By: Edward T. DeLisle & Craig Schroeder

Last year, the United States Association of Veterans in Business ("USAVETBIZ") urged Congress for a government-wide preference in contracting and set-aside programs that extended the existing preference for service-disabled veteran owned small businesses ("SDVOSB") to all veteran-owned small businesses.  While that has not happened yet, the set aside program for SDVOSBs has been recently strengthened.

On October 7, 2010, the Government Accountability Office ("GAO") issued a decision interpreting the Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. sections 8127-8128 (Supp. III 2006) ("the Act") to require that, in certain circumstances, architect/engineer service contracts must be set aside by the Department of Veterans Affairs ("VA") for SDVOSBs.  In the Matter of Powerhouse Design Architects & Engineers, Ltd., Powerhouse, a Pittsburgh SDVOSB, protested the terms of eight Sources Sought Notices (SSN) issued by the VA for A/E services. Powerhouse asserted that the agency improperly failed to set aside these procurements for SDVOSB firms as required by the Act and its implementing regulations. The procurements were conducted pursuant to the Brooks Act, 40 U.S.C. § 1101 et seq. (Supp. III 2006), and Federal Acquisition Regulation (FAR) subpart 36.6. Consistent with the Brooks Act, the agency publicized its need for A/E services on FedBizOpps. Powerhouse challenged the terms of the SSNs, which were issued on an unrestricted basis.

In sustaining the protest, the GAO analyzed the Act and its implementing regulations. It noted that the Act provides that ". . . 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." 38 U.S.C. § 8127(d). The GAO then went on to look at the regulations, which state that "the contracting officer shall set aside an acquisition for competition restricted to SDVOSB concerns upon a reasonable expectation that: (1) Offers will be received from two or more eligible SDVOSB concerns[4] and; (2) Award will be made at a reasonable price.”

The GAO found "nothing in the VA Act or the VA regulations that exempts A/E procurements from the set-aside requirement." It also found that the agency’s defenses to application of the set aside requirement meritless. Accordingly, the GAO held that "the agency [should] determine whether there is a reasonable expectation that it would receive offers from two or more eligible SDVOSB concerns and award would be made at a reasonable price. For each requirement where there is such an expectation, we recommend that the VA solicit the requirement on the basis of a competition restricted to SDVOSB concerns." Powerhouse was awarded its costs for pursuing the protest, including reasonable attorneys’ fees.

While USAVETBIZ is still seeking a veteran-wide preference, the Powerhouse decision should be considered a victory for all veterans, service-disabled or otherwise.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.  Craig A. Schroeder is an Associate in the firm’s Federal Practice Group.