Legal Meets Practical

Yesterday, the Supreme Court heard the oral argument in a case that has the potential to majorly affect all veteran-owned small businesses (VOSBs) competing on the Federal Supply Schedule (FSS): Kingdomware.

Many veteran business owners are already aware of the Kingdomware case, not just because of its implication for their bottom line but also because it’s been dragging on for almost four years now. Here’s the lowdown on what’s happened so far:

Kingdomware History in Brief

In 2012, the Government Accountability Office sustained a number of protests on the grounds that under the Veterans Benefits, Health Care, and Technology Act (the “Act”), the U.S. Department of Veterans Affairs (VA) must conduct market research to determine whether an FSS solicitation should be issued as an SDVOSB set-aside. (Aldevra, B-406205, March 14, 2012; Kingdomware Technologies, B-406507, May 30, 2012).

On November 29th, 2012, however, the Court of Federal Claims (CoFC) ruled that the Department of Veterans Affairs (VA) acted reasonably in determining that it need not set aside FSS contracts for SDVOSBs.

Judge Firestone, who penned the decision, analyzed the VA’s decision using Chevron deference. (Chevron, U.S.A. v. National Resources Defense Council, 467 U.S. 837 (1984)). Chevron deference is the standard used by a court to determine whether to grant deference to an agency’s interpretation and application of its own statute (a statute created to apply to the agency). This involves a two-part step: 1) determining whether Congress had spoken directly on the issue at hand; and 2) determining whether the VA had assigned a permissible definition/interpretation to the applicable provision.

Judge Firestone found that Congress had not spoken directly to the issue of whether the VA was required to conduct mandatory procurements for SDVOSBs under the “Rule of Two.” Accordingly, Judge Firestone proceeded to the second step of determining whether the VA assigned a permissible definition to the applicable provision. In applying the “substantial deference” afforded to an agency’s application of its own statute, Judge Firestone held that the VA’s interpretation was reasonable. In a lengthy analysis, Judge Firestone pointed to the VA’s consistent application of this interpretation, as well as the fact that this interpretation does not conflict with the rest of the Act or the VA Acquisition Regulation.

Kingdomware appealed this decision, but it was unfortunately upheld in a split decision by a district court. Kingdomware then applied for cert to the Supreme Court (its last hail Mary); and in the summer of 2015, the Supreme Court granted cert. This is a victory itself, as the Supreme Court grants cert in only about 1% of cases.

In November of 2015, it appeared the case might be in jeopardy because the Supreme Court raised the issue of mootness (i.e., was the case moot since the contracts at issue had already been performed?). In briefs mandated by the Court, both parties presented a united front in arguing the situation at hand was likely to repeat itself, which the Court accepted, and the case was set for oral argument on February 22, 2016.

In February of 2016, Judge Antonin Scalia passed away. This meant that for Kingdomware to win, it must obtain a 5-3 decision in its favor. In the event of a tie – 4 to 4 – the lower district court decision must stand (and the VA won that case).

Down to Brass Tacks: The February 22 Hearing

The veteran community is now buzzing about the February 22 hearing before the Supreme Court. While I did not have the opportunity to attend, I have reviewed the transcript now on the Court’s website. Here is the nitty gritty:

• The Justices interrupted Kingdomware’s counsel, Mr. Thomas G. Saunders, early on regarding the issue of whether the issue was moot. After all, the contracts at issue have already been performed. In so doing, they questioned the Rule of Two and whether the requirement to set aside work for SDVOSBs/research whether it should be would slow the procurement process even in times of urgent need. This required Mr. Sanders to provide a clear description of procurement databases and acquisition procedures under the FSS; as we government contractors know, it can be difficult to explain these processes to those unfamiliar with government contracting. The Justices appeared to accept this explanation.
• The Justices raised questions to Kingdomware’s counsel, Mr. Saunders, regarding how the VA determines “fair and reasonable price,” noting the difficulty (and subjectivity) in determining whether an award can be made on this basis. They expressed concern over constant litigation between SDVOSBs and the VA regarding whether a particular procurement could meet this criterion (if set aside for SDVOSBs). They also inquired as to why every procurement wouldn’t be set aside to veterans, under the applicable criteria. Mr. Saunders referred to a “natural cap” – sure, these criteria are there, but in most procurements the Rule of Two won’t be met, but it was unclear whether the Court bought (or understood) his argument.
• The Supreme Court literally let the VA’s counsel, Mr. Zachary Tripp, only get one sentence out before interrupting him to ask why the VA walked away from the “winning position” adopted by the federal district court (which had ruled in favor of the VA), which was that the statutory preference for veteran-owned companies applies only if the VA has not met its SDVOSB or VOSB contracting goals.  When Mr. Tripp tried to take a step back to explain the complicated position, Justice Sotomayer interrupted to say: “No. You didn’t listen to me.”

A decision is expected sometime between now and the end of June. As I understand from folks who attended (and based on the moods and questions of the Justices), the decision will be close. I’ll keep you posted!

The entire transcript of the hearing before the Supreme Court can be accessed here.

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In this fight between the VA and veteran business owners, the VA’s duty to set aside work for veterans is at stake.

As several news items from this last week are worthy of note, I’m not going to cover just one. In four hundred words or less, here are the top four items that affect our veterans:

• Supreme Court Judge Antonin Scalia passed away. Last week, the country was saddened to hear of the passing of Supreme Court Justice, Antonin Scalia, who was 79 years old. (Read what other Supreme Court Justices had to say about this great man here). While Scalia’s death is mourned by millions, it also raises the issue of how this affects Kingdomware, a decision long-awaited by the veteran business community that was set for oral argument this Monday (February 22). Long story short, as argument will be held in Scalia’s absence, this sets the stage for one of three options: a split decision, which means the opinion of the lower court will be affirmed (and the veterans lose); 5-3 in the veterans’ favor; or 3-5 in the VA’s favor.

• Congress sounds off on the lack of accountability for VA officials. In reaction to the Merit Systems Protection Board’s (MSPB) decision to overturn the removal of Albany Stratton VA Medical Center Director Linda Weiss, Rep. Jeff Miller, the eloquent and outspoken Chairman of the House Committee on Veterans’ Affairs issued a scathing statement. It’s worth a read if you’ve been following hot mess that is the VA’s relocation scandal.

• VA Secretary Robert McDonald grilled over Colorado Springs clinic’s woes. During a House budget hearing this month, the VA leader responded to calls for discipline for workers at the Fillmore Street facility in the wake of an Office of Inspector General report that found the clinic wasn’t delivering timely care and had falsified appointment days. Let’s hope this isn’t Phoenix all over again. . .

• VA Bosses Want to Cut Red Tape that Prevents Firings. Maybe it was just to save face, but in early February the VA proposed to Congress that the department be authorized to strip all senior executives and doctors of MSPB appeal rights. The agency-backed plan would convert VA senior executive service employees — the federal workforce’s top career bosses — to Title 38 employees, the classification of VA doctors. The plan would then authorize the firing of any Title 38 employee for cause, without appeal rights. While it has been incorporated into existing legislation for consideration, don’t hold your breath on this one – it might be a symbolic statement more than anything, given its (major) Constitutional issues.

That’s it and that’s all! Stay tuned for more next week. (And bonus points if you know what movie I’ve just referenced).

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Even though a Department of Veterans’ Affairs (VA) Office of Inspector General (OIG) report found that Kimberly Graves and Diana Rubens abused their positions as Senior Executive Service (SES) officials and manipulated the employment system for their own benefit, two separate judges have overturned each woman’s demotion and pay cut.

I’ve blogged about this before because it horrifies me – these two women, Kimberly Graves and Diana Rubens, are literally being paid a combined $400,000 for deplorable actions. In both cases, according to the VA’s OIG, Ms. Graves and Ms. Rubens effectively forced out other senior officials so they could take over their jobs – with hefty relocation expenses.

The embattled VA finally seemed to be doing something to hold these officials accountable – they demoted them and effected a pay cut, citing poor judgement and creating a perception of impropriety. It would have been great if they could have been publicly fired, but hey – Government jobs are protected by the U.S. Constitution.

The VA also forwarded its OIG report to the U.S. Attorney’s Office for possible criminal charges. That office declined to prosecute and returned the report to the VA for any disciplinary action.

Now, however, both women have been vindicated (a word they do not deserve) by two separate judges at the Merit Systems Protection Board, which examines disciplinary action taken against Government employees. This means that these women felt entitled to protest their pay cut, which in and of itself is insulting to tax payers.

Both judges stated that technically, neither Ms. Graves or Ms. Rubens violated any laws. They also put a lot of stock in the fact that they acted under the blessing and consent of higher-up officials (one of whom resigned over this scandal). As written by the judge in Ms. Kimberly Graves’s proceeding, “It was not something Ms. Graves hid from them as far as her involvement with [her predecessor’s] reassignment. . . They not only endorsed the actions when they happened, but they continue to endorse the actions.”

Also, it mattered greatly that these higher-ups, including Acting VA Under Secretary for Benefits, Danny Pummill, had not been disciplined by the VA. As noted by the judge in one proceeding, “If Ms. Graves is going to be disciplined for failure to exercise sound judgement by creating the appearance of impropriety, then it would only be reasonable if any other [SES] members … involved in the same situation were disciplined as well.”

Here’s a hypothetical. Robbers are scavenging your home, and they scatter when police arrive. Two of seven are caught. The police say, “Oh, well – I guess we’ll let these two go. It’s not fair to these robbers that the others got away. And since they’re already holding your jewelry, we’ll let them keep it.”

Here, not only are Kimberly Graves and Diana Rubens not being punished because higher-ups in the food chain were ignored in the disciplinary process, but they’re being allowed to keep the money. Ms. Rubens’s judge also ruled that she’ll receive interest on the back pay found “owed” to her (due to the demotion). Meanwhile, veterans wait years for a decision on their entitlement to service-connected disability compensation, and they don’t get interest or penalties.

Another horrifying twist in the continuing VA saga.

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