PDS CONSULTANTS, INC., Plaintiff-Appellee v. UNITED STATES, WINSTON-SALEM INDUSTRIES FOR THE BLIND Defendants-Appellants
2017-2379, 2017-2512
United States Court of Appeals for the Federal Circuit
October 17, 2018
Appeals from the United States Court of Federal Claims in No. 1:16-cv-01063-NBF, Senior Judge Nancy B. Firestone.
DAVID S. GALLACHER, Sheppard Mullin Richter & Hampton LLP, Washington, DC, argued for plaintiff-appellee. Also represented by EMILY SUSAN THERIAULT.
CORINNE ANNE NIOSI, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellant United States. Also represented by ROBERT EDWARD KIRSCHMAN, JR., DOUGLAS K. MICKLE, CHAD A. READLER.
JOANNE L. ZIMOLZAK, LeClairRyan, Washington, DC, argued for defendant-appellant Winston-Salem Industries For The Blind. Also represented by JAMES K. KEARNEY, GARY H. NUNES, JOSHUA L. RODMAN, Womble Bond Dickinson (US) LLP, Tysons Corner, VA; JESSICA C. ABRAHAMS, Drinker Biddle & Reath LLP, Washington, DC.
TRACYE WINFREY HOWARD, Wiley Rein LLP, Washington, DC, for amicus curiae National Industries For The Blind. Also represented by STEPHEN JOSEPH OBERMEIER.
THOMAS SAUNDERS, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, for amici curiae Kingdomware Technologies, Inc., National Veteran Small Business Coalition, American Legion. Also represented by EDWARD HENDERSON WILLIAMS, II.
CRAIG HOLMAN, Arnold & Porter Kaye Scholer LLP, Washington, DC, for amicus curiae SourceAmerica. Also represented by NATHANIEL EDWARD CASTELLANO.
DAVID R. JOHNSON, Vinson & Elkins LLP, Washington, DC, for amicus curiae Goodwill Industries International, Inc.
DANA B. PASHKOFF, Drinker Biddle & Reath LLP, Washington, DC, for amicus curiae National Association for the Employment of People Who Are Blind.
RAECHEL KEAY KUMMER, Morgan, Lewis & Bockius LLP, Washington, DC, for amici curiae Melwood Horticultural Training Center, Inc., Melwood Veterans Services, LLC, Linden Resources, Inc.
Before PROST, Chief Judge, O‘MALLEY and STOLL, Circuit Judges.
This case concerns the relationship between two statutory regimes designed to benefit two historically disadvantaged groups: veterans and disabled persons. The United States and Winston-Salem Industries for the Blind (“Industries for the Blind“) (together, “Appellants“) appeal from a decision of the U.S. Court of Federal Claims (“Claims Court“) holding that section 502 of the Veterans Benefits, Health Care, and Information Technology Act of 2006,
I. BACKGROUND
A. Overview of the Federal Procurement Process
A bevy of statutes and regulations govern the federal procurement process. As explained below, these authorities impose a number of restrictions on executive branch agencies seeking to procure goods and services. At the same time, they permit—or, sometimes, mandate—that preferential treatment be given to certain contractors, including those that are owned by or employ veterans or employ blind or otherwise significantly disabled individuals. This case concerns the relative priority of those mandates for VA procurements.
1. The Competition in Contracting Act
In 1984, Congress enacted the modern statutory framework for federal procurement, the Competition in Contracting Act of 1984,
The Competition in Contracting Act expressly exempts agencies from having to use “competitive procedures” for procurements where (1) procurement procedures are “otherwise expressly authorized by statute,”
2. The Javits-Wagner-O‘Day Act
The JWOD was enacted in 1938 to provide employment opportunities for the blind, and was amended in 1971 to provide such opportunities for “other severely disabled” individuals. To effectuate these goals, the JWOD established the Committee
One of AbilityOne‘s primary duties is to create and maintain a procurement list (“List“) that identifies products and services produced by nonprofit entities that are operated in the interest of, and employ, individuals who are blind or significantly disabled.
An entity of the Federal Government intending to procure a product or service on the procurement list referred to in section 8503 of this title [i.e., the List] shall procure the product or service from a qualified nonprofit agency for the blind or a qualified nonprofit agency for other severely disabled in accordance with regulations of [AbilityOne] and at the price [AbilityOne] establishes if the product or service is available within the period required by the entity.
3. The Small Business Act and Amendments Thereto
The Competition in Contracting Act permits agencies to restrict competition for some federal contracts. For example, the Small Business Act (“SBA“) “requires many federal agencies, including the [VA], to set aside contracts to be awarded to small businesses,” and specifically requires that each agency set “an annual goal that presents, for that agency, the maximum practicable opportunity’ for contracting with small businesses, including those ‘small business concerns owned and controlled by service-disabled veterans.” Kingdomware Techs., Inc. v. United States, 136 S. Ct. 1969, 1973 (2016) (quoting
Congress, through the SBA, established a goal for all agencies to obtain 23% of the value of contracts from “small business concerns.”
Congress further amended the SBA by passing the Veterans Benefits Act of 2003,
4. The VBA and the VA‘s Regulations and Guidance
Congress enacted the VBA in 2006, seeking to remedy federal agencies’ failures to meet these contracting goals.2 In section 502 of the VBA, Congress required the Secretary of Veterans Affairs to establish specific annual goals for the VA‘s own contract awards to veteran-owned small business and to service-disabled veteran-owned small businesses. See
(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.
In response to the VBA, the VA established the “Veterans First Contracting Program” on June 20, 2007. Under the program, contracting officers were directed to give service-disabled veteran-owned small businesses and veteran-owned small businesses first and second priority status when awarding contracts for VA procurements by undertaking the Rule of Two analysis set forth in
5. The FAR and VAAR
The Federal Acquisition Regulation (“FAR“) is a set of uniform policies and procedures for government acquisition of supplies and services, codified at 48 C.F.R.
The VA‘s Acquisition Regulation (“VAAR“) is a subset of the FAR that governs, among other things, VA acquisition procedures. One such VAAR,
6. The 2010 Letter and Angelica Textile
On April 28, 2010, the VA issued a letter setting forth guidelines to its contracting staff about the Veterans First Program and addressed its interaction with the AbilityOne program. The stated purpose of the letter was to “set forth new procedures for gaining approval to request new requirements be placed on the AbilityOne Procurement List,” and it directed contracting officers to take a series of steps to explore whether veteran-owned small businesses and service-disabled veteran-owned small businesses could provide the needed services before proposing a requirement for the List. J.A. 969–71. Among the new steps, a contracting officer must (1) perform market research in accordance with Part 10 of the FAR and Part 810 of the VAAR, and (2) prepare a determination and findings which document the require-ment, the results of the market research performed, and the contracting officer‘s findings. The letter also stated that all contracting officers must “adhere to the authorities of [the VBA] prior to placing new requirements on the AbilityOne Procurement List,” but it distinguished between items that were on the List as of January 7, 2010 and those that were not:
[A]ll items currently on the AbilityOne Procurement List as of January 7, 2010, will continue to take priority over the contracting preferences mandated by [the VBA]. However, all new requirements will be subject to the contracting preferences mandated by [the VBA] prior to being considered for placement with the AbilityOne Program.... To ensure appropriate business opportunities are properly afforded to [service-disabled veteran-owned small businesses] and [veteran-owned small businesses], all [contracting officers] must adhere to the authorities and requirements of [the VBA] (
38 U.S.C. [§§] 8127 –8128 ) prior to placing new requirements on the AbilityOne Procurement List.
J.A. 1338 (emphases added). Thus, the letter indicated that items that had been added to the List prior to January 2010 would be grandfathered in and continue to receive priority.
About six months after the VA published its 2010 letter, the Claims Court issued its decision in Angelica Textile Services, Inc. v. United States, 95 Fed. Cl. 208 (2010), a
Following the Claims Court‘s Angelica Textile decision, AbilityOne “ended cooperation and collaboration between the AbilityOne Program staff and VA contracting officers regarding [List] additions.” PDS Consultants, 132 Fed. Cl. at 122. It then began to add items to the List unilaterally, taking the position that, because the VBA only applied to the VA, and not AbilityOne, it was not required to perform a Rule of Two analysis before adding items to the List. Id.
7. Kingdomware
In 2016, the Supreme Court decided Kingdomware, in which it held that, “[e]xcept when the [VA] uses the noncompetitive and sole-source contracting procedures in subsections (b) and (c),
In response to the Supreme Court‘s decision, the VA issued a new policy memorandum, dated July 25, 2016, again seeking to reconcile the requirements of the VBA and the JWOD. The memorandum stated that the VA has a “continuing requirement to comply with all statutory mandates,” including an obligation to purchase items on the List. J.A. 1301. The memorandum also included a decision tree, which explained that, if there is a mandatory source, such as an item on the List, then the Rule of Two “does not apply.” J.A. 1336. Nevertheless, the memorandum explained that the VA will continue to require contracting officers to “conduct market research” and “apply the VA Rule of Two” as required under the VBA before the officer can propose an addition to the List. J.A. 1313.
Then, on March 1, 2017, the VA sent a memorandum to the heads of contracting activities proposing to amend VAAR
With this background in mind, we next review the procedural history before determining which statute—the VBA or JWOD—controls when VA procurements are made.
B. Procedural History
1. The VISNs and Associated Contracts
The items and services at issue in this case are eyewear and eyewear prescription
Prior to the passage of the VBA, AbilityOne, working in coordination with the VA, added eyewear and eyewear prescription services provided by the Industries for the Blind to the List for VISNs 2 and 7. It added eyewear prescription services for VISN 7 in 2002 and added eyewear for VISN 2 in 2005. Once the products and services for these VISNs were added to the List, the VA entered into contracts with the Industries for the Blind “to produce and provide prescription eyeglasses and associated services to eligible veteran beneficiaries serviced by VA Medical Centers and all affiliated out-patient clinics,” specifying that “eyeglasses will be made to the individual veteran‘s prescription.” PDS Consultants, 132 Fed. Cl. at 121.
After the VA published its 2010 letter, coordination between VA contracting officers and AbilityOne effectively ended. Between 2013 and 2015, AbilityOne, over negative comments from certain service-disabled veteran-owned small businesses, added prescription eyewear requirements for portions of VISN 8 to the List, leading to a new contract with the Industries for the Blind. Id.
In February 2016, AbilityOne published a notice in the Federal Register proposing the addition of eyewear for all of the VA‘s requirements in VISN 6 to the List. See Procurement List, Proposed Additions and Deletion, 81 Fed. Reg. 7,510, 2016 WL 538665 (Feb. 12, 2016). Shortly after the issuance of Kingdomware, PDS Consultants, Inc. (“PDS Consultants“), which alleges that it can provide eyewear for VISN 6, wrote a letter to AbilityOne “stating that many of the eyewear products and services that AbilityOne had proposed adding to the List ‘are the same or similar to the types of eyeglasses many veteran-owned and service-disabled veteran-owned businesses currently provide’ to the VA.” PDS Consultants, 132 Fed. Cl. at 123. PDS Consultants “asserted that adding VISN 6 to the List would cause the VA to violate
On August 1, 2016, AbilityOne voted to add eyewear for VISN 6 to the List. In the notice published in the Federal Register, AbilityOne addressed PDS Consultants’ comments, stating that, although it appreciated
[T]he Commission‘s mission and duty is to provide employment opportunities for people who are blind or have significant disabilities, many of whom are veterans .... Adding the proposed products to the Commission‘s Procurement List will provide employment opportunities to a portion of the U.S. population that has a historically high rate of unemployment or underemployment, and is consistent with the Commission‘s authority established by
41 U.S.C. Chapter 85 .
Additions to and Deletions from the Procurement List, 81 Fed. Reg. 51,863, 51,864–65, 2016 WL 4138446 (Aug. 5, 2016) (footnote omitted).
2. The Claims Court Proceedings
PDS Consultants initiated this bid protest in the Claims Court on August 25, 2016, alleging that it is a service-disabled veteran-owned small business “engaged in the business of providing vision related products” and seeking declaratory and injunctive relief. Specifically, it sought an injunction requiring the VA to perform the Rule of Two analysis for VISNs 2, 6, 7, and 8, and a separate injunction requiring AbilityOne to remove VISNs 6 and 8 from the List.
The Claims Court, after receiving briefing and holding a hearing, ruled that the VA is required to perform a Rule of Two analysis for all procurements that post-date 2006, when the VBA was passed, and not just for those items added to the List after January 7, 2010, when the regulations implementing the VBA became effective. PDS Consultants, 132 Fed. Cl. at 120. The court first determined that it had jurisdiction over PDS Consultants’ complaint, disagreeing with the government‘s position that PDS Consultants was required to challenge additions to the List in federal district court under the Administrative Procedure Act. Id. at 126. Turning to the merits, the Claims Court reasoned that, even though the VBA and the JWOD are not necessarily in conflict in all instances, (1) the VA is required to follow one of the two statutes first when a product or service appears on the List, (2) the Supreme Court in Kingdomware held that
The United States and the Industries for the Blind timely appealed. We have jurisdiction under
II. DISCUSSION
A. Standard of Review
“In a given case, whether Tucker Act jurisdiction exists is a question of law that we review without deference to the decision of the trial court.” Metz v. United States, 466 F.3d 991, 995 (Fed. Cir. 2006) (citation omitted). PDS Consultants, as the plaintiff below, “bears the burden of proving that” the Claims Court “possessed jurisdiction over his complaint.” Sanders v. United States, 252 F.3d 1329, 1333 (Fed. Cir. 2001) (citing Rocovich v. United States, 933 F.2d 991, 993 (Fed. Cir. 1991)).
We generally review an agency‘s statutory interpretations pursuant to Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984); Auer v. Robbins, 519 U.S. 452 (1997); and United States v. Mead Corp., 533 U.S. 218, 229–30 (2001). Chevron requires that a court reviewing an agency‘s construction of a statute that it administers first discern “whether Congress has directly spoken to the precise question at issue.” 467 U.S. at 842. If the answer is yes, the inquiry ends, and the reviewing court must give effect to Congress‘s unambiguous intent. Id. at 842–43. If the answer is no, the court must defer to the agency‘s construction of the statute as long as that construction is a reasonable one. Id. at 843. Notably, “we owe an agency‘s interpretation of the law no deference unless, after ‘employing traditional tools of statutory construction,’ we find ourselves unable to discern Congress‘s meaning.” SAS Inst. Inc. v. Iancu, 138 S. Ct. 1348, 1358 (2018) (quoting Chevron, 467 U.S. at 843 n.9).
Here, despite the existence of various regulations and internal documents purporting to implement the VBA, neither party argues that the VBA is ambiguous or that the VAAR regulations or the 2010 and 2016 memoranda are entitled to deference under Chevron. Rather, both parties argue that the statutes before us—when properly construed and reconciled—unambiguously compel the result they seek.
Before turning to the statutory interpretations the parties urge, we must first consider the question of the Claims Court‘s jurisdiction over PDS Consultants’ complaint.
B. The Claims Court Properly Exercised Subject-Matter Jurisdiction over the Action
The Industries for the Blind argues that the Claims Court lacked jurisdiction to rule on PDS Consultants’ claims for two reasons.6 First, the Industries for the Blind contends that PDS Consultants challenges “the validity of the VAAR and the AbilityOne Program as a whole,” and that such a challenge to the validity of a regulation or statute “rests exclusively with the federal district courts under the authority of the [Administrative Procedure Act].” Indus. for the Blind Br. 22, 24. Second, the Industries for the Blind argues that purchases from the List “are not ‘procurements’ for purposes of Tucker Act jurisdiction.” Id. at 28. Instead, the only List procurements arising under Tucker Act jurisdiction, according to the Industries for the Blind, are AbilityOne‘s decisions to add or remove products and services from the List. See id. at 28–29.
PDS Consultants’ claims fall squarely within Tucker Act jurisdiction. An “interested party” under the Tucker Act is “an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract.”
Regarding whether the Industries for the Blind‘s contracts are procurements, we have found “procurements” under the Tucker Act to encompass “all stages of the process of acquiring property or services, beginning with the process for determining a need for property or services and ending with contract completion and closeout.” Distributed Sols., Inc. v. United States, 539 F.3d 1340, 1345-46 (Fed. Cir. 2008) (emphasis omitted). “To establish jurisdiction pursuant to this definition, [PDS Consultants] must demonstrate that the government at least initiated a procurement, or initiated ‘the process for determining a need’ for” eyewear for VISNs 2 and 7. Id. at 1346. PDS Consultants has satisfied this requirement. The Industries for the Blind‘s agreements in VISNs 2 and 7, stemming from VA procurements, are legally binding contracts requiring the Industries for the Blind to furnish eyewear and related services and the VA to pay for it. Such contracts are encompassed within the Tucker Act‘s broad coverage of “procurements.”
Accordingly, the Claims Court did not err in finding that it had jurisdiction over PDS Consultants’ claims.
C. The VA is Required to Use the Rule of Two Even When Goods and Services Are on the List
Now that we have determined that the Claims Court properly exercised jurisdiction over PDS Consultants’ complaint, we next examine whether the Claims Court
“As in any case of statutory construction, our analysis begins with the language of the statute.” Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438 (1999) (internal quotation marks omitted). “The first step is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case.” Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450 (2002) (quoting Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997)). We “must read the words in their context and with a view to their place in the overall statutory scheme.” King v. Burwell, 135 S. Ct. 2480, 2489 (2015) (quoting FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000)). This is because statutory “[a]mbiguity is a creature not of definitional possibilities but of statutory context.” Brown v. Gardner, 513 U.S. 115, 118 (1994).
The two statutory provisions at the heart of this case are the VBA,
Section 8504(a) of the JWOD also contains the word “shall.” It provides that “[a]n entity of the Federal Government intending to procure a product or service on the [List] ... shall procure the product or service from a qualified nonprofit agency for the blind or a qualified nonprofit agency for other severely disabled” in accordance with regulations promulgated by and prices set by AbilityOne, “if the product or service is available within the period required by the entity.”
As both statutes contain mandatory language, we must determine whether and to what extent they conflict with one another. If it is possible to give effect to both statutes, we must do so. Watt v. Alaska, 451 U.S. 259, 267 (1981) (court must read statutes to give effect to each if it can do so while preserving their sense and purpose). If any interpretation of the statutory provisions at issue allows both statutes to remain operative, the court must adopt that interpretation absent a clear congressional directive to the contrary. Miccosukee Tribe of Indians of Fla. v. United States Army Corps of Eng’rs, 619 F.3d 1289, 1299 (11th Cir. 2010) (interpretation that allows both statutes to stand must be employed).
The government argues that any statutory conflict can be avoided by interpreting
Rather than limit its application to competitive contracts,
So, we must turn to the question of whether an alternative means for reconciling these provisions can be found in standard principles of statutory interpretation. We find that it can.
“A basic tenet of statutory construction is that a specific statute takes precedence over a more general one.” Arzio v. Shinseki, 602 F.3d 1343, 1347 (Fed. Cir. 2010) (citing Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384 (1992) (“[I]t is a commonplace of statutory construction that the specific governs the general.“)); RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639, 645 (2012) (“The general/specific canon is perhaps most frequently applied to statutes in which a general permission or prohibition is contradicted by a specific prohibition or permission. To eliminate the contradiction, the specific provision is construed as an exception to the general one.“). While the JWOD applies to all agencies of the federal government, the VBA applies only to VA procurements and only when the Rule of Two is satisfied. The express, specific directives in
A comparison of the provisions and stated goals of the VBA with those of its predecessor, the Veterans Benefit Act of 2003, reinforces this conclusion. The 2003 Act, unlike the VBA, authorized but did not require all contracting officers within the federal government to apply the Rule of Two when contracting with service-disabled veteran-owned small businesses (as opposed to all veteran-owned small businesses) under title 15 of the United States Code. Specifically, it amended
a contracting officer may award contracts on the basis of competition restricted to small business concerns owned and controlled by service-disabled veterans 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.
The VBA, moreover, was expressly enacted to “increase contracting opportunities for small business concerns owned and controlled by veterans and... by veterans with service-connected disabilities.”
The VBA also lacks any exception for procurements that would otherwise be governed by the JWOD. We assume that Congress was aware that it wrote an exception into the agency-wide Veterans Benefits Act in 2003 when it left that very same exception out of the VBA only three years later.
Additionally, “when two statutes conflict, the later-enacted statute controls.” Miccosukee Tribe, 619 F.3d at 1299; see also United States v. Estate of Romani, 523 U.S. 517, 532 (1998) (finding later-enacted, more specific statute controlling). As the VBA was enacted over 30 years after the JWOD was last amended,7 we can infer that Congress intended the VBA to control in its narrower arena, and the JWOD to dictate broader procurements outside of the VA. Because we can give meaning to both statutes under this interpretation, we avoid any repeal of the JWOD by implication. See Morton v. Mancari, 417 U.S. 535, 549 (1974) (“[R]epeals by implication are not favored.“). That is, agencies outside of the VA must still comply with the JWOD, as does the VA when the Rule of Two is not implicated. We, therefore, conclude that the requirements of the more specific, later-enacted VBA take precedence over those of the JWOD when the two statutes are in apparent conflict.
Our conclusion finds support in the Supreme Court‘s decision in Kingdomware. There, the Court considered whether the VA must use the Rule of Two every time it awards contracts, or whether it instead
Our conclusion is not, as the government and the Industries for the Blind contend, inconsistent with the FAR. They argue that, even if
Indeed, under
Thus, where a product or service is on the List and ordinarily would result in the contract being awarded to a nonprofit qualified under the JWOD, the VBA unambiguously demands that priority be given to veteran-owned small businesses. While we are mindful of Appellants’ policy arguments, we must give effect to the policy choices made by Congress. We find that by passing the VBA, Congress increased employment opportunities for veteran-owned businesses in a narrow category of circumstances, while leaving intact significant mechanisms to protect such opportunities for the disabled.
III. CONCLUSION
Considering the plain language of the more specific, later-enacted VBA, as well
AFFIRMED
COSTS
No costs.