2. Background:
a. On June 16, 2016, the U.S. Supreme Court reversed a lower court decision impacting the Department’s original implementation of the Veterans First Contracting Program. In the Kingdomware case, the Court ruled that under 38 U.S.C. § 8127(d), VA must set aside procurements for competition among veteran-owned small businesses ”if a contracting officer has a reasonable expectation that two or more small businesses owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers the best value to the United States” This is known as the “Rule of Two.” Major Supreme Court holdings in the Kingdomware case were as follows:

(1) §8127 is mandatory, not discretionary and its text requires the Department to apply the Rule of Two to all contracting determinations.
(2) The Rule of Two contracting procedures in 38 U.S.C. § 8127(d) are not limited to those contracts necessary to fulfill the Secretary’s goals under § 8127(a); and
(3) 38 U.S.C. § 8127(d) applies to orders placed against the Federal Supply Schedules (FSS). The Court held that 38 U.S.C. § 8127(d) unambiguously requires the Department to use the Rule of Two before contracting under competitive procedures. An FSS order is a “contract” within the ordinary meaning of that term. Thus, FSS orders fall within the mandate in 38 U.S.C. § 8127(d.

b. VA will continue to ensure the Department can effectively, efficiently, and economically procure goods and services for veterans in a timely manner, while also being good stewards of taxpayer dollars and meeting legal requirements. Accordingly, to implement changes that are now required in VA’s acquisition policies and procedures and to ensure consistent execution of contracts to comply with the U.S. Supreme Court’s decision in Kingdomware and applicable law. Attachment 1 to this PPM includes a Class Deviation to the VAAR and internal policy and procedures.