y of Veterans Affairs, to Under Sec‘ys, Assistant Sec‘ys, Other Key Officials, Deputy Assistant Sec‘ys, and Field Facility Directors (Jan. 28, 2008); Memorandum from Eric K. Shinseki, Sec‘y of Veterans Affairs, to Under Sec‘ys, Assistant Sec‘ys, Other Key Officials, Deputy Assistant Sec‘ys, and Field Directors (May 7, 2010); Memorandum from Eric K. Shinseki, Sec‘y of Veterans Affairs, to Under Sec‘ys, Assistant Sec‘ys, Other Key Officials, Deputy Assistant Sec‘ys, and Field Directors (Feb. 21, 2012); Summary of Veterans Affairs Veteran Owned Small Business Goals Achieved for FY 2006 through FY 2012 (Mar. 18, 2014).
III
This suit arises from the following undisputed facts. In early 2012, the VA decided to implement an Emergency Notification Service in several of its medical centers. The VA contracting officer chose to use the GSA FSS to procure the needed services, and awarded the contract to a FSS vendor which was not a VOSB. On March 14, 2012, Kingdomware, a certified SDVOSB and qualified FSS contractor, filed a bid protest with the Government Accountability Office (“GAO“). Kingdomware challenged the contract award as illegal on the ground that
The VA soon after responded to the GAO and Kingdomware, announcing that it would not acquiesce in GAO‘s recommendation decision. The VA was on firm ground in refusing to accept the GAO decision. Although agencies often follow GAO recommendations in bid protest decisions “given the GAO‘s long experience and special expertise in such ... matters,” CMS Contract Mgmt. Servs. v. Mass. Hous. Fin. Agency, 745 F.3d 1379, 1384 (Fed.Cir.2014) (internal citation omitted), these recommendations are not binding on an agency. See Honeywell, Inc. v. United States, 870 F.2d 644, 647-648 (Fed.Cir.1989) (noting that the provisions of the Competition in Contracting Act “do not compel procuring agencies to obey the recommendation of the Comptroller General....” (internal citation omitted)). By enforcing its long-standing interpretation of
IV
Kingdomware filed its complaint on March 15, 2012. The parties stipulated to the facts as presented here and cross-moved for summary judgment. Both parties claimed victory on the plain meaning of
The Court of Federal Claims reasoned that Kingdomware‘s interpretation of
Having found ambiguity in subsection (d) under the first step of the analysis laid out in Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), the Court of Federal Claims then assessed the reasonableness of the VA‘s consistent interpretation of the statute,
The Court of Federal Claims concluded that the VA‘s interpretation has many of the blazemarks favoring deference under Skidmore. First, the VA‘s view that
Kingdomware timely appealed to this court. We have jurisdiction over the appeal under
V
We review the Court of Federal Claims’ grant of summary judgment without deference. Dominion Res., Inc. v. United States, 681 F.3d 1313, 1317 (Fed.Cir.2012). In reviewing an agency‘s action in a bid protest case, we generally apply the Administrative Procedure Act‘s “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” or “without observance of a procedure required by law” standard of review.
Chevron requires a reviewing court to determine by statutory construction, at the first step, “whether Congress has spoken to the precise question at issue.” 467 U.S. at 842. If so, the “unambiguously expressed intent” of Congress prevails. Id. at 843. If, however, Congress has not spo-
In the case before us, Congress did speak directly to the question of the Secretary‘s authority to use the Rule of Two “for purposes of meeting the goals under subsection (a),” stating that for such purposes the Secretary “shall” use the Rule of Two procedures. For the reasons explained below, we conclude that Kingdomware‘s interpretation of
VI
Kingdomware argues that the mandatory language of
According to Kingdomware, the legislative history of the 2006 Act also supports its interpretation of
Kingdomware also points to legislative history wherein the bill‘s sponsor, John Boozman, explicitly noted the change in language from “may” to “shall” in
Finally, Kingdomware notes that in the Report accompanying the legislation, the Committee on Veterans’ Affairs stated that “small businesses owned and controlled by veterans and service-disabled veterans should routinely be granted the primary opportunity to enter into VA procurement contracts.” H.R. REP., at 14-15 (emphases added). According to Kingdomware, this is evidence that Congress intended the VA to determine whether the Rule of Two was satisfied for every contract before it could look to the FSS.
Kingdomware assigns no substantive meaning to the phrase “for purposes of meeting the goals under subsection (a),” and instead contends that the words only state the objective for Rule of Two awards, i.e., to meet the Secretary‘s goals. Kingdomware is adamant that the “for purposes” words have no limiting effect. But Kingdomware does not explain why Congress intended “shall” to continue as an imperative after the Secretary‘s goals are achieved, or why Congress intended for the goals to be set not by the Secretary, but by whatever success VOSBs have under the Rule of Two in the marketplace.
Looking first to the text of the statute, the VA notes that the mandatory language of subsection (d)—“shall award“—is preceded by the phrase “for purposes of meeting the goals under subsection (a).” While Kingdomware maintains that this phrase is merely hortatory, the VA argues that it must be given effect, and that, read as a whole, the provision mandates a Rule of Two analysis only for those contracts the VA has decided are necessary “for purposes of meeting the goals under subsection (a).”
Under
Responding to Kingdomware‘s argument that “shall” in the 2006 statute is necessarily entirely imperative because “may” limited the Rule of Two in the 2003 statute, the VA explains that “shall” in subsection (d) exists to distinguish “may” with regard to the non-competitive set-aside procedures of subsections (b) and (c). In support, the VA cites the legislative history of the 2006 Act which explains clearly that Congress preferred use by the Secretary of the Rule of Two over the permissive noncompetitive procedures. H.R. REP., at 16. The VA thus reads subsection (d) in context with subsections (b) and (c) to give meaning to “shall” that does not preclude use of the FSS.
Despite its consistent practice of retaining the discretion to forego the Rule of Two when using the FSS, the VA notes that since the passage of the 2006 Act it has consistently set and exceeded ambitious VOSB contracting goals. This is evidence, in the VA‘s view, that its interpretation is consistent with the aims of Congress in passing the 2006 Act, as expressed in the legislative history.
VII
It is a bedrock principle of statutory interpretation that each word in a statute should be given effect. See Qi-Zhuo v. Meissner, 70 F.3d 136, 139 (D.C.Cir.1995) (“An endlessly reiterated principle of statutory construction is that all words in a statute are to be assigned meaning, and that nothing therein is to be construed as surplusage.“); see also Ariad Pharms., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1345 (Fed.Cir.2010) (concluding that a party‘s proposed statutory interpretation “violate[d] the rule of statutory construction that Congress does not use unnecessary words.“).
Kingdomware‘s interpretation of subsection (d) assigns dispositive weight to the command term “shall,” but ignores additional statutory language stating that this mandate is “for purposes of meeting the goals under subsection (a).” Under Kingdomware‘s interpretation, the statute‘s mandate requiring the VA to conduct a Rule of Two analysis would apply to every competitive contract contemplated by the VA without any regard for the VOSB contracting goals set under subsection (a), despite the provision‘s explicit reference to these goals. Indeed, Kingdomware conceded at oral argument that under its interpretation of
The statutory scheme as a whole links the Rule of Two mandate (denoted by the word “shall“) in subsection (d) to the goals set under subsection (a). The mandate is, therefore, the required procedure for meeting these goals. It is fully consistent
Congress enacted
As it stands, there is no reason to compel the Secretary to set aside any contract for a Rule of Two inquiry before using the FSS notwithstanding his goals, as Kingdomware requests. The VA has consistently met the mandatory goals for procurement from SDVOSBs and VOSBs in each year since the Veterans Act of 2006 went into force, and Kingdomware does not contend otherwise. The Secretary has complied with his statutory mandate to both set goals and meet them, and, accordingly, the VA contracting officer‘s decision not to set aside the contracts at issue was not arbitrary, capricious, or contrary to the law.
CONCLUSION
For the reasons provided above, we affirm the final decision of the Court of Federal Claims in favor of the VA.
AFFIRMED
COSTS
Each side shall bear its own costs.
Opinion for the court filed by Circuit Judge CLEVENGER.
Dissenting opinion filed by Circuit Judge REYNA.
REYNA, Circuit Judge, dissenting.
The majority holds that the 2006 Veterans Act does not require the Department of Veterans Affairs (“VA“) to conduct a Rule of Two analysis in every procurement, as long as the VA satisfies its annual small business participation goals. I do not construe the 2006 Veterans Act as giving the VA discretion to decide whether to conduct a Rule of Two analysis. For this and other reasons set forth below, I respectfully dissent.
I
The plain language of the 2006 Veterans Act unambiguously requires VA contracting officers to conduct a Rule of Two analysis in every acquisition and does not ex-
The statutory provision at issue could not be clearer. It provides that contracting officers “shall award contracts” on the basis of restricted competition whenever the contracting officer has a reasonable expectation that the Rule of Two will be satisfied:
(d) Use of restricted competition.—Except as provided in subsections (b) and (c), for purposes of meeting the goals under subsection (a), and in accordance with this section, a contracting officer of the Department shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has 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.
In contrast, subsection (d) of the 2006 Veterans Act applies to all VA acquisitions and requires VA contracting officers to conduct a Rule of Two analysis in every acquisition, without limitation. Unlike subsections (b) and (c), which use discretionary language (“may use” and “may award“), subsection (d) uses mandatory language (“shall award“), and does not otherwise give discretion to VA contracting officers to decide whether to conduct a
Consistent with the 2006 Veterans Act‘s imperative, the Government Accountability Office (“GAO“) has sustained more than seventeen protests in response to the VA‘s refusal to comply with
The majority summarily dismisses any reliance on the GAO‘s construction, noting that “the VA was on firm ground in refusing to accept the GAO decision.” Maj. Op. at 929. Yet, we have long noted that GAO recommendations, although not binding, are nevertheless “instructive in the area of bid protests.”5 The Court of Federal Claims routinely “give[s] due weight and deference’ to GAO recommendations ‘given the GAO‘s long experience and special expertise in such bid protest matters.‘”6 The majority ignores that GAO‘s experience and special expertise is such that “[a]n agency‘s decision to disregard a GAO recommendation is exceedingly rare.” Id. Indeed, we recently acknowledged that “from 1997-2012, the GAO issued 5,703 merit decisions and sustained 1099 protests; during that period, an agency disregarded the GAO‘s recommendation only ten times.” Id. at 1384-85. Hence, although not binding precedent, the GAO “plays an important role in the resolution of contested procurement decisions,” and its construction of the 2006 Veterans Act is consistent with
II.
To override the clear imperative of
The majority takes an unusual step of collecting extrinsic evidence to show that “[t]he VA has consistently met the mandatory goals for procurement from SDVOSBs and VOSBs in each year since the Veterans Act of 2006 went into force[.]” Maj. Op. at 934. While the exact rationale for exploration outside the record is not clear, the majority apparently rests on these statistics to conclude that “there is no reason to compel the Secretary to set aside any contract for a Rule of Two inquiry” where the goals were met for the time period in question. Id. This is an improper construction of the statute, as it adds a limitation that does not exist in the plain words of the statute. “Statutory construction must begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose.” Engine Mfrs. Ass‘n v. South Coast Air Quality Mgmt. Dist., 541 U.S. 246, 253, 124 S.Ct. 1756, 158 L.Ed.2d 529 (2004). Moreover, these statistics were not before the Court of Federal Claims or relied upon by either party, but were provided in response to a request during oral argument. As the appellant notes, the VA submission does not identify the source of the data and “appears to have been created specifically in response to the Court‘s request in this litigation.” ECF# 50, Appellant Letter to Court (Apr. 2, 2014). Significantly, there is no evidence in the record to show that VA contracting officers rely on, or have access to, these types of data in making contracting decisions, and the GAO has explicitly held that an agency‘s belief it has satisfied its small business goals does not affect its obligation to conduct a Rule of Two analysis.7 In sum, the majority‘s use of this extrinsic evidence is post hoc rationalization constructed to shore-up an otherwise unsound construction of the statute.
III.
The majority‘s reliance on the phrase “for purposes of meeting the goals” is also belied by the VA‘s own regulations, which contain no such language. Specifically, in 2009, the VA issued regulations reiterating the imperative to conduct a Rule of Two analysis in every acquisition. See
IV.
The majority does not address the practical implications of its decision in light of the VA‘s existing obligation under the Federal Acquisition Regulation (“FAR“) to conduct a Rule of Two analysis in nearly every acquisition exceeding $3,000.
The majority, on the other hand, finds mischief in requiring contracting officers to continue conducting Rule of Two analyses after the agency‘s goals are met. The majority concludes that requiring a Rule of Two analysis in every VA procurement would render the goal-setting provision superfluous, as “the goal would be whatever number the Rule of Two produces, regardless of the Secretary‘s preference.” Maj Op. at 932. The majority seemingly believes it is bad policy to require an agency to continue efforts to award contracts to small businesses once its participation goals are met, overlooking that participation goals are aspirations, not destinations. Indeed, the FAR explicitly provides that an agency may not refuse to set aside an acquisition solely on the basis that small businesses are “already receiving a fair proportion of the agency‘s contracts
The mischief feared by the majority is further refuted by the discretion retained by contracting officers in how they perform a Rule of Two analysis. Because the Rule of Two requires contracting officers to set aside an acquisition only if they have a reasonable expectation that (i) offers will be made by at least two responsible small businesses, and (ii) award will be made at fair market prices, contracting officers are entitled to exercise their business judgment in determining whether these two conditions are met. See
The majority‘s reticence to requiring agency advancement of small business participation beyond the aspirational goals is due to a misapprehension of the interplay between a Rule of Two analysis and agency-wide goals. The former is undertaken by the contracting officer on a contract-by-contract basis, while the latter are set by the head of the agency and inform the agency‘s entire procurement process. Under the majority‘s rationale, the participation goals established under the Small Business Act would also be rendered superfluous by the FAR‘s existing Rule of Two requirement, which applies in nearly every acquisition. See
The real mischief here is that the majority opinion would saddle contracting officers with the obligation in every acquisition to determine the status of the agency‘s small business goals—expressed as percentages of total awarded contract
V.
In sum, the majority adopts an untenable construction of the 2006 Veterans Act by holding that the agency need not perform a VOSB Rule of Two analysis for every contract, as long as the goals set under subsection (a) are met. The majority‘s holding deprives the Rule of Two mandate of its force and effect, it impedes congressional objectives regarding set-asides, and it renders
Jimmie V. Reyna
UNITED STATES CIRCUIT JUDGE
STC.UNM, Plaintiff-Appellant, v. INTEL CORPORATION, Defendant-Appellee.
No. 2013-1241.
United States Court of Appeals, Federal Circuit.
June 6, 2014.