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SDVOSB vs. AbilityOne: Major Court Ruling Stayed Pending Appeal

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Koprince Law LLC

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In May 2017, SDVOSBs and VOSBs lodged another big win in their battle to enforce the statutory preferences for veteran-owned companies: the Court of Federal Claims held that the VA cannot buy products or services using the AbilityOne list without first applying the “rule of two” and determining whether qualified SDVOSBs or VOSBs are likely to bid.

But the AbilityOne vendor in question isn’t going down without a fight.  It’s taking the case to the United States Court of Appeals for the Federal Circuit–and the Court of Federal Claims just issued a ruling staying its May decision pending the results of the appeal.

The COFC’s decision in PDS Consultants, Inc. v. United States, No. 16-1063C (2017) was a major victory for SDVOSBs and VOSBs.  In that case, the COFC resolved an apparent conflict between the statutes underlying the AbilityOne program and the VA’s SDVOSB/VOSB preference program.  The COFC held that “the preference for veterans is the VA’s first priority” and trumps the requirement to use AbilityOne as a mandatory source.

But Winston Salem Industries for the Blind Inc., known as IFB Solutions, has appealed the COFC’s decision to the Federal Circuit.  And in a ruling issued on September 1, the COFC held that its original decision would be suspended pending the resolution of IFB’s appeal.

The COFC wrote that there are four factors it will consider when deciding whether to suspend a ruling pending an appeal: “(1) whether the movant has made a strong showing that it is likely to succeed on the merits; (2) whether the movant will be irreparably injured absent an injunction; (3) whether the issuance of the injunction will substantially injure the other interested parties; and (4) where the public interest lies.” These factors are “not necessarily entitled to equal weight,” and the court may be “flexible” in its application of the factors.

Here, all parties agreed that “whether the court properly interpreted the interplay between [the two statutes] is a question of first impression” that “has not been decided by any prior court.”  Thus, “while the court rejected IFB’s argument, it is not possible to determine the likelihood of success on appeal.”

Turning to the second factor, irreparable harm, IFB argued that, if the COFC decision stood, it would lose “62% of its revenue from optical services or 15.5% of its total revenue” by January 1, 2018.  The COFC wrote that “the loss of these contracts would have a severe impact on not only IFB’s optical business but also IFB’s mission as a nonprofit to provide employment, training, and services to persons who are blind.”  Therefore, the COFC found that IFB had established irreparable harm.

Under the third factor, balancing of the harms, PDS argued that a stay would substantially injure PDS and other SDVOSBs because they would not be able to compete for the contracts in question during the pendency of the appeal.  The COFC wasn’t persuaded, writing that the harm PDS identified “is hypothetical” because “t is based on the hope that it would be able to compete for the subject work . . ..”  The COFC “weighed the concrete harm IFB has identified against the hypothetical harm PDS has identified” and found that IFB’s harm outweighed PDS’s.

Finally, with respect to the public interest factor, the COFC wrote that both statutes (AbilityOne and the VA’s veteran preference rules) “serve important public purposes.”  But because IFB had identified concrete harm under the third factor, “the public interest tips in favor of allowing IFB to continue its work of employing blind and severely handicapped individuals under its contracts for VISNs 2 and 7 until the appeal is resolved.”

For these reasons, the COFC granted IFB’s motion for a stay pending appeal.  Under the stay, the VA will be permitted to continue procuring the products in question from IFB until the appeal is resolved.

Interestingly, the VA didn’t take a position on whether the COFC’s ruling should be stayed.  It’s not clear from the public documents why the VA stayed out of the fight, but perhaps the VA is having second thoughts about getting into another long-running legal (and P.R.) battle with veterans.

In any event, the COFC’s ruling is a big disappointment for SDVOSBs and VOSBs, many of whom hoped that the COFC’s May decision would put an end to the question about how the “rule of two” intersects with the AbilityOne program.  Stay tuned.


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