United States Court of Appeals 

for the Federal Circuit ______________________ 

KINGDOMWARE TECHNOLOGIES, 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

______________________ 

LAUREN B. FLETCHER, Wilmer Cutler Pickering Hale 

and Dorr LLP, of Washington, DC, argued for plaintiffappellant. With her on the brief were AMY K. WIGMORE,

GREGORY H. PETKOFF, AMANDA L. MAJOR, JOSEPH GAY, 

and CARLA J. WEISS, of Washington, DC. 

ROBERT C. BIGLER, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of 

Justice, of Washington, DC, argued for defendantappellee. With him on the brief were STUART F. DELERY, 

Assistant Attorney General, BRYANT G. SNEE, Acting 

Director, and PATRICIA M. MCCARTHY, Assistant Director. 
2 KINGDOMWARE TECHNOLOGIES, INC. v. US

GENE C. SCHAERR, Winston & Strawn LLP, of Washington, DC, for amicus curiae American Legion. With him 

on the brief was EIMERIC REIG-PLESSIS. 

______________________ 

Before PROST, Chief Judge,

∗

 CLEVENGER, and REYNA,

Circuit Judges.

Opinion for the court filed by Circuit Judge CLEVENGER. 

Dissenting opinion filed by Circuit Judge REYNA. 

CLEVENGER, Circuit Judge. 

This is an appeal from the final judgment of the United States Court of Federal Claims (“Court of Federal 

Claims”) on a matter 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. 

(“Kingdomware”) 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 servicedisabled veteran. The Department of Veterans Affairs 

(“VA”) certified Kingdomware as a service-disabled veteran-owned small business in September 2010 and recertified 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 expressed this policy through the Small 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 TECHNOLOGIES, 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). VeteranOwned Small Businesses (“VOSBs”) and Service-Disabled 

Veteran-Owned Small Businesses (“SDVOSBs”) are 

expressly recognized in the Small Business Act. Id.

§ 632(q).

The policy directive to promote small businesses lies 

within the statutes and regulations that guide Government contract formation. The general policies and procedures for Government contracting are contained in the 

Federal Acquisition Regulation (“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 Regulation (“VAAR”), 48 

C.F.R. ch. 8.

The overarching policy of the FAR generally 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 obtaining commercial supplies and services at prices associated 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 

satisfy 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 con-
4 KINGDOMWARE TECHNOLOGIES, INC. v. US

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 

SDVOSBs. 48 C.F.R. § 8.004. The GSA considers its FSS 

program to be “the premier acquisition vehicle in government,” accounting for 10% of overall procurement spending. For Vendors – Getting on Schedule, GENERAL 

SERVICES ADMINISTRATION (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 part 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 contracts and publish schedules.” Id. § 38.101(d). GSA has specifically delegated 

authority to the VA to procure medical goods and services 

under the VA Federal 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 encourages VOSBs and SDVOSBs to participate in the FSS 

program. Press Release, Dept. 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 these FSS expenditures went to VOSBs. 

Kathleen Miller, Dispute Simmers Between VA and Veteran-Owned Small Businesses, WASH. POST, Nov. 14, 2011, 

at A20.
KINGDOMWARE TECHNOLOGIES, INC. v. US 5

II

In 1999, Congress amended the Small Business Act to 

establish an aspirational Government-wide goal of awarding 3% of Government contracts to SDVOSBs. 15 U.S.C. 

§ 644(g). History shows this 3% goal was not satisfied. For 

the 2001 fiscal year, SDVOSBs 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) (statement of Angela B. Styles, 

Adm’r Fed. Procurement). And the VA awarded only 0.1% 

of its contracts to SDVOSBs in 2000, 0.2% in 2001, and 

0.6% in 2002. H.R. 1460, The Veterans Entrepreneurship 

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 Subcomm. on 

Benefits of the H. Comm. on Veterans Affairs, 108th Cong. 

9 (2003) (statement of Leo Mackay, Deputy Sec’y of Veterans Affairs).

Congress again amended the Small Business Act in 

2003 to focus on SDVOSBs. The 2003 Act grants discretionary authority (“a contracting officer may award”) to 

contracting officers, Government-wide, to award solesource contracts of restricted dollar amounts to SDVOSBs

when the contracting officer estimates receipt of a fair 

and reasonable price, and otherwise to award contracts on 

the basis of competition restricted to SDVOSBs “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 amount specified for sole-source 

contracts requires satisfaction of the Rule of Two, a procedure well-known throughout the Government in connection with award of contracts set aside for competition 

restricted to small businesses. 
6 KINGDOMWARE TECHNOLOGIES, INC. v. US

History again showed a failure to achieve the goal of 

the Small Business Act to award 3% of Government 

contacts to SDVOSBs: only 0.605% of Government contracts went to SDVOSBs in 2005. H.R. REP. NO. 109-592, 

at 16 (2006) (“H.R. REP.”). Consequently, in 2006 Congress 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 provisions 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 Secretary 

of the VA “shall” establish a goal for each fiscal year for 

participation in VA contracts by VOSBs, and “shall” 

establish a goal for participation in VA contracts by 

SDVOSBs which “shall not be less” than the Governmentwide goal set by the Small Business Act, which remained 

at 3%. 38 U.S.C. § 8127(a). 

The Veterans Act of 2006, codified at 38 U.S.C. 

§ 8127, gives contracting officers in the VA certain specific 

tools in subsections (b), (c), and (d) for achieving the goals 

to be set by the Secretary. As the House Report accompanying 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. REP., at 16. 

For VA acquisitions for amounts less than what is 

called the simplified acquisition threshold (currently 

$150,000), § 8127(b) states that “a contracting officer [of 

the VA] may use procedures other than competitive 

procedures.” Contracts under $150,000 can thus be solesourced to VOSBs and SDVOSBs without regard to the 

marketplace competitiveness of the price. Second, for 

contracts worth $150,000 up to $5,000,000, VA contracting officers “may” use procedures other than competitive 
KINGDOMWARE TECHNOLOGIES, INC. v. US 7

procedures to grant sole-source contracts to VOSBs and 

SDVOSBs if the particular business concern (1) “is determined to be a responsible source with respect to performance of such contract opportunity”; and (2) “in the 

estimation of the contracting officer, the contract award 

can be made at a fair and reasonable price that offers best 

value to the United States.” 38 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 

the goals under subsection (a).” Third, Congress also 

authorized use of restricted competition procedures by VA 

contracting officers. Thus, in addition to the noncompetitive methods authorized in subsections (b) and (c), 

Congress specified as follows in subsection (d):

(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) (reciting the 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.
8 KINGDOMWARE TECHNOLOGIES, INC. v. US

The VA promulgated regulations for § 8127(d). Unlike 

that subsection, which does not distinguish between 

VOSBs and SDVOSBs, the VA provided a separate regulation 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. 

§ 819.7005 (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 

make” 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 procurement as a VOSB set-aside. Id. If only one VOSB 

makes a fair and reasonable price offer, 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 business setaside 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 to 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 

affecting 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 not become 

effective until 180 days after its enactment on December 

22, 2006, and as a result was not fully implemented until 

the 2008 fiscal year. For that year and thereafter, the 
KINGDOMWARE TECHNOLOGIES, INC. v. US 9

Secretary set goals well beyond the previous 3% Government-wide goal for SDVOSBs, and achieved well beyond 

his stated goals, as shown below.

Year VOSB 

Goal 

VOSB 

Attainment

SDVOSB 

Goal 

SDVOSB 

Attainment

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%

Memorandum 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, 2008); Memorandum 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 (May 7, 2010); Memorandum 

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 implement an Emergency 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, 
10 KINGDOMWARE TECHNOLOGIES, INC. v. US

Kingdomware, a certified SDVOSB and qualified FSS 

contractor, filed a bid protest with the Government Accountability Office (“GAO”). Kingdomware challenged the 

contract award as illegal on the ground that § 8127(d) 

always bars the VA from using the FSS without first 

invoking the Rule of Two and if satisfied, awarding the 

contract 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 necessary to meet the established contracting goals. The GAO, 

relying on its opinion in a previous case, Aldevra, B406205, 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 setaside, Kingdomware, B-406507, 2012 CPD ¶165 (Comp.

Gen. May 30, 2012). 

The VA soon after responded to the GAO and Kingdomware, announcing that it would not acquiesce in 

GAO’s recommendation decision. The VA was on firm 

ground in refusing to accept the GAO decision. Although 

agencies often follow GAO recommendations in bid protest decisions “given the GAO’s long experience and 

special expertise in such . . . matters,” CMS Contract 

Mgmt. Servs. v. Massachusetts Hous. Fin. Agency, 745 

F.3d 1379, 1384 (Fed. Cir. 2014) (internal citation omitted), these recommendations are not binding on an agency. See Honeywell, Inc. v. United States, 870 F.2d 644, 

647–648 (Fed. Cir. 1989) (noting that the provisions of the 

Competition in Contracting 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 TECHNOLOGIES, 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 judgment. Both parties claimed 

victory on the plain meaning of § 8127(d). Kingdomware 

argued that the word “shall” in the statute is an unambiguous imperative that the Secretary can never use the 

FSS where the Rule of Two may be satisfied. The VA

responded that Kingdomware’s view writes out of the 

statute its obligation to set the 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 purposes of meeting the goals under subsection (a)” language in 

subsection (d) gives clear meaning to the “shall” imperative 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 determines that doing so is 

necessary to meet the goals set by him under subsection 

(a).

The Court of Federal Claims reasoned that Kingdomware’s interpretation of § 8127(d) is not supported by the 

plain language of the statute because it does not account 

for the mandatory goal-setting requirements of the section 

and the command that the Rule of Two procedure be used 

“for purposes 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 

first step of the analysis laid out in Chevron, U.S.A., Inc. 
12 KINGDOMWARE TECHNOLOGIES, INC. v. US

v. Natural Resources Defense Council, Inc., 467 U.S. 837 

(1984), the Court of Federal Claims then assessed 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, Dept. of Veterans 

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 interpretation. But since 

the regulations only recite statutory language verbatim, 

and that language was found ambiguous, 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 favoring 

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 words of the statute or the regulations, 

both of which are silent on the role of the FSS in meeting 

the Secretary’s goals. Also, the legislative history of the 

statute expressed an intent that the VA retain the “option” to award contracts to SDVOSBs 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. S11609-03, 

S11615, S11616 (Dec. 8, 2006). Third, the VA’s interpretation as stated in the preamble of the regulations is crystal 

clear and was made in the context of notice and comment 
KINGDOMWARE TECHNOLOGIES, INC. v. US 13

rulemaking. Finally, the court noted that the VA’s interpretation is consistent with the Government-wide traditional 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 before or while using the FSS. The 

Court of Federal Claims thus found the VA’s interpretation sufficient to warrant deference. Accordingly, 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 Federal Claims’ grant of 

summary judgment without deference. Dominion Res., 

Inc. v. United States, 681 F.3d 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, capricious, an abuse of discretion, or 

otherwise not in accordance with law” or “without observance 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. 2001). 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 Congress has spoken to the precise question at issue.” 467 

U.S. at 842. If so, the “unambiguously expressed intent” of 

Congress prevails. Id. at 843. If, however, Congress has 

not spoken to the issue at hand, or has done so ambiguously, “the question for the court [at step two] is whether 

the agency’s [interpretation] is based on a permissible 

construction of the statute.” Id. If so, the agency’s view of 

the law prevails. The interpretative exercise begins with 
14 KINGDOMWARE TECHNOLOGIES, INC. v. US

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 relevant canons of interpretation.” 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 Secretary “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 Secretary’s mandatory authority to set the goals for contracts 

to VOSBs, and therefore is not a reasonable interpretation. By directly tying the mandatory Rule of Two contracting procedure set forth in subsection (d) to the 

achievement of the goals set pursuant to subsection (a), 

Congress’s intent is clear. Congress 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 Congress.” Chevron, 467 U.S. at 843; Whitman v. Am. Trucking 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 covered 
KINGDOMWARE TECHNOLOGIES, INC. v. US 15

by subsections (b) and (c)), including those cases where 

the VA would prefer to order against the FSS. Kingdomware 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 construction that a change 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 solely to the VA, “expect[ed] [the] VA to 

set the example among government agencies” for contracting with VOSBs. H.R. REP., at 15–16. 

Kingdomware also points to legislative history wherein 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 applies 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 officer may award contracts on the basis of competition restricted to small business concerns owned 

and controlled by service-disabled veterans if the 

[Rule of Two is satisfied].

15 U.S.C. § 657f(b) (emphasis added).

 
16 KINGDOMWARE TECHNOLOGIES, INC. v. US

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. Comm. on Veterans Affairs). 

Finally, Kingdomware notes that in the Report accompanying the legislation, the Committee on Veterans’ 

Affairs stated that “small businesses owned and controlled by veterans and service-disabled veterans should 

routinely be granted the primary opportunity to enter into 

VA procurement contracts.” H.R. REP., at 14–15 (emphases added). According to Kingdomware, this is evidence 

that Congress intended the VA to determine whether the 

Rule of Two was satisfied for every contract before it could 

look to the FSS.

Kingdomware assigns no substantive meaning to the 

phrase “for purposes of meeting the goals under subsection (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 Kingdomware does not explain why Congress intended “shall” to 

continue as an imperative after the Secretary’s goals are 

achieved, or why Congress intended for the goals 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 meeting 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 contracts the VA has decided are necessary

“for purposes of meeting the goals under subsection (a).” 
KINGDOMWARE TECHNOLOGIES, INC. v. US 17

Under § 8127(a), the VA is required to set VOSB contracting goals with a mandatory statutory floor. The VA 

points out that it retains significant discretion under this 

subsection to set the numerical value of these goals. 

According to the VA, this discretion would be meaningless, and the goal-setting provision of § 8127(a) would be

rendered superfluous, if it were required to apply the Rule 

of Two for every contract. Under Kingdomware’s interpretation of § 8127, the goal would be whatever number the 

Rule of Two produces, regardless of the Secretary’s preference. 

Responding to Kingdomware’s argument that “shall” 

in the 2006 statute is necessarily entirely imperative 

because “may” limited the Rule of Two in the 2003 statute, the VA explains that “shall” in subsection (d) exists to 

distinguish “may” with regard to the non-competitive setaside procedures of subsections (b) and (c). In support, the 

VA cites the legislative history of the 2006 Act which 

explains clearly that Congress preferred use by the Secretary of the Rule of Two over the permissive noncompetitive procedures. H.R. REP., 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 contracting 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 subsection (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 Small Business 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” in 
18 KINGDOMWARE TECHNOLOGIES, INC. v. US

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, Kingdomware’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 discretion to forego the Rule of Two when using the FSS, the VA 

notes that since the passage of the 2006 Act it has consistently set and exceeded ambitious VOSB contracting 

goals. This is evidence, in the VA’s view, that its interpretation is consistent with the aims of Congress in passing 

the 2006 Act, as expressed in the legislative history. 

VII 

It is a bedrock principle of statutory interpretation 

that each word in a statute should be given effect. See QiZhuo 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 surplusage.”); see also Ariad Pharms., 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 unnecessary words.”).

Kingdomware’s interpretation of subsection (d) assigns dispositive 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 interpretation, the 

statute’s mandate requiring the VA to conduct 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, King-
KINGDOMWARE TECHNOLOGIES, INC. v. US 19

domware conceded at oral argument that under its interpretation 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, if § 8127(d) 

requires the agency to conduct a Rule of Two analysis for 

every contract irrespective of the goals set under subsection (a), this goal-setting provision is itself made superfluous. Because Kingdomware’s plain meaning 

interpretation of § 8127(d) reads 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.

The 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). The 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, 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 correct 

reading of the statute according 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 aspirational 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 discretionary, not mandatory, nature of the goals.” H.R. REP., at 15. 

As Rep. Boozman observed, § 8127 changed what had 

been a “may” to a “shall” in terms of goals. Congress chose 
20 KINGDOMWARE TECHNOLOGIES, INC. v. US

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, id., while at 

the same time fulfilling the goals it has set 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 attainment of other set-aside goals.”). 

As it stands, there is no reason to compel the Secretary to set aside any contract for a Rule of Two inquiry 

before using the FSS notwithstanding his goals, as Kingdomware requests. The 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, and Kingdomware does not contend otherwise. 

The Secretary has complied with his statutory mandate to 

both set goals and meet them, and, accordingly, the VA

contracting officer’s decision not to set aside the contracts 

at issue was not arbitrary, capricious, or contrary to the 

law. 

CONCLUSION

For the reasons provided above, we affirm the final 

decision of the Court of Federal Claims in favor of the VA.

AFFIRMED

COSTS

Each side shall bear its own costs.
United States Court of Appeals 

for the Federal Circuit ______________________ 

KINGDOMWARE TECHNOLOGIES, 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.

______________________ 

REYNA, Circuit Judge, dissenting.

 The 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 participation goals. I do not construe the 2006 Veterans Act as 

giving the VA discretion to decide whether to conduct a 

Rule of Two analysis. For this and other reasons set forth 

below, I respectfully dissent. 

I.

The plain language of the 2006 Veterans Act unambiguously 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 the 
2 KINGDOMWARE TECHNOLOGIES, INC. v. US

statute’s clarity, the majority guts the Rule of Two imperative of its full force and effect by holding that 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. Participatory goals, however, are aspirational, and an 

agency cannot refuse to set aside an acquisition solely 

because small businesses already receive a fair proportion 

of the agency’s contracts.1 In relying 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. 

It provides that contracting officers “shall award contracts” 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 accordance with this section, a contracting officer of 

the Department 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 

1 48 C.F.R. § (“FAR”) 19.502-6(f); see also LBM, 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 plausible, but likely inaccurate, interpretations of a statute” (quoting Eldred v. 

Ashcroft, 537 U.S. 186, 222 (2003))).

 
KINGDOMWARE TECHNOLOGIES, INC. v. US 3

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) (emphasis added). This provision is 

part of a broader veteran-owned small business contracting program congressionally tailored to the VA, which 

requires the Secretary of the VA to increase small business 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 imperative character of subsection (d). Specifically, for contracts below the simplified acquisition threshold

($150,000), VA contracting officers “may use procedures 

other than competitive procedures” in awarding contracts 

to veteran-owned small businesses. Id. § 8127(b) (emphasis added). Similarly, for acquisitions valued above the 

simplified acquisition threshold but below $5 million, VA 

contracting officers “may award a contract” to a veteranowned small business using noncompetitive procedures as 

long as certain requirements are met. Id. § 8127(c) (emphasis added). 

In contrast, subsection (d) of the 2006 Veterans Act

applies to all VA acquisitions and requires VA contracting 

officers to conduct a Rule of Two analysis in every acquisition, without limitation. Unlike 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 the Supreme Court has noted, the word 

“shall” is ordinarily the language of command, and when 

the same statute uses both “may” and “shall,” the normal 
4 KINGDOMWARE TECHNOLOGIES, INC. v. US

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, 

the 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 Acquisition 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, B405271, 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, we have long noted that GAO recommendations, although not binding, are nevertheless “instructive 

in the area of bid protests.”5 The Court of Federal Claims 

routinely “‘give[s] due weight 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 Grp., 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 TECHNOLOGIES, INC. v. US 5

special expertise in such bid protest matters.’”6 The 

majority ignores that GAO’s experience and special expertise is such that “[a]n agency’s decision to disregard a 

GAO recommendation is exceedingly rare.” Id. Indeed, 

we recently 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 1384-85. Hence, 

although not binding precedent, the GAO “plays an important 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.2d 644, 647-48 

(Fed. Cir. 1989). 

II.

To override the clear imperative of § 8127(d), the majority relies on the provision’s prefatory language to 

reason that requiring a Rule of Two analysis in every VA 

procurement “makes the mandatory goal-setting statutory 

provision unnecessary.” Maj. Op. at 19. Prefatory language 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 operative provisions should be given effect as operative provisions, 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 con6 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).

 
6 KINGDOMWARE TECHNOLOGIES, INC. v. US

tracts on the basis of restricted competition if they have a 

reasonable expectation that the Rule of Two will be satisfied, a mandate that cannot be limited by its prologue. 

The majority takes an unusual step of collecting extrinsic 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 the exact rationale for exploration outside the record is not clear, the 

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 expresses the legislative purpose.” 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 

argument. 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, or 

have access to, these types of data in making contracting 

decisions, and the GAO has explicitly held that an agency’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 (Comp. 

Gen. Sept. 18, 2002); see also FAR 19.502-6(f) (noting that 

 
KINGDOMWARE TECHNOLOGIES, 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 reliance on the phrase “for purposes of 

meeting the goals” is also belied by the VA’s own regulations, which contain no such language. Specifically, in 

2009, the VA issued regulations reiterating the imperative to conduct a Rule of Two analysis in every acquisition. See 48 C.F.R. §§ 819.7005, 817.7006. These 

regulations, which use the mandatory phrase “shall setaside,” do not contain the phrase “for purposes of meeting 

the goals” or any other mention of the goals.8 The 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 services”).

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 expectation that,

1) Offers will be received from two or more eligible SDVOSB concerns; and 

2) Award will be made at a fair and reasonable 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. 

 
8 KINGDOMWARE TECHNOLOGIES, INC. v. US

regulations thus unequivocally 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 pointing 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 override the unambiguous language of the regulations themselves. That is, 

where 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 language in the preamble.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 implications 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 analysis. 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 not 

 
KINGDOMWARE TECHNOLOGIES, INC. v. US 9

2006 Veterans Act’s Rule of Two provision is discretionary, 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 of Two requirement, see FAR 19.502-1(b), 

the 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, 

the 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 statutory role of § 8127(d). 

The majority, on the other hand, finds mischief in requiring contracting officers to continue conducting Rule of 

Two analyses after the agency’s goals are met. The 

majority concludes that requiring 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, regardless 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 small businesses are “already receiving a fair proportion 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 

acquisitions 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). 

 
10 KINGDOMWARE TECHNOLOGIES, INC. v. US

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 acquisition 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 showing 

that his or her business judgment was unreasonable.11 

The contracting officer is not required to use any particular method of assessing small business availability, and 

factors such as “prior procurement history, market surveys and/or advice from the agency’s small business 

specialist and technical personnel may all constitute 

adequate grounds for a contracting officer’s decision not to 

set aside a procurement.” Raven Servs. Corp., B-243911, 

91-2 CPD ¶ 203 (Comp. Gen. Aug. 27, 1991). The Rule of 

Two, therefore, 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 advancement of small business participation beyond the 

aspirational goals is due to a misapprehension of the 

interplay between a Rule of Two analysis and agency11 Res-Care, Inc. v. United States, 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 TECHNOLOGIES, INC. v. US 11

wide goals. The former is undertaken by the contracting 

officer on a contract-by-contract basis, while the latter are 

set by the head of the agency and inform the agency’s 

entire procurement process. Under the majority’s rationale, the participation goals established under the 

Small Business Act would also be rendered superfluous by 

the FAR’s existing Rule of Two requirement, which applies in nearly every acquisition. See 15 U.S.C. 

§ 644(g)(1); FAR 19.502-1. Such an outcome would overturn more than thirty years of federal procurement law 

upholding the Rule of Two as a legitimate method of 

ensuring that agencies award a “fair proportion” of contract dollars to small businesses.12 In 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., B290682, 2002 CPD ¶ 157 (Comp. Gen. Sept. 18, 2002). 

The real mischief here is that the majority opinion 

would saddle 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 

States, 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., B400403, 2008 CPD ¶ 181 (Comp. Gen. Oct. 8, 2008) (noting that “[t]he origin of the Rule of Two predates the 

FAR” and that “it has been adopted as the FAR’s implementation 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 General.”). 

 
12 KINGDOMWARE TECHNOLOGIES, INC. v. US

contracting officers can determine that these goals have 

been “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 solicitation is issued or an individual contract is contemplated. 

The majority thus errs when it asserts that an obligatory 

Rule of Two requirement would obviate the goal-setting 

provision of the 2006 Veterans Act. 

V.

In sum, the majority adopts an untenable construction 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 congressional 

objectives regarding set asides, and it renders § 8127(d) 

inoperative and unnecessary. For these reasons, I dissent.