O n Monday, February 22, 2016, the Supreme Court heard oral arguments in Kingdomware Technologies, Inc. v. United States , a case that raises the question of whether the Department of Veterans Affairs (VA) is legally required to make certain purchases through a "set aside" for veteran-owned small businesses (VOSBs). A set-aside is a competition in which only eligible small businesses may generally participate. For example, if the contract is set aside for small businesses generally, any type of small business may participate. In contrast, if the contract is set aside for VOSBs, only VOSBs may generally participate. Congress amended the Small Business Act in 1999 to establish goals for the percentage of federal contract dollars awarded to one type of VOSBs: service-disabled veteran-owned small businesses (SDVOSBs). Then, in 2003, it further amended the Small Business Act to grant executive branch agencies—including VA—discretionary authority to set aside contracts for SDVOSBs. However, these enactments were widely seen as ineffective in increasing government contracting with VOSBs, and, in 2006, Congress enacted legislation that required VA specifically to take specified steps to promote awards to VOSBs. It is VA's obligations under this 2006 measure, as amended, that are at issue in Kingdomware , not the provisions of the Small Business Act. This report provides a brief overview of the litigation in the Kingdomware case as well as the potential legal and practical implications of the Supreme Court's ruling. The dispute in Kingdomware centers upon the meaning of the following language from the 2006 act, which is currently codified in Section 8127(d) of Title 38 of the United States Code (hereinafter referred to as Section 8127(d)): [f]or purposes of meeting [the goals as to contracting with SDVOSBs and VOSBs that the VA is required to establish under the 2006 act], a contracting officer of the Department [of Veterans Affairs] shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States. The latter two conditions—that offers are reasonably expected from at least two small businesses and the award can be made at a fair market price—are commonly known as the "Rule of Two" because of the focus upon there being at least two small businesses. VA has taken the position that Section 8127(d) does not preclude it from placing orders through the Federal Supply Schedules (FSS)—which is a simplified method for purchasing commercial items —without consideration or use of a contract set-aside for VOSBs, although its rationale for this position has changed over time. For example, in the preface to the final regulations it promulgated in 2009 to implement Section 8127(d), VA expressly rejected the suggestion that it clarify that orders placed through the FSS are not subject to Section 8127(d)'s set-aside requirements on the grounds that the regulations "do[] not apply to FSS task or delivery orders." At that time, it further noted that the procedures in Part 8 of the Federal Acquisition Regulation (FAR)—which generally govern purchases through the FSS—"will continue to apply to VA FSS task/delivery orders" and that "VA will continue to follow GSA guidance regarding [the] applicability of ... [P]art 19 of the FAR, Small Business Programs, which states that set-asides do not apply to ... FSS acquisitions." VA has also advanced other rationales, as discussed below. Many VOSBs, however, have challenged this interpretation, arguing that VA cannot place orders through the FSS without considering and using, where appropriate, contracts set aside for VOSBs, because Section 8127(d) uses the word shall when discussing set-asides for VOSBs. The word shall is often characterized as the "language of command," "creating an obligation impervious to ... discretion," and other statutes and regulations pertaining to small business set-asides that similarly use (or previously used) shall have been construed to mean that agencies are required to set aside contracts for small businesses when the Rule of Two is satisfied. Thus, VOSBs have argued that Section 8127(d) creates a similar mandate for VA. As is explained below, in attempting to determine which interpretation prevails—that of VA or that of the VOSBs challenging VA's procurement practices—the parties and administrative and judicial tribunals have invoked certain principles of statutory interpretation commonly used in determining Congress's intent in enacting particular legislation. These include principles regarding (1) plain meaning, (2) the words shall and may , (3) prefatory material, (4) surplusage, (5) deference to agency interpretations of ambiguous statutes, (6) usage of the same word in different parts of the same statute, (7) the presumption that Congress is knowledgeable about existing law, and (8) statutory and legislative history. Each of these principles is discussed further in the materials below. However, it is important to note at the outset that different tribunals reached different conclusions as to whether VA is required to set aside contracts for VOSBs, instead of placing orders through the FSS, based on their application of these principles. Kingdomware Technologies was among the VOSBs that objected to VA's interpretation of Section 8127(d). It filed a bid protest with the Government Accountability Office (GAO) in 2012 that challenged VA's proposed procurement of emergency notification services through the FSS without conducting market research to see if the procurement could be made through a contract set aside for VOSBs. GAO found for Kingdomware in a decision issued on May 30, 2012, which adopted the logic of earlier GAO decisions that had construed Section 8127(d) as unambiguou sly requiring VA to set aside contracts for VOSBs whenever the Rule of Two is satisfied because Section 8127(d) uses the word shall . Given what it viewed as this plain statutory mandate, GAO found that VA's comments regarding the relationship between FSS purchases and VOSB set-asides in the preface to the 2009 regulations were not entitled to deference, because agency interpretations of statutes are granted deference only when the statute is silent on a particular issue, not when Congress has "directly spoken to the precise question at issue." In so finding, GAO expressly rejected VA's argument that the obligation imposed by Section 8127(d) applies only for purposes of meeting VA's goals and that VA may make purchases through the FSS provided these goals are met. According to GAO, Section 8127's language regarding goals merely "explains the purposes of [its] mandate" and "does not create an exception to the mandate." GAO concluded by recommending that VA conduct market research to determine whether the procurement in question could be made through a contract set aside for VOSBs. However, VA declined to follow GAO's recommendation, which was not legally binding. Because GAO is a legislative branch agency, it cannot constitutionally compel executive branch agencies to implement its recommendations due to the separation of powers doctrine. Kingdomware then filed a bid protest with the U.S. Court of Federal Claims, which, in a decision issued on November 27, 2012, stated that it "respectfully disagree[d] with the GAO's interpretation" of Section 8127(d). The court did so because it viewed Section 8127(d) as ambiguous as to whether VA is required to set aside contracts for VOSBs, since the "goal-setting nature of the statute clouds the clarity [Kingdomware] would attribute to the phrase 'shall award.'" Given this apparent ambiguity, the court found that VA's statements regarding the relationship between FSS purchases and VOSB set-asides in the preface to the 2009 regulations are entitled to deference because Congress has not "directly spoken to the precise question at issue." Since the court viewed VA's interpretation as an "informal" one, set forth in the preface to the 2009 regulations, it applied a lesser degree of deference than that typically afforded to "formal" interpretations set forth in regulations promulgated through notice-and-comment rulemaking. Nonetheless, even with this lesser degree of deference, the court found that VA's interpretation was permissible, in part, because it had "remained consistent over time, and reflects a uniform approach on the part of the agency." The court also opined that Congress could be seen to have left a "gap" for VA to fill by not addressing the relationship between FSS purchases and VOSB set-asides in Section 8127(d). In so doing, the court noted that FSS purchases have historically been exempt from the FAR's requirements as to small business set-asides, and one principle of statutory interpretation is that "Congress can be presumed to be ... knowledgeable about existing law pertaining to legislation it enacts." Kingdomware appealed the lower court's decision to the U.S. Court of Appeals for the Federal Circuit, which, on June 3, 2014, by a vote of 2-1, affirmed the decision of the Court of Federal Claims on other grounds. The majority of the Federal Circuit did so because it viewed Section 8127(d) as unambiguous in requiring that VA use contracts set aside for VOSBs only "for purposes of meeting [its annual] goals" as to the percentage of VA contract dollars awarded to VOSBs; assuming these goals are met—as they have been, in the majority's view—VA has no obligation to set aside contracts for VOSBs.