VETERANS 

ADMINISTRATION 

PROCUREMENT

Protests Concerning 

Service-Disabled VeteranOwned Small Business 

Preferences Sustained 

Statement of Ralph O. White

Managing Associate General Counsel

Office of General Counsel 

Testimony

Before the Subcommittees on Oversight 

and Investigation and Economic 

Opportunity, Committee on Veterans’ 

Affairs, House of Representatives

For Release on Delivery 

Expected at 10:00 a.m. EST

Wednesday, November 30, 2011

GAO-12-278T

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-278T a testimony before 

Subcommittees on Oversight and Investigation 

and Economic Opportunity, Committee on 

Veterans’ Affairs, House of Representatives 

November 2011 

VETERANS ADMINISTRATION PROCUREMENT

Protests Concerning Service-Disabled VeteranOwned Small Business Preferences Sustained

GAO’s Role Under The 

Competition in Contracting 

Act 

Under the Competition in Contracting 

Act of 1984, GAO is required to 

consider protests filed by interested 

parties concerning the terms of 

solicitations or contract awards. In 

deciding protests, GAO makes a 

determination of whether the agency’s 

actions complied with procurement 

statutes and regulations. Aldevera, an 

SDVOSB concern, argued that two 

solicitations issued by the Veterans 

Administration should have been set 

aside for SDVOSB concerns.

GAO’s Recommendations

GAO recommended, for the solicitation 

where the record showed that two or 

more SDVOSBs were capable of 

meeting the agency’s requirements at 

a fair and reasonable price, that the VA 

cancel the solicitation and obtain its 

requirements using an SDVOSB setaside. GAO also recommended, for 

the solicitation where the record did not 

indicate whether there were two or 

more SDVOSBs capable of meeting 

the agency’s requirements at a fair and 

reasonable price, that the VA conduct 

reasonable market research regarding 

its requirements. If the VA determines 

that there is a reasonable expectation 

of receiving offers from two or more 

SDVOSB concerns capable of 

performing the requirements at a fair 

and reasonable price, we 

recommended that the VA cancel the 

solicitation and re-solicit its 

requirements using an SDVOSB 

set-aside.

GAO’s Findings

The Veterans Benefits, Health Care, and Information Technology Act of 2006, 

38 U.S.C. §§ 8127-8128 (2006) (the 2006 Act) provides in relevant part that the 

Department of Veterans Affairs (VA) must set aside procurements for ServiceDisabled Veteran-Owned Small Business (SDVOSB) concerns if the contracting 

officer has a reasonable expectation of receiving offers from two or more 

SDVOSB concerns and that award can be made at a fair and reasonable price 

that provides the best value to the government.

Aldevra, an SDVOSB concern, challenged the terms of two solicitations issued 

by the VA for kitchen equipment. In both protests, Aldevra argued that the VA 

should have restricted the competitions to SDVOSB concerns, instead of issuing 

the solicitations for competition under the General Services Administration’s 

(GSA) Federal Supply Schedule (FSS). In its response to the protest, VA argued 

that the SDVOSB set-aside requirements of the 2006 Act did not apply to the 

FSS.

In a decision issued by our Office, GAO concluded that the 2006 Act applies to 

the FSS.

Accordingly, GAO sustained the protests. The decision is available at: 

http://www.gao.gov/decisions/bidpro/405271.pdf.

View GAO-12-278T. For more information, 

contact Ralph White at 202-512-8278 or 

whitero@gao.gov. 
Page 1 GAO-12-278T 

Chairman Johnson, Chairman Stutzman, Ranking Members, and 

Members of the Subcommittees:

Thank you for the opportunity to be here today to discuss the bid protest 

decision recently issued by the Government Accountability Office (GAO) 

in response to two protests challenging the issuance of solicitations by 

the Department of Veterans Affairs (VA). This decision addressed the 

statutory preference for setting aside VA procurements for ServiceDisabled Veteran-Owned Small Business (SDVOSB) concerns.

GAO provides an objective, independent, and impartial forum for the 

resolution of disputes concerning the awards of federal contracts. Since 

1984, the Competition in Contracting Act (CICA) has established statutory 

authority for GAO’s bid protest function. GAO has issued implementing 

regulations establishing the procedural framework for our bid protest 

forum in Title 4, Part 21, of the Code of Federal Regulations.

In Fiscal Year 2011, we received 2,353 bid protests challenging 

procurements across the federal government. The bid protest process is 

a legal one, and both the process and the resulting product differ from 

those associated with the reports that GAO issues in connection with its 

program audits and reviews. Protests are handled solely by GAO’s Office 

of General Counsel (OGC), not by its audit teams. In developing the 

record, OGC provides all parties—the protester, the awardee, and the 

contracting agency—an opportunity to present their positions. In some 

cases, OGC conducts a hearing to further develop the record. Under 

CICA, as amended, we have 100 calendar days to decide a protest.

The product of a GAO protest—our legal decision—does not address 

broad programmatic issues such as whether or not a particular 

government program is being managed effectively or consistent with best 

practices. Instead, our bid protest decisions address specific allegations 

challenging particular procurement actions as contrary to procurement 

laws, regulations, and the evaluation scheme set forth in the solicitation.

We sustain a protest when we find that the procuring agency has not 

complied with procurement laws, regulations, or the solicitation’s 

evaluation scheme, and that the violation prejudiced the protester’s 

chances of winning the contract.

With that background, my testimony today will summarize our recently 

issued decision concerning challenges to the VA’s interpretation of the 

statutory requirement that VA set aside procurements for SDVOSB 

concerns.

 
Page 2 GAO-12-278T 

Our decision concerns two protests filed by Aldevra, an SDVOSB. The 

first protest, which was received on July 1, 2011, challenged the terms of 

solicitation No. VA-69D-11-RQ-1170 for a tilting skillet/braising pan and 

one countertop electric griddle for the Federal Health Care Center in 

Chicago, Illinois. The second protest, which was received on August 12,

challenged the terms of solicitation No. 693-11-4-179-0306, for two 

griddles and one food slicer for the VA Medical Center in Wilkes-Barre, 

Pennsylvania. Our decision of October 11 addressed both protests by the 

100-day deadline for the first protest.

The VA issued both solicitations under the Federal Supply Schedule 

(FSS), which is a program consisting of contracts administrated by the 

General Services Administration that is available for all Executive Branch 

agencies to use in their procurements. The solicitations here were not 

restricted to SDVOSB concerns, or concerns under any other socioeconomic program.

The sole issue raised by Aldevra was whether the Veterans Benefits, 

Health Care, and Information Technology Act of 2006, 38 U.S.C. 

§§ 8127-8128 (2006) (the 2006 VA Act), required the VA to conduct 

market research to determine whether the VA should set aside the

procurements for SDVOSB concerns before using the FSS to satisfy its 

requirements.

In relevant part, the 2006 Act provides as follows:

. . . 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.

The statute also sets out an order of priority for the contracting 

preferences it establishes, providing that the first priority for contracts 

shall be given to SDVOSB concerns, followed by veteran owned small 

businesses (VOSBs).

A regulation issued by the VA implementing the 2006 Act similarly stated 

that a contracting officer “shall” set aside a procurement for SDVOSBs (or 

VOSBs) if there is a “reasonable expectation” that offers will be received 

from two or more SDVOSB (or VOSB) concerns, and award will be made 

Background

The Legal Standard
Page 3 GAO-12-278T 

at a reasonable price. Veterans Administration Acquisition Regulation 

(VAAR), 48 C.F.R. § 819.7005(a) (2011).

The VA argued that, notwithstanding the statutory language in the 2006 

Act, the agency is not required to conduct market research to determine 

whether SDVOSBs (or VOSBs) are capable of performing the 

requirement if the VA instead chooses to procure its requirements 

through the FSS. In support of its position, the VA cited provisions of 

Federal Acquisition Regulation (FAR) part 19.14, which states that 

agencies “may” set aside procurements for SDVOSBs if they have an 

expectation of receiving two or more offers from SDVOSB concerns 

capable of performing the requirements at a fair and reasonable price. As 

relevant to the protests—and the VA’s response to the protests—FAR 

part 8.4 states that the small business set-aside rules under FAR part 

19—including SDVOSBs—do not apply to the FSS.

Our Office reviewed the language of the 2006 Act, as well as the FAR 

provisions cited by the VA. We concluded that the 2006 Act plainly states 

that the VA “shall” set aside procurements for SDVOSB (or VOSB) 

concerns if it determines that there is a reasonable expectation of receiving 

offers from two or more SDVOSB (or VOSB) concerns capable of 

performing the requirements at a fair and reasonable price. This statutory 

language takes precedence over any regulatory language to the contrary.

Moreover, the FAR provisions cited by the VA, which state that agencies 

“may” consider using an SDVOSB set-aside, were implemented to meet the 

statutory requirements of the Veterans Benefit Act of 2003, 15 U.S.C. 

§ 657f (2006) (the 2003 Act), which applies government-wide. The 2006 Act, 

however, is a separate statutory authority codified within the statutes that 

govern the VA (i.e., Title 38 of the U.S. Code) that applies only to the VA.

Thus, the FAR provisions, which state that agencies “may” set aside 

procurements for SDVOSBs, and which are also exempt under the FSS 

from the provisions of FAR part 19.14, do not apply to the VA, because 

the VA is governed by the later-enacted and VA-specific 2006 Act, and 

not the 2003 Act, which applies government-wide. Put differently, the VA 

is subject to procurement rules concerning SDVOSBs that do not apply to 

any other Executive Branch agency.

For the record, our decision does not state that the VA must set aside 

every competition for SDVOSB (or VOSB) concerns. Instead, our 

decision states that the VA must first conduct market research to 

GAO’s Review of the 

Record
Page 4 GAO-12-278T 

determine whether it will receive offers from two or more SDVOSB (or 

VOSB) concerns. If the VA concludes that there is a reasonable 

expectation of receiving offers from two or more SDVOSB (or VOSB)

concerns capable of performing the requirements at a fair and reasonable 

price, the agency must set aside the procurement for SDVOSBs (or 

VOSBs). If the VA concludes that there is not a reasonable expectation of 

receiving offers from two or more SDVOSB (or VOSB) concerns capable 

of performing the requirements at a fair and reasonable price, it may use 

any other authorized procurement method.

Based on our review of the record, we sustained the protests. For the first 

solicitation, the VA conceded that there were two or more SDVOSB 

concerns capable of performing its requirements at a fair and reasonable 

price. GAO therefore recommended that the VA cancel the first 

solicitation and re-solicit its requirements using an SDVOSB set-aside.

For the second solicitation, the record did not address whether there were 

two or more SDVOSB concerns capable of performing the requirements 

at a fair and reasonable price. GAO therefore recommended that the VA 

conduct market research regarding its requirements for that solicitation. 

If the VA determines that there is a reasonable expectation of receiving 

offers from two or more SDVOSB concerns capable of performing the 

requirements at a fair and reasonable price, we recommended that the 

VA cancel the solicitation and re-solicit its requirements using a SDVOSB 

set-aside. We also recommended that the agency reimburse the protester 

the costs of filing and pursuing the protests.

Under CICA, a GAO decision sustaining a protest results in a 

recommendation. The statute gives agencies 60 days to implement a GAO 

recommendation. In the event an agency does not implement a GAO 

recommendation, the agency must advise GAO within 5 days after the 

conclusion of the 60-day period. In the event an agency advises it will not 

follow a GAO recommendation, CICA requires GAO to advise the Congress 

of the agency’s decision.

Here, the VA has until December 15, 2011, to respond to our 

recommendation. As of today, the VA has not yet responded.

Chairman Johnson, Chairman Stutzman, this concludes our prepared 

statement. I would be happy to respond to any questions regarding our 

bid protest decisions that you or other Members of the Subcommittees 

may have.

Recommendation

(996201)
Page 5 GAO-12-278T 

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