# United States **Court of Appeals**  **for the Federal Circuit**

______________________
KINGDOMWARE TECHNOLO GIES, INC., Plaintiff

- Appellant,

v.

UNITED STATES, Defendant

- Appellee.

______________________

2013

- 5042

______________________ Appeal from the United States Court of Federal Claims in No. 12

- CV

- 0173, Judge Nancy B. Firestone.

______________________

Decided: June 3, 2014

______________________

L AUREN B. F LETCHER , Wilmer Cutler Pickering Hale and Dorr LLP, of Washington, DC, argued for plaintiff

appellant. With her on the brief were A MY K. W IGMORE , G REGORY H. P ETKOFF , A MANDA L. M AJOR , J OSEPH G AY , and C ARLA J. W EISS , of W ashington, DC

.

R OBERT C. B IGLER , Trial Attorney, Commercial Litig ation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant

appellee. With him on the brief were S TUART F. D ELERY , Assistant Attorney General, B RYANT G. S NEE , Acting Director, and P ATRICIA M. M C C ARTHY , Assistant Director.KINGDOMWARE TECHNOLO GIES , INC

. v. US 2

G ENE C. S CHAERR , Winston & Strawn LLP, of Was hington, DC, for amicus curiae American Legion. With him on the brief was E IMERIC R EIG -P LESSIS

.

______________________
Before P ROST , Chief Judge

, ∗ C LEVENGER , and R EYNA , Circuit Judges.
Opinion for the court filed by Circuit Judge C LEVENGER

. Dissenting opinion filed by Circuit Judge R EYNA

. C LEVENGER , Circuit Judge

. This is an appeal from the final judgment of the Uni ted States Court of Federal Claims (“Court of Federal Claims”) on a mat ter of statutory construction. The Court of Federal Claims ruled in favor of the United States, Kingdomware Techs., Inc. v. United States , 107 Fed. Cl. 226 ( Fed. Cl. 2012) , and Kingdomware Technologies, Inc. (“Kingdom ware”) appeals. For the reasons set forth below, we affirm the final judgment of the Court of Federal Claims.

I
Kingdomware is owned and controlled by a service

disabled veteran. The Department of Veterans Affairs (“VA ” ) certified Kingdomware as a service

- disabled vete ran

- owned small business in September 2010 and re

certified Kingdomware in September 2012.
It has long been the policy of the United States to promote small businesses, including small businesses owned and controlled by veterans

. Congress has e xpressed this policy through t he Smal l Business Act, 15 U.S.C. ch. 14A, and stated its expectation that small

∗ Sharon Prost assumed the position of Chief Judge on May 31, 2014.KINGDOMWARE TECHNOLO GIES , INC

. v. US 3

businesses generally will receive “a fair proportion of the total purchases and contracts for property and services for the Government . . .

. ” 15 U.S.C. § 644(a)(3). VeteranO wned Small B usinesses (“VOSBs”) and S ervice

- Disabled Veteran- Owned Small Businesses (“SDVOSBs”) are expressly recogni zed in the Small Business Act. Id. § 632(q).
The policy directive to promote small businesses lies within the statutes and regulations that guide Gover nment contract formation. The general policies and proc edures for Government contracting are contained in the Federal Acquisition R egulation (“FAR”), 48 C.F.R. ch. 1, which implements the Office of Federal Procurement Policy Act of 1974, 41 U.S .C. ch. 7. Certain agency

- specific contract regulations are established agency by agency, and contract regulations specific to the VA are stated in the Veterans Affairs Acquisition Regula tion (“VAAR”), 48 C.F.R. ch. 8. The overarching policy of the FAR gen erally demands that “[c]ontracting officers shall provide for full and open competition.” 48 C.F.R. § 6.101( b ). The Federal Supply Schedule (“FSS”) exists as one of the tools for achievement of the overarching policy. The FSS was established by the General Services Administration (“GSA”) to provide Government agencies with a “simplified process for o btaining commercial supplies and services at prices assoc iated with volume buying.” Id. § 8.402(a)

. FSS contractors agree to provide goods and services on the FSS at stated prices for given periods of time, thus permitting agencies to buy supplies and services directly from the FSS, rather than using traditional full and open competition contract tools for such purposes. FSS contracts are deemed to satisf y the conditions of full and open competition. Id. § 8.404(a). Unless otherwise specified by statute or regulation, an agency has wide discretion to decide the method of co n-KINGDOMWARE TECHNOLO GIES , INC

. v. US 4

tracting to use, including the FSS. Tyler Constr. Grp. v

. United States , 570 F. 3d 1329, 1334 (Fed. Cir. 2009)

. The FAR specifies as a matter of contracting priority that an agency is encouraged to obtain goods and services from FSS contractors before purchasing from commercial sources, which include privately owned VOSBs and SDVOSB s. 48 C.F.R. § 8.00 4 . The GSA considers its FSS program to be “the premier acquisition vehicle in gover nment,” ac counting for 10 % of overall procurement spen ding. For Vendors – Getting on Schedule

, G ENERAL S ERVICES A DMINISTRATION (May 29 , 2014)

, http://www.gsa.gov/portal/content/198473. The FAR explicitly states that an agency placing an order against the FSS is exempt from requirements of the small business set

- aside programs under FAR p art 19. See 48 C.F.R. §§ 8.404(a), 8. 405

- 5(a), 19. 502

- 1(b)

. This exemption does not affect the VA’s obligation under 48 C.F.R. § 19. 502 -1(a ) otherwise to set aside contracts for competition among small businesses. “ Although GSA awards most [FSS] contracts, it may authorize other agencies to award schedule contr ac ts and publish sche dules .” Id

. § 38.101(d). GSA has specifically delegated authority to the VA to procure medical goods and services under the VA Fe deral Supply Schedule Program. Id

. § 38.000. For other goods and services, the VA uses the GSA FSS program. As a matter of policy, the VA encou rages VOSBs and SDVOSBs to participate in the FSS
program. Press Release, Dep t. of Veterans Affairs, Statement on VA Veteran

- Owned Small Business Contract (Oct. 28, 2011). Purchasing goods and services through the FSS is important to the VA and to VOSBs : in 2011, the VA used FSS contracts for 20% of its total spending, and 13% of the se FSS expendi tures went to VOSBs

. Kathleen Miller, Dispute Simmers Between VA and Vete ran

- Owned Small Businesses

, W ASH

. P OST , Nov. 14, 2011, at A20.KINGDOMWARE TECHNOLO GIES , INC

. v. US 5

II In 1999, Congress amended the Small Business Act to establish an aspirational Government

- wide goal of awar ding 3% of Government contracts to SDV OS Bs

. 15 U.S.C. § 644(g). History shows this 3% goal was not satisfied

. For the 2001 fiscal year, SDV OS Bs received but 0. 24% of federal contract funds. The State of Veterans’ Employment : Hearing Before the H. Comm. on Veterans Affairs

, 108th Cong. 92 (2003) (s tatement of Angela B. Styles, Adm’r Fed. Procurement)

. And the VA awarded on ly 0.1% of its contracts to SDV OS Bs in 2000, 0.2% in 2001

, and 0. 6% in 2002. H.R. 1460, The Veterans Entre preneurship Act of 2003 ; H.R. 1712, The Veterans Federal Procurement Opportunity Act of 2003; and H.R. 1716, The Veterans Earn and Learn Act: Hearing Before the Subc omm. o n Benefits of the H. Comm. on Veterans Affairs , 108th Cong. 9 (2003) (s tatement of Leo Mackay, Deputy Sec’y of Ve terans Affairs).
Congress again amended the Small Busin ess Act in 2003 to focus on SDV OS Bs

. The 2003 Act grant s discr etionary authority ( “a c ontracting officer may award”) to contracting officers, Government

- wide, to award sole

source contracts of r estricted dollar amounts to SDV OS Bs when the contracting officer estimates receipt of a fair and reasonable price, and otherwise to award contracts on the basis of competition restricted to SDV OS Bs “ 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 .” 15 U.S.C. § 657f. The discretionary authority to award contracts beyond the limited dollar amoun t specified for sole -source contracts requires satisfaction of the Rul e of Two , a pr ocedure well

- known throughout the Government in conne ction with award of contracts set aside for competition restricted to small businesses.KINGDOMWARE TECHNOLO GIES , INC

. v. US 6

History again show ed a failure to achieve the goal of the Small Business Act to award 3 % of Government contacts to SDV OS Bs: only 0.605% of Government co ntracts went to SDV OS Bs in 2005

. H.R. R EP

. N O

. 109

- 592, at 16 (2006) (“H.R. R EP .”)

. Consequently, in 2006 Co ngress returned to the subject of preferences for businesses owned and controlled by veterans, enacting a statute specifically and only directed to the VA. While the Small Business Act and previous amendments contained prov isions relating only to SDVOSBs, the 2006 Veterans Act expanded the reach of the small business provisions to include both VOSBs and SDVOSBs.
In particular, Congress mandated that the Secre tary of the VA “ shall” establish a goal for each fiscal year for part icipation in VA contracts by V OS Bs, and “shall” establish a goal for participation in VA contracts by SDVOSB s which “shall not be less” than the Government wide goal set by the Small Bus iness Act, which remained at 3%. 38 U.S.C. § 8127(a).

The Veterans Act of 2006 , codified at 38 U.S.C. § 8127
, give s contracting officers in the VA certain specific tools in subsections (b), (c), and (d) for achieving the goa ls to be set by the Secretary. As the House Report accomp anying the statute explained: “[g]iven this new set of acquisition tools, there should be no reason for VA not to meet the veteran and service

- disabled veteran small business contracting goals.” H.R. R EP ., at 16

. For VA acquisitions for amounts less than what is called the simplified acquisition threshold (currently $1 5 0,000), § 8127(b) states that “ a contracting officer [of the VA] may use procedures other than competitive procedures.” Contracts under $1 5 0,00 0 can thus be sole

sourced to V O SBs and SDV OS Bs without regard to the marketplace competitiveness of the price. Second, for contracts worth $1 5 0,000 up to $5,000,000, VA contrac ting officers “may” use procedures other than competitiveKINGDOMWARE TECHNOLO GIES , INC

. v. US 7

procedures t o g rant sole

- source contracts to V O SBs and SDVOS Bs if the particular business concern (1) “is dete rmined to be a responsible source with respect to perfo rmance of such contract opportunity” ; and (2) “in the estimation of the contracting officer, the contra ct award can be made at a fair and reasonable price that offers best value to the United States .” 3 8 U.S.C. § 8127(c). The authority given to VA contracting officers in subsections (b) and (c) of § 8127 is expressly “for purposes of meeting th e goals under subsection (a).” Third, Congress also authorized use of restricted competition procedur es by VA contracting officers. Thus, in addition to the no ncompetitive methods authorized in subsections (b) and (c), Congress specified as follows in subsection (d):
(d) USE OF RESTRICTED COMPETITION. – Except as provided in s ubsections (b) and (c), for purposes of meeting the goals under subsection (a), and in accordance with this section, a co ntracting officer of the [VA] shall award contracts on the basis of com petition restricted to small business concerns owned and controlled by vete rans if the contracting officer has a reasonable e xp ectation 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) (reciting t he Rule of Two within the “if” clause ). As an assist for achieving the goals under subsection (a), Congress ordered the VA in subsection (i ) to give contracting priority to SDVOSBs and VOSBs over other small business entities. Id

. § 8127(i). Thus, SDVOSBs and VOSBs enjoy primary opportunities over other small businesses.KINGDOMWARE TECHNOLO GIES , INC

. v. US 8

The VA promulgated regulations for § 8127(d). Unlike that subsection , wh ich does not distinguish between VOSBs and SDVOSBs, the VA provided a separate reg ulation for each group, repeating in each regulation the statutory language that the contracting officer shall award contracts according to the Rule of Two

. 48 C.F.R. § 819.7 005 ( providing for SDVOSBs); § 819.7006 ( providing for VOSBs). The regulations further specify that contracting officers must give preference to SDVOSBs over VOSBs, and if only one SDVOSB makes an offer at a fair and reasonable price, the contracting officer “should

ma ke” the award to that offeror (thus converting the Rule of Two to a Rule of One)

. Id

. § 819.7005

. If no acceptable offer is made by a SDVOSB, the contracting officer “shall” withdraw the SDVOSB set

- aside and process the pr ocurement as a VOSB s et- aside. Id

. If only one VOSB makes a fair and reasonable price off er, the contract officer “should make” the award to that offeror, and if no acceptable offer is made, the contracting officer “shall” process the procurement under other small busi ness set

aside programs. Id

. § 819.7006. In the preamble to the regulations, the VA expressed its view that 38 U.S.C. § 8127(d) “does not apply to FSS task or delivery orders” and that the VA would “continue to follow GSA guidance regarding applicability of 48 CFR part 19 of the FAR, Small Business Programs, which states that set

- asides do not apply t o FAR part 8 FSS acquisitions.” 74 Fed. Reg. 64,619, 64
, 624 (Dec. 8, 2009)

. In practice, the VA has continuously and consistently interpreted § 8127(d) as not affectin g its authority to place orders under the FSS, and as granting it the flexibility to achieve the subsection (a) goals by any of the three § 8127 methods.
History has proven true the prediction made in the legislative history of § 8127

. The 2006 Act did n ot become effective until 180 days after its enactment on December 22, 2006, and as a result was not fully implement ed until the 2008 fiscal year. For that year and thereafter, theKINGDOMWARE TECHNOLO GIES , INC

. v. US 9

Secretary set goals well beyond the previous 3% Gover nment

- wide goal for SD VOSBs, and achieved well beyond his stated goals, as shown below.

Year VOSB Goal VOSB Attain ment SDVOSB Goal SDVOSB Attain ment

2008 10% 14.89% 7% 11.78%

2009 10% 19.98 % 7% 16.96%

2010 12% 23.08% 10% 20.05%

2011 12% 20.50% 10% 18.22%

2012 12% 21.77% 10% 19.24%

Memorand um from James B. Peake, Sec’y of Veterans Affairs, to Under Sec’ys, Assistant Sec’ys, Other Key Officials, Deputy Assistant Sec’ys, and Field Facility Directors ( Jan. 28 , 20 08 ); Memorandum from Eric K. Shinseki, Sec’y of Veterans Affair s, to Under Sec’ys, Assistant Sec’ys, Other Key Officials, Deputy Assistant Sec’ys, and Field Directors ( May 7 , 201 0 ); Memorand um from Eric K. Shinseki, Sec’y of Veterans Affairs, to Under Sec’ys, Assistant Sec’ys, Other Key Officials, Deputy Assistant Sec ’ys, and Field Directors (Feb. 21, 2012); Summary of Veterans Affairs Veteran Owned Small Business Goals Achieved for FY 2006 through FY 2012 (Mar. 18, 2014).

III This suit arises from the following undisputed facts. In early 2012, the VA decided to im plement an Emerge ncy Notification Service in several of its medical centers. The VA contracting officer chose to use the GSA FSS to procure the needed services, and awarded the contract to a FSS vendor which was not a VOSB. On March 14, 2012,KINGDOMWARE TECHNOLO GIES , INC

. v. US 10

Kingdomware, a certified SDVOSB and qualified FSS contractor, filed a bid protest with the Governm ent A ccount ability Office (“GAO”). Kingdomware challenged the

con tract award as illegal on the ground that § 8127(d) always bar s the VA from using the FSS with out first in voking the Rule of Two and if satisfied, awarding the

co ntract pursuant to the Rule of Two. The VA argued that subsection (d)’s requirement to invoke this Rule of Two applies only when the VA determines that this is nece ssary to meet the established contra cting goals

. The GAO, relying on its opinion in a previous case, Aldev ra , B

406205, 2012 CPD ¶ 112 (Comp. Gen. Mar. 14, 2012)

, rejected the VA’s argument, and issued a recommendation decision that the VA cancel the contract award already made and re

- solicit the requirement as a SDVOSB set aside, Kingdomware , B

- 406507, 2012 CPD ¶ 165 (Comp. Gen. May 30, 2012).
The VA soon after responded to the GAO and Kin gdomware, announcing that it would not acquiesce in GAO’s recommendation decision. The VA was on firm
gr ound in refusing to accept the GAO decision

. Although agencies often follow GAO recommendations in bid pr otest decisions “given the GAO’s long experience and special exper tise in such . . . matters,” CMS Contract Mgmt. Servs. v. Massachusetts Hous. Fin. Ag ency , 745 F.3d 1379, 1384 (Fed. Cir. 2014) (internal citation omi tted)

, these recommendations are not binding on an age ncy. See Honeywell, Inc. v. United States

, 870 F.2d 644, 647

– 648 (Fed. Cir. 1989) (noting that the provisions of the Competition in Contr acting Act “do not compel procuring agencies to obey the recommendation of the Comptroller General . . . . ” (internal citation omitted) ). By enforcing its long

- standing interpretation of § 8127(d), the VA set the stage for Kingdomware’s retreat to the United States Court of Federal Claims.KINGDOMWARE TECHNOLO GIES , INC

. v. US 11

IV Kingdomware filed its complaint on March 15, 2012. The parties stipulated to the facts as presented here and

cross

- moved for summary judg ment. Both parties claimed victory on the plain meaning of § 8127(d). Kingdomware argued that the word “shall” in the statute is an una mbiguous imperative that the Secretary can never use the FSS where the Rule of Two may be satisfied. The VA responded that Kingdomware’s view wri te s out of the statute its obligation to set t he goals for VOSB contract awards because a mandatory set

- aside requirement for all contracts would obviate the need for the Secretary to establish goals. The VA argued that all the words in § 8127 have to be accounted for, and that “for the purpo ses of me eting the goals under subsection (a)” langua ge in subsection (d) giv es clear meaning to the “shall” imper ative to use the Rule of Two procedure: § 8127(d) properly understood only compels the VA to conduct a Rule of Two analysis when the Secretary determin es th at doing so i s necessary to meet the goals set by him under subsection (a). The Court of Federal Claims reasoned that Kingdo mware’s interpretation of § 8127(d) is not supported by the plain language of the statute because it does not account for the m andatory goal

- setting requirements of the section

an d the command that the Rule of Two procedure be used “for p urposes of meeting the goals.” Without addressing the VA ’s plain meaning interpretation, the Court of Federal Claims ruled that “the goal

- setting nature of the statute clouds the clarity plaintiff would attribute to the phrase ‘shall award’ in subsection (d) of the Act, and renders the Act ambiguous as to its application to other procurement vehicles, such as the FSS.” Kingdomware

, 107 Fed. Cl. at 241. Having found ambiguity in subsection (d) under the fir st step of the analysis laid out in Chevr on, U.S.A., Inc.KINGDOMWARE TECHNOLO GIES , INC

. v. US 12

v. Natural Resources Defense Council, Inc. , 467 U.S. 837 (1984) , the Court of Federal Claims then assesse d the reasonableness of the VA ’s consistent interpretation of the
statute , which was first expressed in the preamble of the regulations promulgated for the 2006 Act after notice and comment rulemaking, and since articulated in policy
statements
, see, e.g., Press Release, Dep t. of Veteran s Affairs, Statement on VA Veteran

- Owned Small Business Contract (Oct. 28, 2011), and in litigation. Because the regulations themselves do not expressly state that the subsection does not apply to the FSS, the court declined Chevron deference to the VA ’s i nterpreta tion. But since the regulations only re cite statutory language verbatim, and that language was found ambigu ous, and because the regulations are wholly silent as to what role the FSS might play in meeting the goals set by the Secretary, the court considered granting deference under Skidmore v. Swift & Co. , 323 U.S. 134 (1944), to the clear statement of the VA’s interpretation in the regulations ’ preamble.

The Court of Federal Claims concluded that the VA ’s interpretation has many of the blazemarks f avoring deference under Skidmore

. First, the VA ’s view that § 8127 does not apply to the FSS has been consistent over time, reflecting a uniform administrative and litigation stance by the VA. Second, the VA ’s view is not directly in conflict with the wor ds of the statute or the regulations, both of which are silent on the role of the FSS in meeting the Secret ary’s goals. Also, the legislative history of the statute expressed an intent that the VA retain the “o ption” to award contracts to SDVOSB s and VOSBs

, and would “exercise reasonable judgment” in meeting the required set

- aside goals alongside the VA’s obligation to satisfy small business awards to other groups, such as

women ’s owned businesses. 152 Cong. Rec. S11 609

- 03
, S11 615 , S11616 (Dec. 8 , 2006)

. Third, the VA ’s interpret ation as stated in the preamble of the regulations is crystal clear and was made in the context of notice and commentKINGDOMWARE TECHNOLO GIES , INC

. v. US 13

rulemaking. Finally, the court noted that the VA ’s inte rpretation is consistent with the Government

- wide trad itio nal relationship between set

- asides for small businesses and the FSS as found in the FAR, namely that agencies are not required to implement small business
set

- aside programs b efore or while using the FSS. The Court of Federal Claims thus found the VA ’s in terpret ation sufficient to warrant defer ence. According l y, the VA ’s

cross

- motion for summary judgment was granted.
Kingdomware timely appealed to this court. We have jurisdiction over the appeal under 28 U.S.C. § 1295(a)(3).

V

We review the Court of Federa l Claims’ grant of summary judgment with out deference. Dominion Res., Inc. v. United States , 681 F.3 d 1313, 1317 (Fed. Cir. 2012). In reviewing an agency’s action in a bid protest case, we generally apply the Administrative Procedure Act’s “arbitrary, capr icious, an abuse of discretion, or otherwise not in accordance with law” or “without o bservance of a procedure required by law” standard of review. 5 U.S.C. § 706 (2)(A), (D); Impresa Construzioni Geom. Domenico Garufi v. United States , 238 F.3d 1324, 1332 (Fed. Cir. 20 01). Here, since there are no factual or mixed factual and legal issues, and the only question is one of statutory construction, we apply the Chevron standard. See Dominion , 681 F.3d at 1317.

Chevron requires a reviewing court to determine by statutory construction, at the first step, “whether Co ngress has spoken to the pre cise question at issue.” 467 U.S. at 842

. If so, the “unambiguously expressed intent” of Congress pre vails. Id

. at 843. If, however, Congress has not spo ken to the issue at hand, or has done so ambig uously, “ the question for the court [ at st ep two] is whether the agency’s [interpretation] is based on a permissible construction of the stat ute.” Id

. If so, the agency’s view of the law pre vails. The interpretative exercise begins wit hKINGDOMWARE TECHNOLO GIES , INC

. v. US 14

the language of the statute, Santa Fe Indus. , Inc. v. Green , 430 U.S. 462, 472 (1977), and uses “traditional tools of statutory construction, ” including the “ statute’s text, structure , and legislative history, and . . . the rel evant canons of i nterpre tation.” Delverde, SrL v. United States , 202 F.3d 1360, 1363 (Fed. Cir. 2000). “If a court, employing traditional tools of statutory construction, ascertains that Congress had an intention on the precise question at issue, that intention is the law and must be given effect.” Chevron , 467 U.S. at 843 n.9. In the case before us, Congress did speak directly to the question of the Secretary’s authority to use the Rule of Two “for purposes of meeting the goals under subsection (a),” stating that for such purposes the Sec retary “shall” use the Rule of Two procedures. For the reasons explained below, we conclude that Kingdomware’s interpretation of § 8127(d) does not account for, and undercuts, the Secr etary’s mandatory authority to set the goals for contrac ts to VOSBs , and therefore is not a reasonable interpret ation. By directly tying the mandatory Rule of Two co ntracting procedure set forth in subsection (d) to the achievement of the goal s set pursuant to subsection (a), Congress’s intent i s clear. Congres s intended the VA to meet the goals set by the Secretary. To meet the goals, the Secretary “shall” use Rule of Two procedures, “may” use the subsection (b) and (c) contract tools, and may elect to use the FSS at other times so long as the goals are met

. We perceive no ambiguity in § 8127, which “is the end of the matter, for the court, as well as the agency, must give effect to the unambiguously expressed intent of Co ngress

. ” Chevron , 467 U.S. at 843; Whitman v. Am. Truc king Ass’ ns , 531 U.S. 457, 472 (2001)

. VI Kingdomware argues that the mandatory language of § 8127(d)

— “shall award”

— requires the VA to conduct a Rule of Two analysis in all cases (other than those coveredKINGDOMWARE TECHNOLO GIES , INC

. v. US 15

by subsections (b) and (c)) , including those cases where the VA would pr efer to order ag ainst the FSS. Kingdo mware points out that Congress used language almost identical to that in § 8127 in the 2003 Veterans Act, but importantly, changed the permissive term “may” to the mandatory term “shall.” 1 It invokes the canon of constru ction that a ch ange in legislative language generally gives rise to a presumption that Congress intended to change the meaning of the law. See Midwest of Cannon Falls, Inc. v. United States , 122 F.3d 1423, 1428 (Fed. Cir. 1997).
According to Kingdomware, the legislative history of the 2006 Act also supports its interpretation of § 8127(d). Kingdomware cites legislative history suggesting that the 2006 Act was passed following frustration with agencies’ failure to meet the permissive VOSB contracting goals of the 1999 and 2003 Acts, and that Congress, in passing the 2006 Act to apply s olely to the VA, “expect[ed] [the] VA to set the example among government agencies” for contrac ting with VOSBs. H.R. R EP

. , at 15

– 16. Kingdomware also points to legislative history wher ein the bill’s sponsor, John Boozman, explicitly noted the change in language from “may” to “shall” in § 8127(d)

, stating that “ [t]he bill will essentially change what has been a ‘may’ to a ‘shall’ in terms of goals . . . .” H.R. 1773,

1 The 2003 Veterans Act remains in effect and a pplies to all agencies. The 2006 Act, in contrast, applies only to the VA. The relevant provision of the 2003 Act
states: In accordance with this section, a contracting o fficer may award contracts on the basis of compet ition restricted to small business co ncerns owned and controlled by service

- disabled veterans if the [Rule of Two is satisfied]. 15 U.S.C. § 657f(b) (emphasis added).KINGDOMWARE TECHNOLO GIES , INC

. v. US 16

the Native American Veteran Home Loan Act; H.R. 3082, the Veteran

- Owned Small Business Promotion Act of 2005 ; and Four Draft Bills : Hearing Before the Subcomm. on Econ. Opportunity of the H. Comm. on Veterans Affairs

, 109th Cong. 2 (2005) (statement of Rep. John Boozman

, Member, H. Co mm. on Veterans Affairs ).
Finally, Kingdomware notes that in the Report a ccompanying the legislation, the Committee on Veterans’ Affairs stated that “small businesses owned and co ntrolled by veterans and service

- disabled veterans should routinely be gra nted the primary opportunity to enter into VA procurement contracts.” H.R. R EP

. , at 14

– 15 (emph ases added). According to Kingdomware, this is evidence that Congress intended the VA to determine whether the Rule of Two was satisfied for every contract befor e it could look to the FSS.
Kingdomware assigns no substantive meaning to the phrase “for purposes of meeting the goals under subse ction (a), ” and instead contends that the words only state the objective for Rule of Two awards, i.e.

, to meet the Secretary’ s goals. Kingdomware is adamant that the “for purposes” words have no limiting effect. But Kingdo mware does not explain wh y Congress intended “shall” to continue as an imperative after the Secretary’s goals are achieved , or why Congress intended for the go als to be set not by the Secretary, but by whatever success VOSBs have under the Rule of Two in the marketplace.
Looking first to the text of the statute, the VA notes that the mandatory language of subsection (d)

— “shall award”

— is preceded by the phrase “ for purposes of mee ting the goals under subsection (a).” While Kingdomware maintains that this phrase is merely hortatory, the VA argues that it must be given effect, and that, read as a whole, the provision mandates a Rule of Two analysis only for those c ontracts the VA has decided are necessary “for purposes of meeting the goals under subsection (a).”KINGDOMWARE TECHNOLO GIES , INC

. v. US 17

Under § 8127(a), the VA is required to set VOSB co ntracting goals with a mandatory statutory floor. The VA points out that it retains significant discretio n under this subsection to set the numerical value of these goals. According to the VA, this discretion would be meanin gless, and the goal

- setting provision of § 8127(a) would be rendered superfluous, if it were required to apply the Ru le of Two for every contract. Under Kingdomware’s interpr etation of § 8127, the goal would be whatever number the Rule of Two produces, regardless of the Secretary’s pre ference. Responding to Kingdomware’s argument that “shall” in the 2006 statute is necessarily entirely impe rative because “may” limited the Rule of Two in the 2003 sta tute, the VA explains that “shall” in subsection (d) exists to distinguish “may” with regard to the no n- competitive set aside procedur es of subsections (b) and (c). In support, the VA cites the l egislative history of the 2006 Act which explains clearly that Congress preferred use by the Secr etary of the Rule of Two over the permissive no ncompetitive procedures. H.R. R EP

. , at 16. The VA thus reads subsection (d) in context with subsections (b) and (c) to give meaning to “shall” that does not preclude use of the FSS. The VA also asserts that Kingdomware’s reading of

“ shall” conflicts with its multiple small business contrac ting responsibilities . According to the VA, if it were to follow subsection ( d)’s Rule of Two in every instance , in addition to respecting the contracting priorities of subse ction (i), it would be unable to meet other small business contracting goals specified by the Small Business Act. Moreover, the VA points out that under the Sm all Bus iness Act, including the 2003 Veterans Act amendments, agencies have always retained the discretion to use the FSS in lieu of following the Rule of Two. See 48 C.F.R. §§ 8.404(a), 19.502

- 1(b). It argues that a single wording change

— from “may” in the 2003 Veterans Act to “shall” inKINGDOMWARE TECHNOLO GIES , INC

. v. US 18

the 2006 Act

— without further explicit guidance as to how the provisions of the 2006 Act interact with the FSS is insufficient evidence that Congress intended to disrupt the existing scheme here. According to the VA, Kingdo mware’s interpretation would lead to the untenable result wherein the VA is unable to use the FSS for even routine and minor purchases. Despite its consistent practice of retaining the discr etion to forego the Rule of Two when using the FSS, the VA
notes t hat since the passage of the 2006 Act it has co nsistently set and exceeded ambitious VOSB contracting goals. This is evidence, in the VA’s view, that its interpr etation is consistent with the aims of Congress in passing the 2006 Act, as expressed in the le gislative history.

VI I It is a bedrock principle of statutory interpretation that each word in a statute should be given effect. See Qi

Zhuo v. Meissner

, 70 F.3d 136, 139 (D.C. Cir. 1995) ( “An endlessly reiterated principle of statutory construction is that all words in a statute are to be assigned meaning, and that nothing therein is to be construed as surplu sage.” ); see also Ariad Pharm s ., Inc. v. Eli Lilly & Co. , 598 F.3d 1336, 1345 (Fed. Cir. 2010) (concluding that a party’s proposed statutory interpretation “violat[ed] the rule of statutory construction that Congress does not use unne cessary words.”). Kingdomware’s interpretation of subsection (d) a ssigns dispo sitive weight to the command term “shall,” but ignores additional statutory language stating that this mandate is “for purposes of meeting the goals under subsection (a).” Under Kingdomware’s interpreta tion, the
statute ’s mandate requiring the VA to conduc t a Rule of Two analysis would apply to every competitive contract contemplated by the VA without any regard for the VOSB contracting goals set under subsection (a), despite the provision’s explicit reference to these goals. Indeed, Kin g-KINGDOMWARE TECHNOLO GIES , INC

. v. US 19

domware conceded at oral argument that under its inte rpretation of 38 U.S.C. § 8127(d), the VA must continue to apply a Rule of Two analysis for every contract even after it has met the goals set under § 8127(a). Oral Argument at 4:05

– 5:20. Further, as the VA points out, i f § 8127(d) requires the agency to conduct a Rule of Two analysis for every contract irrespective of the goals set under subse ction (a), this goal

- setting provision is itself made superfl uous. Because Kingdomware’s plain meaning interpretation of § 8127(d) r eads the words “for purposes of meeting the goals under subsection (a)” out of the
statute and makes the mandatory goal

- setting statutory provision unnecessary, it cannot stand.

T he statutory scheme as a whole links the Rule of Two mandate (denoted by the word “shall”) in subsection (d) to the goals set under subsection (a). T he mandate is, therefore, the required procedure for meeting these goals. It is fully consistent with subsection (a), which requires the VA to set goals for contracting with VOSBs, but grants the VA considerable discretion to set the value of these goals. Accordingly, t he agency need not perform a VOSB Rule of Two analysis for every contract, as long as the goals set under subsection (a) are met

. The correct reading of the statute accor ding to its plain meaning puts the “shall” in subsection (d) in harmonious context with the discretionary “may” provisions of subsections (b) and (c), and assures that the goals of subsection (a) will be set by the Secretary, not the success or failure of the Rule of Two in the marketplace. Congress enacted § 8127 out of frustration with the failure of agencies Government

- wide to achieve the asp irational goals of 3% for SDVOSBs. In hearings leading up to the 2006 Veterans Act, the prime reason for failure to achieve the Government

- wide goals was “the discretio nary, not mandatory, nature of the goals. ” H.R. R EP

. , at 1 5. As Rep. Boozman observed, § 8127 changed what had been a “may” to a “shall” in terms of goals. Congress choseKINGDOMWARE TECHNOLO GIES , INC

. v. US 20

the VA to set the example among Government agencies by imposing on it the obligation to meet the goals set by the Secretary for both categories of veteran

- owned small businesses. Id

. Indeed, Congress anticipated that with the contracting tools provided in § 8127, the VA would be able to “meet, if not exceed” its contracting goals, i d. , while at the same time fulfilling the go al s it has s et for other small business entities. 152 Cong. Rec. S11609

- 03, S11616 (“The goals for veteran and service

- disabled veteran owned businesses are not in any way intended to prevent a ttainment of other set

- aside goals.”)

. As it stands, there is no reason to compel the Secr etary to set aside any contract for a Rule of Two inquiry before using the FSS notwithstanding his goals , as Kin gdomware requests. T he VA has consistently met the mandatory goal s for procurement from SDVOSBs and VOSBs in each year since the Veterans Act of 2006 went into force, and Kingdomware does not contend otherwise. The Secretary has complied with his statutory mandate to both set goals and me e t them, and , a ccordingly

, the VA contracting officer’s decision not to set aside the contract s at issue was not arbitrary, capricious, or contrary to the law

. C ONCLUSION For the reasons provided above, we affirm the final decision of the Court of Federal Claims in favor of the VA.

AFFIRMED

C OSTS

Each side shall bear its own costs.

# United States **Court of Appeals**  **for the Federal Circuit**

______________________
KINGDOMWARE TECHNOLO GIES, INC., Plaintiff

- Appellant,

v.

UNITED STATES, Defendant

- Appellee.

______________________

2013

- 5042

______________________ Appeal from the United States Court of Federal Claims in No. 12

- CV

- 0173, Judge Nancy B. Firestone.

______________________ R EYNA , Circuit Judge

, dissenting.

T he majority holds that the 2006 Veterans Act does
not require the Department of Veterans Affairs (“VA”) to conduct a Rule of Two analysis in every procurement , as long as the VA satisfies its annual small business partic ipation goals

. I do not construe the 2006 Veterans Act as giving the VA discretion to decide whe ther to conduct a Rule of Two analysis

. For this and other reasons set forth below, I respectfully dissent

. I.

T he plain language of the 2006 Veterans Act una mbiguously requires VA contracting officers to conduct a Rule of Two analysis in every acquisition and does not exempt task or delivery orders under the Federal Supply Schedule ( “FSS” ) from this imperative. Despite theKINGDOMWARE TECHNOLO GIES , INC

. v. US 2

statute’s clarity, t he majority guts the Rule of Two impe rative of its full force and effect by holding t hat a Rule of Two analysis is not required for every contract “as long as the goals set under subsection (a) are met

. ” Maj. Op. at 19

. P articipatory goals , however, are aspirational, and an agen cy cannot refus e to set aside an acquisition solely because s mall busi nesses already receiv e a fair proportion of the agency’s contracts

. 1 In rel ying entirely on prefatory language to second- guess Congress, the majority becomes policy maker and departs from our duty to enforce the proper interpretation of the statute regardless of our policy views. 2

The statutory provision at issue could not be clearer

. I t provides that contracting officers “ shall award co ntracts” on the basis of restricted competition whenever the contracting officer has a reasonable expectation that the Rule of Two will be satisfied: (d) Use of restricted competition.

— Except as provided in subsections (b) and (c), for purposes of meeting the goals under subsection (a), and in a ccordance with this section, a contracting officer of the Department shall award contracts on the b asis of competition restricted to small business co ncerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned

1 48 C.F.R. § (“ FAR ”) 19.502

- 6(f); see also LB M, Inc.

, B- 290682, 2002 CPD ¶ 157 (Comp. Gen. Sept. 18, 2002).

2 See Harbison v. Bell , 556 U.S. 180, 198 (2009) (Thomas, J., concurring) (noting that it “‘ is not within our province to second

- guess’ the ‘wisdom of Congress’ action’ by picking and choosing our preferred interpretation from among a range of potentially plausi ble, but likely inacc urate, interpretations of a statute” (quoting Eldred v. Ashcroft , 537 U.S. 186, 222 (2003))).KINGDOMWARE TECHNOLO GIES , INC

. v. US 3

and controlled by vet erans will submit offers and that the award can be made at a fair and reason able price that offers best value to the United States.

38 U.S.C. § 8127(d) (emphasis added). Th is provision is part of a broader veteran- owned small business contrac ting program congressionally tailored to the VA , which requires t he Secretary of the VA to increase small bus iness contracting opportunities by establishing annual participation goals for veteran- owned small businesses (“VOSB”) and service

- disabled veteran

- owned small businesses (“SDVOSB”) in VA acquisitions. Id. § 8127(a) (1)

. This statutory program confirms the impe rative character of subsection (d). Specifically, for co ntracts below the simplified acquisition threshold ($150,000)

, VA contracting officers “ may use p rocedures other than competitive procedures” in awarding contracts
t o veteran

- owned small businesses. Id. § 8127(b) (emph asis added). Similarly, f or acquisitions valued above the simplified acquisition threshold but below $5 million, VA contracting officers “ may award a contract” to a veteran

owned small business using noncompetitive procedures as long as certain requirements are met. Id. § 8127(c) (e mphasis added).
In contrast, subsection (d) of the 2006 Veterans Act applies to all VA acquisition s and requires VA contracting officers to conduct a Rule of Two analysis in every acquis ition , without limitation. U nlike subsections (b) and (c), which use discretionary language (“may use” and “may award” ), subsection (d) uses mandatory language (“shall award”)

, and does not otherwise give discretion to VA contracting officers to decide whether to conduct a Rule of Two analysis. As t he Supreme Court has noted

, the word

“ shall ” is ordinarily the language of command

, and when the same statute uses both “m ay ” and “ shall ,” the normalKINGDOMWARE TECHNOLO GIES , INC

. v. US 4

inference is that each is used in its usual sense and that the former is permissive

, the latter mandatory. 3

Consistent with the 2006 Veterans Act’s imperative

, t he Government Accountability Office (“GAO”) has sustained more than seventeen protests in response to the VA’s refusal to comply with § 8127(d). 4 As the GAO held, “The provisions of both the VA Act and the [VA Acquis ition Regulation] are unequivocal; the VA ‘shall’ award contracts on the basis of competition restricted to SDVOSBs where there is a reasonable expectation that two or more SDVOSBs will submit offers and award can be made at a fair and reasonable price.” Aldevra , B

405271, 2011 CPD ¶ 183 (Comp. Gen. Oct. 11, 2011). The GAO further concluded that “the VA Act requires, without limitation, that the agency conduct its acquisitions using SDVOSB set asides where the necessary conditions are present.” Id.
The majority summarily dismisses any reliance on the GAO’s construction, noting that “the VA was on firm ground in refusing to accept the GAO decision.” Maj. Op.
at 10. Yet, w e have long noted that GAO recommend ations , although not binding, are nevertheless “ instructive in the area of bid protests.” 5 T he Court of Federal Claims routinely “‘ give[s] due weig ht and deference’ to GAO recommendations ‘given the GAO’s long experience and

3 Anderson v. Yungkau , 329 U.S. 482, 485 (1947); see also Kentucky, Educ. Cabinet, Dep’t for the Blind v. United States , 424 F.3d 1222, 1227 (Fed. Cir. 2005).

4 U.S. Gov’t Accountability Office , B

- 158766, GAO Report to Congress for Fiscal Year 2012 (Nov. 13, 2012).

5 Centech Gr p. , Inc. v. United States , 554 F.3d 1029, 1038 n.4 (Fed. Cir 2009) (citing Planning Research Corp. v. United States

, 971 F.2d 736, 740 (Fed. Cir. 1992)).KINGDOMWARE TECHNOLO GIES , INC

. v. US 5

special expertise in such bid protest matters.’” 6 The majority ignores that GAO’s experience and special expe rtise is such that “[a]n agency’s decision to disregard a GAO recomm endation is exceedingly rare.” Id. Indeed,

w e recent ly acknowledged that “from 1997

- 2012, the GAO issued 5,703 merit decisions and sustained 1099 protests; during that period, an agency disregarded the GAO’s recommendation only ten times.” Id. at 1384 -8 5. Hence, al t hough not binding precedent, the GAO “plays an i mportant role in the resolution of contested procurement decisions,” and its construction of the 2006 Veterans Act is consistent with § 8127(d) ’s “unequivocal” imperative to conduct a Rule of Two analysis in every procurement

. Honeywell, Inc. v. United States

, 870 F. 2 d 644
, 647

- 48 (Fed. Cir. 1989).

II.

T o override the clear impe rative of § 8127(d), t he m ajority relies on the provision’s prefatory language to reason that re quiring a Rule of Two analysis in every VA procurement “makes the mandatory goal

- setting statutory provision unnecessary.” Maj. Op. at 19

. P refatory la nguage is introductory in nature and does nothing more than explain the general purpose for the Rule of Two mandate. The Supreme Court has noted, albeit in the context of constitutional construction, that “apart from [a] clarifying function, a prefatory clause does not limit or expand the scope of the operative clause” and that oper ative provisions should be given effect as operative prov isions, and prologues as prologues

. District of Columbia v. Heller , 554 U.S. 570, 578 (2008)

. Here, the operative clause is that VA contracting officers must award co n6 CMS Contract Mgmt. Servs. v. United States

, 745 F.3d 1379, 1384 (Fed. Cir. 2014) (quoting Baird Corp. v. United States , 1 Cl. Ct. 662, 668 (1983)) (alteration in original).KINGDOMWARE TECHNOLO GIES , INC

. v. US 6

tracts on the basis of restricted competition if they h ave a reasonable expectation that the Rule of Two will be sati sfied, a mandate that cannot be limited by its prologue

. T he majority takes an unusual step of collecting e xtrinsic evidence to show that “[t] he VA has consistently met the mandatory goals for procurement from SDVOSBs and VOSBs in each year since the Veterans Act of 2006 went into force[.]” Maj. Op. at 20

. While t he exact r ationale for exploration outside the record is not clear , t he majority apparently rests on these statistics to conclude that “ there is no reason to compel the Secretary to set aside any contract for a Rule of Two inquiry” where the goals were met for the time period in question. Id. This is an improper construction of the statute , as it adds a limitation that does not exist in the plain words of the
statute . “Statutory construction must begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately e xpresses the legislative purpo se.” Engine Mfrs. Ass’n v. South Coast Air Quality Mgmt. Dist. , 541 U.S. 246, 253 (2004). Moreover, these statistics were not before the Court of Federal Claims or relied upon by either party

, but were provided in response to a request during oral
argume nt. As the appellant notes , the VA submission does not identify the source of the data and “appears to have been created specifically in response to the Court’s request in this litigation.” ECF#50, Appellant Letter to Court ( Apr. 2, 2014 ). Significantly, there is no evidence in the record to show that VA contracting officers rely on , o r have access to, the se type s of data in making contracting decisions , and the GAO has explicitly held that an age ncy’s belief it has satisfied its small business goals does not affect its obligation to conduct a Rule of Two analysis. 7 In

7 LBM, Inc. , B

- 290682, 2002 CPD ¶ 157 (Co mp. Gen. Sept. 18, 2002); see also FAR 19.502

- 6(f) (noting thatKINGDOMWARE TECHNOLO GIES , INC

. v. US 7

sum, the majority’s use of this extrinsic evidence is post hoc rationalization constructed to shore

- up an otherwise unsound construction of the statute.

III.
The majority ’s r eliance on the phrase “for purposes of meeting the goals” is also belied by the VA’s own regul ations, which contain no such language. S pecifically, i n 2009, the VA issued regulations reiterating the imper ative to conduct a Rule of Two analysis in every ac quis ition. See 48 C.F.R. §§ 819.7005, 817.7006. T hese regulations, which use the mandatory phrase “ shall set

aside ,” do not contain the phrase “for purposes of meeting the goals” or any other mention of the goals

. 8 T he VA’s

agencies cannot refuse to set aside an acquisition solely on the basis that “[s]mall business concerns are already receiving a fair proportion of the agency’s contracts for supplies and servic es”).

8 The VA Acquisition Regulation provides:
(a) The contracting officer shall consider SDVOSB
set

- asides before considering VOSB set

- asides. Except as authorized by 813.106, 819.7007 and 819.7008, the contracting officer shall set

- aside an acquisition for competition restricted to SDVOSB concerns upon a reasonable expect ation that, 1) Offers will be received from two or more e ligible SDVOSB concerns; and
2) Award will be made at a fair and reason able price. 48 C.F.R. § 819.7005 (emphasis added); see also id. § 819.7006 (applying same set

- aside regulation to VOSBs). The exceptions mentioned at 48 C.F.R.KINGDOMWARE TECHNOLO GIES , INC

. v. US 8

regulations thus unequivocal ly require the VA to conduct a Rule of Two analysis in every procurement, which is consistent with the agency’s authority to write regulations as broadly as it wishes, subject only to the limits of the
statute. Auer v. Robbins , 519 U.S. 452, 463 (1997). The majority downplays the regulation’s imperative by poin ting to the preamble to the regulations

. Maj. Op. at 8 (quoting 74 Fed. Reg. 64,619, 64,624 (Dec. 8, 2009) )

. Again, statements made in a preamble as part of the notice

- and

- comment process cannot o verride the una mbiguous language of the regulations themselves. That is,

w here the enacting or operative parts of a statute or regulation are unambiguous, the meaning of the statute or regulation cannot be controlled or limited by the la nguage in the prea mble. 9 Accordingly, the VA’s refusal to conduct a Rule of Two analysis before proceeding to the FSS is at minimum a violation of its own regulations, if not also a violation of § 8127(d)

. IV.
The majority does not address the practical implic ations of its decision in light of the VA’s existing obligation under the Federal Acquisition Regulation (“ FAR ”) to conduct a Rule of Two analysis in nearly every acquisition exceeding $3,000. FAR 19.502

- 2. 10 By holding that the

§§ 813.106, 819.7007, and 819.7008 relate to sole

- source awards and are thus not relevant to this appeal.

9 Wyoming Outdoor Council v. U.S. Forest Serv.

, 165 F.3d 43, 53 (D.C. Cir. 1999) (quoting Assoc. of Am. Railroads v. Costle , 562 F.2d 1310, 1316 (D.C. Cir. 1977)).

10 The FAR contemplates two situations in which the contracting officer must conduct a Rule of Two anal ysis. For acquisitions exceeding $ 3,000 but less than $150,000, the contracting officer must award the contract on the basis of restricted competition unless he or she makes an affirmative finding that the Rule of Two is notKINGDOMWARE TECHNOLO GIES , INC

. v. US 9

2006 Veterans Act’s Rule of Two provision is discretio nary , the majority effectively renders § 8127(d) superfluous and unnecessary in light of the FAR’s existing Rule of Two requirement. Although the FAR exempts task or delivery orders awarded under FSS contracts from the general Rule o f Two requirement, see FAR 19.502

- 1(b),
t he 2006 Veterans Act is devoid of any similar language that would allow the VA to proceed directly to the FSS without first conducting a Rule of Two analysis. Hence,
t he majority’ s holding reads this exemption into § 8127(d) and expands the VA’s discretion to decide when to conduct a Rule of Two analysis, thereby undermining the statut ory role of § 8127(d)

. T he majority , on the other hand, finds mischief in r equiring contracting officers to continue con ducting Rule of Two analyses after the agency’s goals are met. The majority concludes that requir ing a Rule of Two analysis in every VA procurement would render the goal

- setting provision superfluous, as “the goal would be whatever number the Rule of Two produces, re gardless of the Secretary’s preference

. ” Maj Op. at 17

. The majority seemingly believes it is bad policy to require an agency to continue efforts to award contracts to small businesses

once its participation goals are met , overlooking that participation goals are aspirations, not destinations

. Indeed, the FAR explicitly provides that an agency may not refuse to set aside an acquisition solely on the basis that s mall business es are “ already receiving a fair propo rtion of the agency’s contracts for supplies and services.” FAR 19.502

- 6(f).

reasonably expected to be satisfied. Id. § 19.502

- 2(a). For

acq uisitions exceeding $150,000, “[t]he contracting officer shall set aside ” the acquisition for small businesses “when there is a reasonable expectation that” the Rule of Two will be met. Id. § 19.502

- 2(b) (emphasis added).KINGDOMWARE TECHNOLO GIES , INC

. v. US 10

The mischief feared by the majority is further refuted by the discretion retained by contracting officers in how they perform a Rule of Two analysis. Because the Rule of Two requires contracting officers to set aside an acquis ition only if they have a reasonable expectation that (i) offers will be made by at least two responsible small businesses, and (ii) award will be made at fair market prices, contracting officers are entitled to exercise their business judgment in determining whether these two conditions are met. See 38 U.S.C. § 8127(d); FAR 19.502

- 2. The contracting officer’s decision not to set aside a procurement is subject to a “highly deferential rational basis review” and will not be overturned absent a showin g that his or her business judgment was unreasonable. 11 The contracting officer is not required to use any partic ular method of assessing small business availability

, and f

actors such as “ prior procurement history, market su rvey s and/or advice from the age ncy’ s small business specialist and technical personnel may all constitute adequate grounds for a contracting officer’ s decision not to set aside a procurement. ” Rave n Servs. Corp. , B

- 243911, 91

- 2 CPD ¶ 203 (Comp. Gen. Aug. 27, 1991). The Rule of Two, th erefore, does not diminish the contracting officer’s discretion to ultimately conclude that there is (or is not) a reasonable basis for setting aside any given procurement for small businesses.
The majority ’s reticence to requiring agency a dvance ment of sm all business participation beyond the aspirational goals is due to a misapprehension of the interplay between a Rule of Two analysis and agency

11 Res

- Care, Inc. v. United Sta tes , 735 F.3d 1384, 1390 (Fed. Cir. 2013); see also Information Ventures, Inc.

, B- 294267, 2004 CPD ¶ 205 ( Comp. Gen. Oct. 8, 2004) ; Benchmade Knife Co., Inc. v. United States , 79 Fed. Cl. 731, 738 (2007).KINGDOMWARE TECHNOLO GIES , INC

. v. US 11

wide goals . The former is undertaken by the contracting officer on a contract

- by

- contract basis, while the latt er are set by the head of the agency and inform the agency’s entire procurement process. U nder the majority’s r ationale, the participation goals established under the Small Business Act would also be rendered superfluous by the FAR’s existing Rule of Two requirement , which a pplies in nearly every acquisition

. See 15 U.S.C. § 644(g)(1 ) ; FAR 19.502

- 1. Such an outcome would ove rturn more than thirty years of federal procurement law upholding the Rule of Two as a legitimate method of ensuring that agencies a ward a “fair proportion” of co ntract dollars to small businesses. 12 I n fact

, the FAR requires agencies to conduct a Rule of Two analysis under FAR 19.502

- 2 regardless of whether the agency’s “small business goals have already been satisfied.” LBM, Inc. , B

290682, 2002 CPD ¶ 157 (Comp. Gen. Sept. 18, 2002 ).

The real mischief here is that the majority opinion would saddl e contracting officers with the obligation in every acquisition to determine the status of the agency’s small business goals

— expressed as percentages of total awarded contract dollars

— but does not elaborate on how

12 See, e.g.

, Adams & Associates, Inc. v. United St ates , 741 F.3d 102, 110 (Fed. Cir. 2014) (rejecting the argument that a “‘fair proportion’ determination must be made on a contract

- specific basis”); Delex Sys., Inc. , B

400403, 2008 CPD ¶ 181 (Comp. Gen. Oct. 8, 2008) (no ting that “[t] he origin of the Rul e of Two predates the FAR ” and that “it has been adopted as the FAR’s impl ementation of the [Small Business] Act’ s requirements ”); Federal Acquisition Regulation (FAR) “Rule of Two” , 49 Fed. Reg. 40,135, 40,136 (Oct. 12, 1984) (“This method of implementing the fair proportion of total contracts has been upheld by the Courts and the Comptroller Ge neral.”).KINGDOMWARE TECHNOLO GIES , INC

. v. US 12

contracting officers can determine that the se goals have be en “met” before the end of the fiscal year

. Participation goals require agency officials to consider a range of factors in their broader acquisition policies well before a solicit ation is issued or an individual contract is contemplated. The majority thus errs when it asserts that a n obligatory Rule of Two requirement would obviate the goal

- setting provision of the 2006 Veterans Act

. V.
In sum, t he majority adopts an untenable constru ction of the 2006 Veterans Act by holding that the agency need not perform a VOSB Rule of Two analysis for every contract, as long as the goals set under subsection (a) are
met. The majority’s holding deprives the Rule of Two mandate of its force and effect , it impedes congression al objectives regarding set asides, and it renders § 8127(d) inoperative and unnecessary. For these reasons, I di ssent

.