Appeals from the United States Court of Federal Claims in No.
1:16-cv-01063-NBF, Senior Judge Nancy B. Firestone.
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.
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,
Winfrey Howard, Wiley Rein LLP, Washington, DC, for amicus
curiae National Industries For The Blind. Also represented by
Stephen Joseph Obermeier.
Saunders, Wilmer Cutler Pickering Hale and Dorr LLP,
Washington, DC, for amici curiae Kingdom-ware Technologies,
Inc., National Veteran Small Business Coalition, American
Legion. Also represented by Edward Henderson Williams, II.
Holman, Arnold & Porter Kaye Scholer LLP, Washington, DC,
for amicus curiae SourceAmerica. Also represented by
Nathaniel Edward Castellano.
R. Johnson, Vinson & Elkins LLP, Washington, DC, for
amicus curiae Goodwill Industries International, Inc.
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
Prost, Chief Judge, O'Malley and Stoll, Circuit Judges.
O'Malley, Circuit Judge.
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, Pub. L. No. 109-461, 120 Stat. 3403, 3431-35
(2006) ("VBA"), requires the Department of Veterans
Affairs ("VA") to consider awarding contracts for
prescription eyewear based on competition restricted to
veteran-owned small business-i.e., to undertake a "Rule
of Two" analysis-before procuring such eyewear from any
other source, including a nonprofit agency for the blind or
significantly disabled, designated as such under the
Javits-Wagner-O'Day Act ("JWOD"), 41 U.S.C.
§ 8504. See PDS Consultants, Inc. v. United
States, 132 Fed.Cl. 117 (2017). For the reasons that
follow, we affirm.
Overview of the Federal Procurement Process
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.
Competition in Contracting Act
1984, Congress enacted the modern statutory framework for
federal procurement, the Competition in Contracting Act of
1984, Pub. L. No. 98-369, div. B, tit. VII, 98 Stat. 494,
1175, which is codified, as amended, in various sections of
titles 10, 31, and 41 of the United States Code. The
Competition in Contracting Act generally requires that all
executive agencies "obtain full and open competition
through the use of competitive procedures" when
procuring goods or services. 41 U.S.C. § 3301(a). An
agency uses "competitive procedures" when it
permits any responsible source to compete for a procurement;
it also uses "competitive procedures" when it
appropriately restricts competition to "small business
concerns." Id. § 152.
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,"
id. § 3301(a); or (2) "a statute expressly
authorizes or requires that the procurement be made through
another executive agency or from a specified source,"
id. § 3304(a)(5). The parties do not dispute
that the JWOD is a statute that expressly requires that
certain procurements be made "from a specified
source." They dispute, however, whether and to what
extent the VBA contains a separate exception from the
Competition in Contracting Act's "competitive
procedures" requirement, one that applies before resort
to the requirements of the JWOD.
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 for Purchase from People Who Are Blind or
Severely Disabled ("AbilityOne"), a fifteen-member
body appointed by the President that includes one
representative from the VA. 41 U.S.C. § 8502.
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. Id. § 8503(a). The JWOD
generally requires that federal agencies, which on its face
would include but not be limited to the VA, purchase products
and services on the List from designated nonprofits.
Specifically, the JWOD provides that:
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
Id. § 8504(a) (emphasis added). Regulations
promulgated under the JWOD mandate that AbilityOne, in
deciding what items to place on the List, consider, among
other things, the additional service or commodity's
potential to generate employment, the nonprofit agency's
qualifications and capability to meet Government standards
and schedules, and the impact on private contractors. 41
C.F.R. § 51-2.4. AbilityOne can make changes to the List
by posting a notice in the Federal Register and following the
notice and comment procedures set forth in the Administrative
Procedure Act. 41 U.S.C. § 8503(a)(2).
Small Business Act and Amendments Thereto
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 15 U.S.C. § 644(g)(1)(B)).
Federal regulations, such as 48 C.F.R. § 19.502-2(b),
moreover, "set forth procedures for most agencies to
'set aside' contracts for small businesses."
through the SBA, established a goal for all agencies to
obtain 23% of the value of contracts from "small
business concerns." 15 U.S.C. § 644(g)(1)(A)
(2012). Congress then expanded small-business opportunities
for veterans by passing section 502 of the Veterans
Entrepreneurship and Small Business Development Act of 1999,
Pub. L. No. 106-50, 113 Stat. 233, which amended the SBA and
established a government-wide contracting goal for agencies
to obtain at least 3% of the value of contracts from
service-disabled veteran-owned small businesses. Id.
further amended the SBA by passing the Veterans Benefits Act
of 2003, Pub. L. No. 108-183, 117 Stat. 2651. Section 308 of
the 2003 Act, as codified, provides that contracting officers
"may award contracts on the basis of competition
restricted to small business concerns owned and controlled by
service-disabled veterans," provided "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." 15 U.S.C.
§ 657f(b). It also provides, however, that such a
procurement may not be made from a source on this basis
"if the procurement would otherwise be made from a
different source under section 4124 or 4125 of title 18 or
chapter 85 of title 41," the latter including the JWOD.
Id. § 657f(c).
VBA and the VA's Regulations and Guidance
enacted the VBA in 2006, seeking to remedy federal
agencies' failures to meet these contracting
goals.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 38 U.S.C. §
8127(a). Congress also created a preference for awarding
contracts restricted to veteran-owned small business, known
as the "Rule of Two," which provides:
(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.
Id. § 8127(d). Subsections (b) and (c) give
contracting officers discretion to award contracts below
certain dollar thresholds to veteran-owned small businesses
without using competitive procedures (very small contracts)
or on a sole-source basis (slightly larger contracts).
Id. §§ 8127(b) & (c). Unlike the 2003
Act, the VBA contains no express exception for procurements
which would "otherwise be made from a ...